House committee Dems move to ban state sales tax increase

Wednesday, March 23, 2011 at 4:26pm

In a comical bit of political theater Wednesday, state House Democrats may have found a way to foil Republican efforts to amend the Tennessee constitution to ban the state income tax.

With the help of a couple of Republicans, who doubtlessly will hear from party leaders about this, Democrats on the House Finance Subcommittee managed to change the anti-income tax resolution to prohibit any increases in the sales tax as well. That, of course, would hamstring state government’s taxing capacity and leave lawmakers without much way to plug budget holes if necessary in the future.

With a straight face, Rep. Jimmy Naifeh, D-Covington, offered the amendment. As House speaker in 2002, Naifeh tried and failed to enact an income tax as part of reform legislation that would have lowered the sales tax. The resulting furor led to the defeat of some Democrats in the next elections.

“This is a friendly amendment,” Naifeh deadpanned as he made his motion, pointing out that Tennessee’s maximum sales tax rate is the nation’s highest at 9.75 percent.

“We’re hurting those people who can afford it the least. A bigger percentage of their income goes for the sales tax than someone who makes $100,000 or $200,000 or whatever.”

“I think it’s just common sense,” he said as some Republicans tried to table his amendment. “I guess if you vote to table this, then you’re voting that we should have more sales tax at some point in time. I hope that we’re not thinking that when we need funds again that we’re going to go and raise the sales tax. It’s against all humanity to do that.”

Reps. Dennis Roach of Rutledge and Steve McDaniel of Lexington were the Republicans who voted with the Democrats.

Rep. Glen Casada, R-College Grove, then tried to postpone action on his resolution, but the subcommittee went ahead and adopted it with Naifeh’s amendment.

The Senate already has voted for the anti-income tax resolution. It needed also to pass the House by a majority in this General Assembly and then by a two-thirds majority in both the House and Senate in the next. Then the resolution would have gone on the ballot for voter approval in the 2014 elections.

In 2002, a state income tax won 45 votes in the House. The state Supreme Court has ruled three times — most recently in 1964 — that the constitution already prohibits an income tax. But in 1999, the state attorney general issued an opinion saying the tax was permissible. Supporters of a constitutional amendment say it’s needed to resolve the issue.

8 Comments on this post:

By: Thetaxgod on 3/23/11 at 3:05

What a ridiculous piece of legislation. I would take a state income tax over a consumption tax anyday, for the general good. The State of Tennessee has just as high, and in many cases, higher tax burdens than many states, it is just in different forms. By focusing on consumption tax (sales tax), you have a tax that hits low income earners the hardest, as they are taxed on pretty much all they earn, and those with higher income and in comparison marginal consumption, they pay much less. Of course the wealthy would love more of the same. For all of you who believe in trickle down economics, a real folly of economic theory (if you can call it a theory), providing low tax to the wealthy does not provide any real societal benefit, and certainly does not equate to more jobs. That theory has so many holes in it, it resembles swiss cheese.

By: govskeptic on 3/23/11 at 3:16

These legislators have never had a problem hitting the hardest to those
that can least afford it. Protection of Wealth and extremely high income
earners has been the true rule for both parties for many yrs. Why else
would the State of Tenn be the second best address in the nation for
those seeking tax protection for their high wealth and super star salaries.

By: pswindle on 3/23/11 at 5:22


By: tgunch63 on 3/23/11 at 6:01

M.R. O'Hara
I just read the 3 posts here and I am astonished that apparent adults have totally lost their ability to comprehend simple arithmetic. Forget politics, I belive if a wealthy person buys a luxury vehicle, a multimillion home, luxury cruiser ,etc,etc they pay the sales tax at the same rate I do for my Chevvy, my 15' fishing boat and my less than 100,000$ home. There is no tax fairer than sales tax , the only tax the rich can't get around....They can beat an income based tax and a lot of others.
Sales tax also gets illegal aliens and those on food stamps dressing better than I can and driving far newer vehicles than I can afford ............

By: PhiDelt496 on 3/24/11 at 9:05

I think this is a good thing. Fix the tax rates, and force the government to live within its means(sorry to sound like Dave Ramsey). Pass the amendment with the amendment.

Also, is it just me or is it funny that TN with its "horribly regressive" tax policy isnt in anywhere near the budget trouble that CA, NY, WI, MI, or the federal government are?

Also, I do love the "political theater" that happened here. The Dems found a way to stop something without running off to a resort in Illinois to hide.

By: mg357 on 3/24/11 at 11:34

tgunch63; you are aware of the fact that food stamp recipients pay no sales tax on their food aren't you? The last stats I checked were that $13 million in food stamps were dispensed last month in Memphis alone. Big number; right? Think how much that would add to the revenue in Tennessee should they be required to pay sales tax like everyone else. We pay for their food, why aren't they required to pay sales taxes? Until the dead weight in this country is minimized, it's only going to get worse. We, the taxpayers are not in possession of unlimited funding and cannot sustain all the entitlement programs being shoved down our throats. You cannot destroy one source of revenue to sustain another. This is called rewarding failure and punishing success!

By: mg357 on 3/24/11 at 11:42

PhiDelt; the government has absolutely no concept of what living within your means entails. Most of us who must live within a budget are well aware of this. As a general rule, the government and lawmakers, pander to specific groups i.e. the rich and the have nots. Middle class America is becoming extinct rapidly and being obliterated by these high minded individuals. If they intend to continue this idiocy, their priorities should change and soon.

By: dnewton on 3/29/11 at 2:16

High sales taxes never bothered New York until they got up around 11 cents. They had some kind of reform that lowered them because too many people were shopping across the border. According to a recent slide presentation to the TN legislature, the last time they increased the sales tax the income to the state went down for a while. In real dollar value terms, the state will have a problem in the future with its tax collections. You buy government services, in the long run, with the real dollar value.

What is strange to me is that anyone would want an income tax. According to testimony given this year on the sales and franchise and excise tax, the reason for the shortfall was that these two main and biggest taxes are sensitive to the economic situation. An income tax would be even more sensitive to bad times. I don't think the ammendment would be a problem if the state would strengthen the provision to limit spending to the increase in GDP and population. Naife's ammendment would have that effect, but I doubt if he will be signing onto any reform that would limit the increase in the budget to the increase in state GDP plus population.

In further testimony this year, it was predicted that the tax intake for the state would not get back to 2008 levels for at least 2.5 years and in the worst case scenario, assuming no war in the Middle East, and no Tsunami in Japan, would be another 7.5 years.