The Income Tax

10 Responses to “The Income Tax”

1. Moderate Democrat writes
   November 22nd, 2009 5:32 pm

   A State Income Tax WILL eventually come up again. Why? Because the current hodge podge of various selective consumption taxes simply does not work for the State’s needs. This should NOT be a tax increase but a revenue neutral change in the way we tax both Tennesseans and the out of state people who work in TN. It is not only because the current taxes are extremely regressive and unfair to seniors and to lower income citizens but it cannot keep up with the economy as it grows and is more (not always) subject to wider fluctuations. So, an income tax is more fair and more efficient.

   In the meantime, TN will languish at the bottom, or bad end, of about every statistic that is measured

2. Bill Hobbs writes
   November 22nd, 2009 6:00 pm

   If we had adopted the income tax 10 years ago, Tennessee today would be facing a much larger revenue shortfall than it currently faces. That’s because income tax revenue drops faster and farther in a recession that does revenue from a sales tax - and because an income tax during a good economy grows revenue faster than a sales tax, leading to an explosion in spending which is unsustainable when the economy slows.

   The reason is simple: When a recession results in someone losing their job, their income - and therefore their tax - drops to ZERO but they continue spend money at a reduced level, from savings, credit, spouse’s income, or other sources, so they continue to generate some sales tax revenue.

   Spending grows faster during a good economy with an income tax - but revenue falls faster when the economy turns sour - leaving a much larger gap between revenue and the baseline budget. That’s why states that rely on income taxes are facing mammoth shortfalls and budget crises this year, while states like Tennessee that rely on consumption taxes are facing smaller fiscal problems.

   We should all be grateful that the legislature did NOT adopt a state income tax a decade ago.

   Now, if they would just restrain the growth of spending to the rate of growth of the state’s economy, as required by the state constitution (the “Copeland Cap”) and defined in law as the rate of growth of personal income in the state, we would be far better off in future recessions. In fact, had they done so consistently since 1985, Tennessee today would have a $3 billion revenue surplus just this fiscal year, and about $20 billion in surplus revenue over the previous decade.

   If that money had been socked into a rainy day fund, we’d be well-protected against even a deep and long recession. And if it had been returned to taxpayers via lower tax rates and elimination of the grocery tax, we’d have a more robust economy.

   Too bad too many of our governors and politicians routinely exploit a loophole and spend too much money almost every year, setting us up for fiscal crises and the threat of tax rate increases when the economy slows.

   I like all four GOP candidates for governor. I’m leaning toward two of them, but would vote for whichever one guarantees to never propose or sign a budget that exceeds the Copeland Cap.

3. the 4th estate writes
   November 22nd, 2009 6:09 pm

   The only tax reform that would work would be one that had lobbyist support therefore, the obvious plan is to repeal all the sales tax exemptions. Generations of lobbyists worked to get those and we know there will be no more exemptions. So if you repeal them you ensure full lobbyist employment for the next hundred years as they work to put the exemptions back in.

4. common sense writes
   November 22nd, 2009 11:23 pm

   Bill Hobbs neglects the clear fact that a small percentage of Tennesseans make an inordinate amount of the income. Even a 0.25% personal income tax would bring in revenue in the ballpark of a billion (with a ‘b’) dollars a year.

   Moreover, as Hobbs is well-aware, a sales-tax is extraordinarily regressive and actually creates a system where the poor (and unemployed) pay a larger percentage of their income on taxes … thereby keeping the rich getting richer and the poor poorer … and a cycle of need and poverty continues, which creates greater dependency on the government, which perpetuates the cycle.

   Of course, Hobbs would tell us that these folks just need to “work harder” - which is both ignorant and impertinent of him.

5. Mark Rogers writes
   November 23rd, 2009 12:01 am

   Common Sense,

   Do you have a source for that?

   But you are talking about if everyone paid the 0.25%? That sounds possible although it would seem unlikely that taxing people below a certain income level would actually create any revenue so you would need to set a floor on who is taxed and raise the 0.25% to maybe 0.50% or 1%.

   But let me ask you this, would you trade tax reform in the shape of a combination of state income tax and sale tax in return for a constitutional cap on the growth in state spending?

   I only ask becuase for so many people ‘tax reform’ is not about fairness or justice but to create a new revenue stream to increase government spending. So are you a tax reformer and would support such a hard cap on spending or are you just looking to increase government?

6. Bill Hobbs writes
   November 23rd, 2009 12:42 am

   To “common sense” - the sales tax is regressive primarily for two reasons. 1. The sales tax on groceries. 2. The rather long list of things that are exempt from it.

   Neither of those reasons supports any logical argument in favor of an income tax, as you can address both of those issues without an income tax. You can restrain spending growth a bit and wipe out the sales tax on groceries, and you can lower the sales tax rate overall and extend it to many more things not currently taxed, many of which are purchased in larger quantities by the “rich.”

   Both of those reforms would make the sales tax far less regressive. Neither of them requires imposition of an unconstitutional and unwanted state income tax.

   Years ago, I proposed a grand political bargain in which two amendments to the state constitution would be simultaneously placed on the ballot for voters to consider.

   It would go something like this:

   The first would enact a state income tax (coupled, I would suggest, with a reduction of the sales tax.)

   The second would stiffen the Copeland Cap, by requiring a 2/3rds majority to exceed the spending growth cap, and would also cap the income tax rate and the sales tax rate and forbid increases without voter approval.

   The people of Tennessee then would get to vote simultaneously on the Liberals’ proposal for “tax reform” and “tax fairness” and all that, and on the conservatives’ goal of restraining spending and ending the endless cycle of tax increases, spending sprees and more tax increases to sustain the spending spree when the economy slows.

   My guess is, voters would reject the income tax amendment and approve the other.

   The liberals wouldn’t be happy about that result, of course, but the idea of the two-amendment approach is to separate two issues that should not be joined in the first place - the issue of tax fairness and the issue of how much revenue & spending do we the people of Tennessee to have and spend.

   The problem several years ago was the that liberals had two goals - they wanted gobs more money to spend, and they wanted their vision of “fairness” to be written into the tax code.

   Well, there are plenty of folks who think the tax code could be made more fair, but who don’t believe that the state needs a lot more money to spend. By co-mingling the “fairness” issue with the “we need more money” issue, liberals lost most of these potential supporters.

   The right time to address “fairness” of the tax code is during a healthy economy when the state is running a surplus, so that the legislature can offset the pain of the shift of reform by cutting taxes. The WRONG time to bring it up is at a time like now, amid a revenue shortfall, because it makes people believe that the “fairness” argument is just being used to mask a grab for more money.

   Deal with one issue at a time - the people don’t much trust politicians, so tax reform for fairness should be revenue neutral. And any politician proposing a tax increase to deal with a budget hole should not try to mix in any big reforms for “fairness.”

   On the national level, I support the basic concept of the Automated Payment Transaction Tax - see http://www.apttax.com/ - in part because it would completely end the use of the federal tax code to benefit or harm special interest groups or to engage in “social engineering.”

   With an Automated Payment Transaction Tax, our annual political debate over the federal budget would focus on budgetary issues - how much revenue do we need? How much spending is enough? Should we run a deficit or not? - without the added mess of lobbyists seeking special treatment for special interest groups, and without the ruling party and administration using the tax code for social engineering or to reward or punish allies and enemies.

7. idgaf writes
   November 23rd, 2009 4:52 am

   Steve McDaniel, Hit the nail on the head when he said

   “The people don’t support an income tax because they don’t trust the government.”

   They live for the sole purpose of seperating us from our money and they don’t even have enough common sense to take advantage of us being a no-income tax state, they just give that advantage away and bribe businesses to come here reduceing their (our) revenue while increasing demand on services.

8. idgaf writes
   November 23rd, 2009 5:10 am

   The mindset of the general populations is that of enablers. They say they need more money and people help them to figure out how to get it rather then smacking them hard and telling them to live within their budget like we have to.

   We raised spoiled children where we don’t have the gumption to say no to them.

   That has to be stopped before we can make any meaningfull progress toward “fairness”. Look at other states, has it solved their problems? Heck NO 41 states are on the brink of banruptcy with NY going next month with Ca to soon follow.

   Spending is the root cause not revenue. If they had 90% of what everyone made that still wouldn’t be enough and Brede$en said as much. (”The government never has enough money”)

   Right now if we took 100% of the profits from the fortune 500 companies it would take 104 years just to pay off the current debt, nevermind the reoccurring debt. We are basically insolvent, at all levals of government.

   That is the objection of those against dizzys folly of spending over a billion dollars on the new CC. We don’t need to go further in debt, especially at this time. We are tapped out and things will get worse before they get better. Even Barry and his band of commies tell you that or at least did until they read the temperature of those that have to pick up the tab for their out of control spending/give aways.

9. TNVolunteer73 writes
   November 23rd, 2009 7:25 am

   “A democracy can only last until the Government begins taking money from those that work and giving it to those that will not work.”

   Thomas Jefferson 1791

10. TNVolunteer73 writes
    November 23rd, 2009 7:27 am

    Bill hobbs

    Why do you want to tax PRODUCTION, instead of consumption?

    An income tax is a form of slavery, government takes your earnings BEFORE you receive the earnings which constitutes slavery.

    It also constitutes ideal that WE WORK FOR THE GOVERNMENT, rather than the governement is our employee.