Go ahead and pinch us — not to see if we’re dreaming but just because we have to be masochists to keep on living in this state and could stand some more pain.
Believe it or not, the 132 elected members of the General Assembly of Tennessee seem primed this year to do that which not even they have been foolish enough to attempt in the last several sessions of the legislature. In response to an ever-worsening financial situation — the state is experiencing a $300 million shortfall this year and expects one of $800 million to $1 billion for next year — the gallant solons who reconvened in Nashville last week have let it be known that we can expect an increase in the state sales tax — one as large, perhaps, as a full percentage point.
A moment to consider the consequences: Tennessee’s statewide sales and use tax stands already at 6 percent. (Memphians, Nashvillians, and a few others are paying an additional 2.25 percent — for a total of 8.25percent.) If this trend continues, it doesn’t take a mathematical whiz or a theologian to see that we will soon be in danger of paying the state an amount (9.25 percent) commensurate with the biblical tithe of 10 percent. Most churchgoers cannot afford to do so, however much they revere their religion, and most consumers are in the same fix.
To be sure, the assessment of another point of sales tax would bring in almost enough new money to compensate for next year’s expected shortfall — that is, if consumption remains at the present levels. The problem is that there is no guarantee that it will — especially in the current, already slumping economic climate. What’s more, it is almost axiomatic that Tennessee consumers, or at least those close enough to the borders, will accelerate a practice they have already begun, fleeing to adjoining states with far lower sales taxes in order to make their basic purchases. Add to that one more caveat — the continued existence, mandated by Congress, of tax-free Internet retailers.
In short, any revenue estimates currently being made in Nashville are almost surely overoptimistic.
It could stand repeating, too, that the sales tax is inherently regressive, disproportionately taxing Tennesseans of modest incomes, those who must expend a greater percentage of their resources to acquire the necessities of life.
And, finally, as Lt. Governor John Wilder is fond of saying, “Uncle Sam taxes taxes.” That’s his way of saying the obvious: What the state takes in tax on purchases will be taxed all over again by the federal government as income. That’s what you call double taxation. Time was when the sales tax was subject to deduction on one’s federal tax returns, as a state income tax would be now. No longer.
To their credit, Governor Don Sundquist, state House of Representatives Speaker Jimmy Naifeh, and various legislators have expressed their willingness to accept a state income tax, which would be non-regressive, deductible, and “elastic” in its ability to grow with the economy. For their pains, they have been met with public derision, riots, and legislative irresponsibility. This year, Sundquist and Naifeh have let it be known they won’t stand in the way of a sales tax.
What is it they say? “We get the government we deserve.” Pinch us again. Hard.
