No one wants to pay more taxes. I don’t want to pay more in taxes than is absolutely necessary.
However, I recognize that providing an adequate level of state services requires we all pay taxes.
We are a low-tax state and, even after tax
reform, will continue to be a low-tax state. The average
Tennessean pays less in state and local taxes than the citizens
of any other state. Including the District of Columbia, we
rank 51st in the nation in per-capita state taxation.
While being ranked last in taxation is a good thing, it
does have consequences. If we insist on being 51st in taxes, we
will never rank much higher in areas that are important to all of
us, like quality educational programs for our children and
health care for our neediest citizens. I support increased tax revenue
because I do not want to be ranked 51st in these areas.
Our current consumption-based tax system grows at
a slower pace than the cost of services being provided for
two simple reasons. First, over the last 20 years, we have
dramatically shifted our purchasing away from goods which are
taxable to services which are not taxed. Second, under
federal law, most purchases made over the Internet are not subject
to state sales taxes. It is estimated that Internet sales are costing
us over $300 million annually in tax growth.
The current system is unfair. It asks lower-income families
to pay a higher share of their income in state taxes because we tax consumption of
basic needs, such as food, clothing, gasoline, and driver’s
licenses. Why do I say this is unfair? A family making $12,600
pays approximately 12 percent of its income in state and
local taxes while a family making $159,000 pays approximately
4 percent of its income in state and local taxes. What’s
fair about that?
I support the flat-tax reform plan because it creates a
fairer tax system and represents a long-term solution to the
state’s funding needs.
This income-tax amount is deductible on your
federal income tax return in the same way that you currently
deduct home-mortgage interest and property taxes.
The plan does remove the state and local sales tax
on groceries, on clothing with a value less than $500, and
on nonprescription drugs. This provides some degree of tax
relief to low- and middle-income families as well as our
elderly population who live on a fixed income.
With this reform in place, Tennessee will also be able
to capture the taxes it currently loses from people who work
in Tennessee but live out of state. Those who do not live here
but work here would now begin paying income taxes to Tennessee.
For instance, professional athletes and entertainers
would have to pay to play or perform here just as they do in
almost every other state. We estimate that Tennessee lost out
on around $120 million in revenue from people who work
here but pay no taxes here.
During this legislative session, it has become
apparent that a majority of legislators now recognize that
Tennessee faces a significant financial problem. To have a
balanced budget next year, we must find a way to raise revenue or
we must reduce the current budget by $950 million.
I don’t want to cut $950 million from existing
spending because of the severe consequences it will have on every
citizen in this state. I don’t think most people who have
studied this want that either. The question, then, is: How are
we going to raise this money? We can either reform the system
by choosing fairness, deductibility, and long-term stability or
we can perpetuate the current unfair and inadequate system
and continue to have a similar problem in the years ahead.
I’m for fixing the problem. n
Jimmy Naifeh, who represents Covington in the state
legislature, is Speaker of the House. This is an abridgement of
a longer communication that may be read on the
Flyer Web site, www.memphisflyer.com.
