Tennessee is in desperate need of tax reform.
With a highly regressive sales tax as the main source of state revenue, Tennessee ranks as one of the worst states in the nation for income inequality. Our state has fallen behind others in economic growth and has lost thousands of jobs due to the harmful nature of our tax code. You’d think with all of the negative effects of our current system, that representatives in Nashville would be trying to seek relevant solutions to this problem that would place middle and lower class families first.
Instead, the only major proposal (that was made by the Governor) actually sought to increase inheritance tax exemptions and reduced the sales tax on food by a measly .2%. And worst of all, many people actually viewed this weak legislation as reform. Really…how is reducing the tax burden on rich Tennesseans who have already benefited from the regressive nature of our state’s tax code reform? Maybe the conservatives in our state legislature believe this will have some sort of far-fetched “trickle down” effect for working families. Or, more than likely, they are defending the assets of their wealthy supporters in their respective districts.
It is amazing how out of touch representatives in Nashville are with the facts. My home state has the highest sales tax in the country, businesses fleeing from the state in droves, and families struggling; yet, they act like there is nothing wrong with current policy. It is not that hard to bring meaningful reform that would help the middle and working class families as well as businesses in our state, but no one has looked at what will actually work. Here are a few, simple solutions that would do our (by our, I’m referring to Tennesseans reading this diary) state well:
First of all, we need to get rid of what has been the main source of financing Tennessee’s public expenditures for years: the sales tax. This tax costs jobs, redistributes wealth upward, and is easily avoided through online shopping and crossing over into other states that have much lower sales taxes.
There are two taxes that we could implement to replace the sales tax.
Number One: We should use a land value tax to fund expenditures. A land value tax is basically this: a tax on the rental value of land. This tax does not apply to improvements, cannot be evaded, and provides a large amount of revenue without hurting the economy. As the well-known American economist, Paul Samuelson wrote, “Pure land rent is in the nature of a ’surplus’ which can be taxed heavily without distorting production incentives or efficiency.” This tax would be used to fund the majority of public expenditures.
Number Two: We should implement a state income tax for citizens that are upper-middle or upper class. I believe a good starting point for a state income tax would roughly around $100,000 a year. The income tax would only have a few brackets, probably no more than four. This would ensure that our tax system is progressive and does not harm the lower and middle classes.
With the large amount of revenue produced by these two taxes, I believe that we should be able to reduce taxes on businesses and improve our state’s education, health, social services, etc. Overall, switching from a regressive sales tax to a land value and progressive income tax system would increase revenue, relieve the current burdens that have been placed on working families, and improve business relations with our state government.
Here are some links:
http://en.wikipedia.org/... (More info on land value taxation)
http://www.prospercalifornia.com/ (Similar proposal for California’s tax code)
http://www.fairtaxation.org/... (Organization that is campaigning for progressive taxation in Tennessee)