Rationale
for LWVTN Support of Tax Modernization
and
Fiscal Stimulus Act, SB 2054 Tate, HB 2182 Turner
The
pertinent sections of the LWVTN position are as follows; issues especially
relevant to the Act are shown in bold:
POSITION: The League supports a balanced
system of taxation that considers the ability of the taxpayer to pay and which
produces sufficient revenues to fund essential services. Constitutional
taxation provisions should be broad and sufficiently flexible to meet future
revenue needs. Therefore the state position includes the following:
State Income Tax: The League
supports a broad-based
personal income tax and repeal of the Hall income tax in order to enhance the
equity and balance of the tax structure and to produce adequate state and local
government revenue. An occupational privilege tax (payroll tax) and
retention of the Hall income tax is a less desirable second choice. The League
opposes the levy of local option income or payroll taxes. The corporate excise
(income) tax should be retained. The
statewide income tax should be adopted by Legislative action rather than
Constitutional amendment. For this reason, a flat-rate tax with a standard
deduction and personal exemptions sufficient to reduce regressivity
would be acceptable.
Sales Tax: The League opposes continued and
increased reliance on sales tax for revenue. The local option sales tax rate
should be no higher than currently authorized at 50 percent of the state levy.
The sales tax on food for home consumption should be eliminated; broadening of
the sales tax base and any raise in rate should be contingent upon the
exemption of tax on food.
. . . . .
. . . . . .
Intergovernmental Revenue: A
percentage of statewide personal income tax proceeds should be transferred to
local government(s) earmarked principally for public education. State services mandated and
performed by local government should be fully state funded. State/local
transfer formulas should be equitable and consider the recipient local
government's tax capacity and effort.
The League used the following criteria to evaluate a system of taxation: ability
of the taxpayer to pay, diversity of revenue sources, economy of
administration, simplicity and convenience, certainty, sufficiency, and elasticity.
Each tax should be considered and evaluated in relationship to all other
state and local taxes. No single tax will meet all of the above criteria.
TAX MODERNIZATION AND FISCAL STIMULUS ACT
The most important features of the proposed
bill are as follows:
This plan
will provide much needed tax breaks to 60% of Tennesseans, those low- and
middle-income families most likely to put that money back into the local
economy. For example:
These provisions are
consistent with the League’s position in support of “a broad-based personal income tax and repeal of the Hall income tax in
order to enhance the equity and balance of the tax structure and to produce
adequate state and local government revenue,” opposition to “continued and
increased reliance on sales tax for revenue,” and support for the elimination
of the sales tax on food. They are also consistent
with the League’s support for sharing such revenues with local
governments. They meet the League’s
criteria for evaluating a tax, especially regarding of ability to pay,
sufficiency and elasticity.
(Note:
While the League position states that a flat rate tax would be
acceptable, it does not imply that this was the League’s first choice; the
understanding at the time this position was adopted was that a flat tax would
be deemed more constitutionally acceptable than a graduated tax. However, current interpretation of the
constitution is that a graduated tax would also pass muster.)