Study calls Tennessee's tax system among worst in the nation

The Kingsport Times ^ | 2/4/03 | staff/wire

[GailA]

Study calls Tennessee's tax system among worst in the nation

Tuesday, February 04, 2003

By Staff and wire report

Governing Magazine released a study on Monday that ranks Tenneessee's tax system among the worst in the nation and called it "famously dysfunctional."

Richard Green told the Associated Press that the study found the tax system in Tennessee "about as badly broken as any" in terms of its long-term ability to fund services. Green is one one of the study's four authors.

"That's largely thanks to the fact that the state has kind of the twin problems of relying on sales taxes that are extremely high and not relying at all on an income tax that's sort of been the standout means for getting the sales tax down," Greene told the Chattanooga Times Free Press.

Tennessee was among five states that earned only one out of four possible stars for their tax systems' adequacy (reliability of revenue). The state also received one star in a fairness category and two stars for tax system management.

The state's reliance on the state sales tax was seen as regressive and unfair by the authors, who concluded it "is not as responsive now" to changing economic conditions.

Nevada's system was considered the worst overall, Greene said.

State Rep. Bobby Wood, R-Harrison, disputed the study's conclusion that Tennessee's revenue situation will continue to deteriorate.

"I feel like what we have in place will take care of the state if the economy will turn around," he said. "I believe that with the measure we have taken, we'll be in good shape at least for a few years."

But figures presented by new Gov. Phil Bredesen in recent weeks show otherwise. With an estimated $500 million deficit expected in next year's budget, Bredesen has told his Cabinet he expects cuts averaging 7.5 percent in most departments. He also is looking to reduce state employment by 2,900 people over the next few years.

All of this comes less than a year after the state Legislature voted to increase the state sales tax from 6 percent to 7 percent. Worth $933 million, it was the largest tax increase in Tennessee history and expected by lawmakers to keep the state afloat for at least several years.

The approval came after a 3½-year battle over whether to implement a state income tax - an issue the magazine quoted University of Tennessee economist Dr. Bill Fox as being "off the table" for the next five years.

The overall Governing magazine study found that the "vast majority" of states have tax systems that are "inadequate for the task of funding a 21st-century government. Most of those tax systems are also unfair."

Facing their worst economic times since World War II, states are looking at cutting services or raising taxes, according to the National Governors Association.

One reason for that is the reliance on a sales tax, something Clemson University expert James Hite said was "like riding a horse that is rapidly dying," the study reported. In Tennessee, sales taxes account for 57.3 percent of state tax revenue - the third highest reliance in the nation, according to the study.

Governing Magazine tax study.

STUDY

[GailA]

I posted Governing Mags study with links to all 50 states here: FR POSTED

[JohnnyZ]

The overall Governing magazine study found that the "vast majority" of states have tax systems that are "inadequate for the task of funding a 21st-century government. Most of those tax systems are also unfair."

Translation: we ain't gettin' enough of yo' money somehows. We needs to get some mo'!

[joesnuffy]

They Shoot Puppies...Dont They?

[Bob Buchholz]

They would LOVE North Carolina. We have the income tax, the sales tax, the property tax, the highway tax, the fuel tax, the liquor tax, the sales tax on the liquor tax, the food tax, the luxury tax, the unemployment insurance tax, the cigarette tax, the white goods tax, the interstate communications tax, the personal property tax and just about any tax that they could possibly dream up. They just can't figure out why they still don't have enough money to fund decent education, roads or state services.

[Nephi]

Isn't this report an example of laudatory condemnation?

[AppyPappy]

I bet all states that don't have income taxes faired poorly.

[rellimpank]

--Nevada is supposed to be near the top of the list , too-but for some reason people keep coming, both legally and otherwise--

[ChinaThreat]

Dont be fooled. I just recently moved to Memphis, and no, i don't pay an income tax here. But the sales tax is outrageous. Mississippi is about 3 miles away and Arkansas about 10 miles away, so anytime i have to make a major purchase, guess where im going. Memphis city government is the most decrepit and incompetent one i have ever lived in. I can hear them down at city hall salivating over my wallet. Its beginning to make DC look like a well run city. Won't be here long!!!!!

[GailA]

Tennessee has GREAT roads..in fact one of the new roads leads right past the last governors new multi-million dollar home. BTW he gave himself and his wifie FREE golf for LIFE at the State Golf Courses as a going out of office present.

[GailA]

All those taxes are bad. Hubby is applying for jobs in NC. 2 way radio senior field tech.

[GailA]

Welcome to Memphis ChinaThreat..one of the most ineptly run cities in the State. Did you see where they got that juvy court clerk for emblezzing our money?

[JDGreen123]

Interesting observation. Memphis has often been called the DC of the Deep South. The two cities share many demographic characteristics and statistics. A large part of the State budget is directed at inner city Memphis where nothing ever changes. Many in Tennessee have joked that we should sell Memphis to Mississippi or Arkansas.

[Right Wing Professor]

This is what I sent to Governing Magazine yesterday

Hawaii, the state with the highest taxes as a percentage of personal income, gets four stars for 'fairness'. Vermont and New Mexico, second and third in that ranking, get three stars. All the other states tax less, and almost all get fewer stars. Looks like 'fair' in your lexicon is a synonym for 'confiscative'.

[JDGreen123]

Good post RW Professor!

I ran a count for total stars out of 12 and got this

Their favorite state: DE (11 out of 12)

10 stars: None

9 stars: ND, SD, HA

8 stars: NM, UT, VT, WI, WY, MO, MN, MI, IN, ID

7 stars: NJ, NY, NC, OH, PA, OR, WA, ME, MA, MD, KS, IA, GA, NH, NE

6 stars: OK, SC, RI, VA, WV, AK, AZ, AR, CT, FL, KY, LA, MT

5 stars: MS, TX, CO, CA, IL

4 stars: TN, AL

3 stars (Their least favorite): NV

Now I imagine if we turn the list upside down, we would see where most people would want to live (the 3-5 star states).

[ChinaThreat]

I stopped keeping up with local events. It only depresses me and I just read the comics when i want humor. Its tough finding jobs right now, otherwise I would be history. Memphis' only saving grace is Bar-b-q and blues and a few really nice folks.

[ChinaThreat]

This city is annex crazy. Everytime they come up with some stupid liberal program they annex the most valuable property on the outskirts of the city The typical results ensue under the same logic that "people who earn money want to keep money" --- The working people keep running from the city untill there is nothing left but a bunch of liberal politicians, a bunch of free loading losers, and eventually Jesse Jackson black mailing whatever corporate entity that was stupid enough to stay.

[Redbob]

Yeah, isn't it funny how they focus on taxation, but ignore the profligate spending that creates the deficits in the first place!
Typical gummint bureaucrat "thinking."

[Redbob]

You don't think you have an income tax?
You must not have any investment income! It's taxed at 6%!

Look up a little thing called the "Hall Tax" sometime; you'll certainly not consider retiring in Tennessee!

[Redbob]

"Hawaii, the state with the highest taxes as a percentage of personal income, gets four stars for 'fairness'. Vermont and New Mexico, second and third in that ranking, get three stars."

When making a comparison of this sort, you also want to look at the incomes themselves. While high on the "fairness" rankings, I'd bet that New Mexico has a relatively low average income - meaning that taxes are actually fairly low.