The Tennessee Catholic Public Policy Commission supports a major reform of the state tax system that includes a comprehensive review of expenditures, as well as potential revenue sources. It is essential that the tax system adequately fund both the legitimate needs of state government and services to the citizens of the state but it must be done it a way that fairly distributes the tax burden. The most important factor in this equation is lessening the undue burden on those who can least afford to pay by eliminating the sales tax on food.
The equity of our tax structure, specifically, its distribution of our tax burden among Tennessee’s working families and poor is of great concern. Over the last decade, growth in state spending has increased at a faster rate than either inflation or population. This rate of spending growth must be examined with a critical eye and dealt with by both the Governor and the legislature, but there is little budgetary fat to cut.
A significant part of the growth in the Tennessee budget is the direct result of the Federal and State courts finding that Tennessee was unconstitutionally failing to provide adequate services in areas of K-12 education, mental health services, our corrections system and services for the disabled and mentally disabled. Current court cases yet to be decided could result in significant additional spending in the areas of equalizing urban and rural schools teacher salaries and complying with the Americans with Disabilities Act. These restrictions, combined with the general operation of state government, have put great strains on the budget process.
The basic fairness of the tax system must also be addressed. Although the tax burden for all income levels is lower in Tennessee than that for the region or nationwide, it is without doubt that Tennessee has a regressive tax structure that must be changed. All studies of recent vintage reflect that the poorest 20 percent of families have a relative tax burden that far exceeds the tax burden of more affluent families. Much of this tax burden on the poor is driven by the sales tax on food, which we believe must be eliminated. The weakest among our citizens are carrying the heaviest load. Tennessee needs to be a state where the basic necessities of life are affordable, and we urge the legislature to support this initiative.
We favor review of all options, including a personal income tax, so long as the taxes are not regressive; that is, burdensome on Tennessee’s working families and poor.
While each of these alternatives has both advantages and disadvantages, maintaining the status quo leaves us on a course with a future full of devastating crisis. Too often the Federal and State court systems have had to force our State government to live up to its obligations.