Naifeh's Bad Plan
How bad is Speaker Jimmy Naifeh's income tax plan? In a word, horrible. The Naifeh proposal doesn't just create an unconstitutional 4.5 percent tax in personal income, it creates a confusing mish-mash of sales tax rules that will confuse retailers and taxpayers alike, and require the goverment to add 300 new bureacrats in order to collect taxes and regulate such mundane things as what kinds of edibles are "food" and which are not. Plus, it offers a "cap" on tax revenue that is both a mirage and an invitation to a second massive tax increase as early as next year, and include a hidden method of "stealth" tax increases that will hit every taxpayer with tax bills that rise even though their effective incomes don't. That will a flood of revenue to fund uncontrolled government growth - at the expense of the people and the economy of Tennessee.

For more on the weird mishmash of sales taxes proposed in the Naifeh plan, click here. And remember this: every year, lobbyists will be pressuring the legislature to exempt items from the tax or remove the exemption from other items, which practically guarantees endless confusion for shoppers and merchants alike. Which is one reason the state will need 300 more employees just as efficient and friendly as those down at the DMV - to enforce the ever-changing tax regulations and perform what will have to be endless audits of merhants in order to collect the complex and confusing tax.

The Naifeh legislation also proposes to "cap" tax revenue at 6 percent of total personal income in Tennessee, but that's a trick. Here's why: the state takes only 4.6 percent now, and even if the Naifeh bill passes, revenue will total only around 5.5 percent of personal income in the state. That leaves the Legislature room to adopt another massive tax increase.

Additionally, the cap itself is a bad joke. It can be raised or repealed by a simply majority vote of the the legislature - if there are 50 House members and 17 senators who want to raise taxes above the cap, there would be enough votes to raise the cap, or eliminate it. Naifeh offers taxpayers the mirage of protection while providing government a fat new pipe into taxpayers' wallets.

That fat pipe is going to carry a revenue gusher because of "bracket creep." Naifeh's tax has some standard deductions - the first $15,000 in income for a single person, the first $30,00 for a couple, and $1,500 per child would not be taxed. But the standard deductions are not indexed to rise with inflation. The net result of that will be workers who get annual raises to offset inflation's corrosive effect on their paycheck will see more and more of their income above the tax threshold. They will pay more to the Tennessee Revenue Service solely because of inflation, even if their pay increase barely keeps up with inflation. Because of "bracket creep," the government will get richer at the expense of hard-working Tennesseans. The Naifeh tax will pump money out of taxpayers' pockets at an ever-increasing rate even if they never raise the tax rate.

For more on bracket creep, click here to read my final column in Nashville City Paper, and related commentary posted here and here.