New Budget Proposal Lacks Income Tax
Sen. Doug Jackson has proposed a "middle ground" budget that spares K-12 and higher education from budget cuts but doesn't impose an unconstitutional income tax on the people of Tennessee. There's a lot to like in the "Continuing Adequate Taxes and Services," a/k/a "CATS" budget, and a few things to dislike.

Things to like:
- It spends $500 million less than the governor’s proposed 2002-2003 budget
- It avoids creating a new layer of taxation via an income tax.
- It doesn't raise the state sales tax.

Things not to like:
- It raises $806.8 million in additional revenue via a patchwork of increases to existing taxes

Some of the tax increases are hard to argue against. It makes no sense, for example, that taxes on alcohol haven't been raised in 31 years. The rising price of wine, etc., over the past three decades has not been reflected in higher tax collections because alcohol taxes are levied on a per-unit measure rather than on the purchase price. It also makes no sense to continue the sales tax exemption on vending machine sales. Those two changes in the CATS budget would raise a combined $222.8 million.

But other tax increases are less palatable. A $100 annual fee on commercial trailers would raise $47 million, but at the expense of businesses and trucking industry employees. Raising the local option sales tax rate to a uniform 2.75 percent in cities and counties that are below that rate would raise $249 million, but drive up the cost of shopping for many Tennesseans. Increasing the business excise tax from 6 percent to 6.75 percent would raise $75 million, but harm businesses and workers by reducing the company profits needed to fund business expansion, raises, benefits, etc. Removing the single-article cap on sales taxes would raise $213 million, but at great cost to people who buy cars and other big-ticket items, for example.

Of prime political consideration is whether the legislature is more or less likely to pass an income tax if the CATS budget appears to be an alternative. Without CATS, the legislature is being asked to chose between an income tax the massive spending cuts of the "Downsizing Ongoing Government Services" (DOGS) budget. While there is not yet majority support for the unconstitutional income tax, it is clear to even the casual observer that the majority of the legislature would like to see revenue and spending increased.

Conservatives who prefer no tax increases at all and don't like government spending to increase won't like the CATS budget. But supporting it may be our best hope for avoiding an income tax. If by failing to support the CATS budget we push the legislature to adopt an income tax, we will have won a battle.... and lost the war. If so, then our side must support the middle-ground approach offered by the author and bipartisan sponsors of the CATS budget, while working to decrease the CATS budget's tax increases and increase the spending cuts.