Bias Watch
The Tennessean editorializes today in favor of the new tax study commission giving legislators "backbone" to "face up to their responsibilities" - which is Tennessean-speak for "subvert the state constitution and impose an unconstitutional income tax." The editorial continues to push the myth that sales tax revenue is "dwindling" and that somehow the sales tax would be a better revenue-producer in an economic slump than would an income tax.

Let's review the facts:

Tennessee sales tax is NOT dwindling. In fact, it is UP this year, despite the economic slump. Meanwhile states that rely on an income tax are seeing actual declines in revenue from that form of tax. In fact, according to a survey report from the National Conference of State Legislatures, states with income taxes are suffering big shorftalls. According to the survey, individual income tax payments to states fell 21 percent in April and for the first four months of 2002, state income tax collections were down 14 percent from the same period last year.

The same would be happening to Tennessee if we'd adopted a state income tax three years ago, when Gov. Sundquist first proposed it. Instead, according to the Tennessee Department of Finance & Administration, sales tax revenue in Tennessee is UP slightly this fiscal year, despite the economic slump. An income tax would make Tennessee's budget problems worse. The Tennessean's editorial ignores the NCSL report, though readers of this site learned about it a month ago.

Incidentally, sales tax revenue is not only up for this year, it increases every year like clockwork, with its growth mirroring the health of the state's economy. Sales tax revenue in the just-completed fiscal year will have grown about 1 percent - pretty good, given the stagnant economy.

Tennessee’s sales tax mirrors the state’s economy quite well. In fact, since 1990, sales tax revenue has outgrown the state’s economy. Some facts: The sales tax - then 5.5% - brough in $2.23 billion in fiscal year 1989-90. That same tax rate would have brought in 80 percent more money, $4.04 billion, in fiscal year 2000. According to the U.S. Census' Bureau of Economic per capita income grew 56 percent in Tennessee from calendar year 1990 to 2000, while total personal income grew 78 percent and gross state product grew a little over 80 percent. Undeniably, the sales tax keeps pace with Tennessee’s economy - and please note that all that increased revenue does not include extra revenue from the 1992 increase in the sales tax rate to 6 percent.

I made a similar point a year ago in a column I wrote for Nashville City Paper while working for the Tennessee Institute for Public Policy.

Revenues are growing more slowly this year because so is the economy. That’s true elasticity. What the politicians want is a tax that grows fast even when the economy doesn’t - an income tax, especially one that has graduated rates and standard deductions that aren't indexed to inflation, guaranteeing that cost-of-living raises push taxpayers into higher tax brackets, automatically increasing their tax bill without a vote.

Rather than mislead readers with comments about "dwindling" sales, The Tennessean would serve taxpayers better by focusing its editorial fire on the built-in bias of the tax study commission. All of its members will be appointed by a state official who favors the income tax. The commission has yet to meet yet it is virtually certain to recommend an income tax. The people of Tennessee, overwhelmingly opposed to the income tax, will reject the commission's report. And we'll be no closer to addressing the state's real fiscal problem: government spending is growing much faster than the state's economy. As long as that continues, no tax code will be able to keep up.