Whom Do You Trust?
It's got a pro-income tax spin, but the rest of this column by David Kushma, editor of the editorial page of the Memphis Commercial Appeal, is pretty good.

Kushma reports on a recent report from the "Better Government Association," which he describes as "an independent watchdog group formed in 1923 to combat public corruption in Al Capone's Chicago long before Eliot Ness arrived." The report is a ranking of the 50 state governments on an "integrity index" based on honesty and accountability in state government. Tennessee ranks 44th. Arkansas ranked 31st and Mississippi 33rd, while ranking below Tennessee were Louisiana, Alabama, New Mexico, Vermont and South Dakota. But

Quoting from Kusmha's column:

"It begins to look like the state's for sale," said Terrance Norton, BGA's executive director and a former federal prosecutor. "Our form of government is sustained by public trust. If you don't believe your public officials are people of integrity, you've got problems."

The index ranks the states according to the effectiveness of their laws that fight corruption and promote government integrity. Those laws deal with such things as freedom of public information, protection of "whistleblowers" who expose government waste and corruption, campaign finance, conflict of interest, and rules covering gifts, trips and speaking fees for politicians.

Norton said the strength (or weakness) of such laws reflects a state's commitment to transparency of government processes, accountability for public officials, and strong, clear limits on what "public servants" can do in accepting campaign money and other favors. The BGA assigned each state a numerical grade on how close it came to meeting the best prevailing practices among state governments.

Kushma notes that the BGA's findings are "neither new nor startling"

After all, he says : Two years ago, another good-government group, the Washington-based Center for Public Integrity, surveyed conflicts of interest in state legislatures. In Tennessee, it found, a third of lawmakers sat on legislative committees that regulated their own professions or businesses.

A third received income from a government agency other than the legislature, even though the General Assembly often subsidizes those institutions. And 15 percent of lawmakers had financial ties to businesses or groups that lobby state government.

Such findings can - and do - cause voters and taxpayers to believe that the officials they elect are more concerned with promoting their own interests, or peddling their influence to the special-interest lobbyists who bankroll their campaigns, than with pursuing the common good. That's especially true when lawmakers of both parties conspire to limit electoral competition, and perpetuate their own tenure, through the gerrymandering of legislative districts.

As a result, citizens are going to look upon government as something they need to be protected from, rather than something that can improve their lives. That's hardly a recipe for progress.

Kushma asserts that some people oppose the income tax (which Kushma favors) even though it would benefit their own checkbook if the state adopted an income tax (a debatable assertion, but we'll do that another time), "based on the notion that, given their past performance, the politicians in Nashville can't be trusted to spend more tax dollars efficiently or even honestly."

On that point, Kushma is correct.

There is a way to solve that problem, if legislators want to.

They could pass a Taxpayers Bill of Rights amendment to the state constitution, similar to Colorado's, and put it on the ballot in the 2006 governor's race.

A smart Taxpayers Bill of Rights (TABOR) would have three essential components:

1. It would limit the rate of growth of state government spending from state tax revenues to the combined rate of inflation and population growth.

2. It would require surplus revenue above that growth cap be returned to the taxpayers via across-the-board tax rate reductions, unless the people approved in a referendum spending the surplus on a specific set of projects or programs proposed by the Legislature.

3. It would require tax rate increases and new taxes be voted on by the people.

Colorado's TABOR amendment - which ushered in a decade-long economic boom in that state - is considered the benchmark model of such a constitutional amendment.

Consider the words of Martin McBride, an Oak Ridge resident who is leading an effort to enact a local version of the Taxpayers Bill of Rights there. McBride emailed me just the other day.

Today’s citizen has typically seen many more political promises and experienced more tax increases than typical citizens have in the past. In my lifetime, I have been in three states where governors have broken solemn tax-related promises to their constituents. I have experienced a variety of tax increases---and heard all the assurances that “this would be the last major tax increase.”

I am an optimist in general, yet I find I have very little trust left to give my government in the tax arena. Many other citizens of my generation appear to feel the same. I see the advancing experience-level of American citizens is the single greatest reason why so many tax increases are being currently turned back across the country - good, old-fashioned lack of citizen trust in government.

Faced with declining citizen interest and trust, what options do our political systems really have in future tax decision-making? More promises probably will not work. About all that’s left are options that give folks a little bigger piece of the tax decision-making process, (a bigger piece of the action!) This line of thinking brings you to the conclusion that approaches like the TABOR - options which gives citizens a more-direct say-so in tax policy - are the coming thing in this country and are, in a sense, inevitable..

I think McBride is right.

I personally believe an income tax is more damaging to the economy than a sales tax, though a low, flat and constitutionally capped and TABOR-ized income tax would not do significant harm. I also believe Tennessee's constitution does not allow an income tax without the constitution being amended.

That said, I also believe this: if voters were given a chance to vote on a package that eliminates the state sales tax, the Hall income tax, the state's "death tax" on inheritances and estates, and the state's economically destructive franchise & excise taxes on business, replace it with a flat 4% income tax that applied on the first dollar of income for complete fairness, and include a TABOR amendment to cap the whole thing (and every other state tax to boot) - and guarantee future surpluses came back to the taxpayers - it might well pass.

I ran the numbers on such a package, incidentally, using data from the year 2000.

That year, the sales tax, franchise & excise taxes, Hall tax and inheritance/estate taxes brought the state $6.09 billion in revenue.

That same year, total personal income in Tennessee was $148.4 billion.

A flat 4% tax that year would have brought in essentially the same amount of revenue, $5.93 billion, a difference of just $160 million.

Under such a plan, the state would immediately switch from being an exporter of retail sales to retailers just across the border in lower-tax states, to being a retail magnet. And by wiping out the largest business tax, Tennessee would immediately become a business haven and an economic growth powerhouse. Increased economic growth would benefit workers with higher wages and more available jobs, while providing state government a surge in revenue. Meanwhile, the state's costs for various welfare services would drop as unemployment fell.

And in future years, the stronger economy would no doubt generate revenue surpluses, which TABOR would force the government to give back via tax rate reductions. Those reductions would begin to ratchet down Tennessee's income tax rate. Unless the people voted otherwise, the tax rate would never go up.

Such a system would force the Legislature to economize and prioritize, to cut the bureaucracy down to size and root out waste and duplication, to confront the entrenched special interests and tell them the party is over and their feeding trough is closed. It would force the Legislature to deal honestly and opening with the public as well, making them justify every dollar spent and every request to spend a surplus dollar.

And a TABOR-ized tax system would also clean up government, by lessening the power of lobbyists and special interests. Legislators would not be able to make promises to lobbyists and special-interest groups of lavish new spending in exchange for generous campaign donations, because TABOR would put surplus revenue off limits without approval by voters. Instead of courting the financial support of a few well-heeled lobbyists and PACs, legislators would have to convince a majority of voters that their proposals for new spending or new taxes or spending of surplus revenue made sense. Fewer and fewer legislative proposals would be tailored to curry favor with this well-funded special interest or that powerful lobbyist because the taxpayers would be the most powerful special interest, and ordinary citizens would be the most powerful lobbyists, which is as it should be.

Think that's pie in the sky? It's not. In fact, it's what has happened in Colorado.

The Rocky Mountain News once urged voters in that state to reject the TABOR amendment, when it was on the ballot in 1992, but on Nov. 7, 1999, the paper urged voters in Washington state to pass a similar measure there, saying that TABOR “actually strengthens the political process rather than destroys it."

"That's clearly what has happened in Colorado since the passage of TABOR," the paper continued. "Here, shifting responsibility for taxes from politicians to the public hasn't resulted in automatic rejection of every spending plan.

"But while Tabor hasn't straitjacketed government, it has accomplished a number of good things. It has heightened interest in elections and government policy; it has given public officials mandates they otherwise would have lacked; it has shrunk voters' sense of helplessness over the use of their hard-earned taxes; and last, but hardly least, it has strengthened the fiscal responsibility of state and local government."

A TABOR-ized tax system - whether it includes an income tax or not - would bring about what Mr. Kushma says he wants: a government the people can trust. A TABOR-ized tax system puts the ultimate political power in the hands of the people. TABOR trusts the people. You, on the other hand, want to get the people to trust their government again by having the very government they can't trust pass some more rules to toughen the rules that very government, ranked a dismal 44th in integrity, currently flouts.

Sorry, Mr. Kushma. Your goal is noble, but your approach is pure naiveté.