Pushing for the income tax?
Tennessee’s sales tax in the news:
When Julie Abel goes grocery shopping each week, she drives more than 25 miles to Georgia to avoid paying the nation’s highest average tax on food: 8.4 percent in Tennessee.
“If you can save $5 it is worth driving down the road,” Abel said after traveling from her rural home in Hamilton County, which collects 2.22 percent sales tax on food on top of the 6 percent for the state. Georgia does not tax food sales.
Abel is not alone in her frustration. Rep. Michael Kernell, D-Memphis, said he regularly hears complaints about the state’s almost 60-year-old food tax and he predicted it would change.
I don’t know that the numbers are accurate as our sales tax is 9.5% but 8.5% on some food and not others but the breakdown is arbitrary and the new sales tax laws have not been in effect for 60 years. Still, driving across a state line to buy food isn’t a bad idea. More:
An “average family of four could eat for free from Thanksgiving to Christmas on the tax they pay on food in a year,” Daly said.
A recent report from Daly’s group shows Tennessee leads the nation with the highest average sales tax on food, 8.4 percent, and a 9.4 percent sales tax.
Tennessee is among nine states that either have no state income tax, or collect it on dividend and interest income. Some say a state income tax could help ease the burden of the tax on food.
And there’s the pitch. Bredesen says he won’t support it and that’s why I voted for him.
December 26th, 2005 at 5:34 pm
“If you can save $5 it is worth driving down the road,”
It says something about the state of education in our nation that someone will hop in their 18mpg car full of $2.50/gal gas and drive fifty miles round trip to “save $5”.
Work that word problem out, Ms. Abel, you dolt.
December 27th, 2005 at 2:44 pm
Even if you hate the idea, this is one of the reasons an income tax makes sense: so freeloaders can’t drive over to the next state to dodge paying their fair share of the state tax burden. It’s even more visible with big-ticket items like cars and appliances.
In my former home state of Ohio, the top tax bracket was 5.4% and the state/local sales tax was 5.5% – 6.0%, depending on where you lived; the sales tax didn’t apply to food (even restaurant food if ordered “to go”). When you factor that exemption in, along with the fact that the 5.4% is figured from federal AGI, the resulting rate of taxation isn’t much different from Tennessee’s 9.25-9.75% tax, and has the additional benefit of not being tied wholly to in-state consumption.
Ohio’s state income tax laws even contained a provision with “instant refunds” for any budget surplus; if, say, a 1.2% surplus remained at the end of the year, your state income tax liability was reduced by 1.2%. And lest the cynics complain that this would never actually happened, it happened the last two or three years I lived there.
December 27th, 2005 at 2:50 pm
When you get taxes that high compared to other regions, you end up with all sorts of distortions. People go out of their way to avoid paying sales tax on things, increasing the black market and driving people across the border, hurting the local economy and driving donw the tax collection even more. And, of course, that means you cannot pay for things like good schools and roads and police protection and health care and the like that attract business. Which in turn means your economy suffers … and you see how this ends.
And, of course, you have a situation where classes of people can avoid paying much in the way of taxes at all.
The way to run a tax system is not to tax one thing a lot, but tax a lot of things a little bit. You minimize distortions and make it much more difficult for people to avoid paying any taxes.
December 27th, 2005 at 8:45 pm
Anyone here think the sales tax wouldn’t climb back up in a few years when those ethically challenged crooks in Nashville spend themselves into a another hole(cough cough Pre-k)is delusional.
The fairness of the tax argument is moot when you can’t trust the folks wanting to enact it.
December 28th, 2005 at 1:09 am
north carolina has an income tax and i noticed their sales tax was pretty high when i went to the mall in charlotte over christmas. seemed like it was pretty much the same rate as ours.
December 28th, 2005 at 2:08 am
Drake:
Creep up? Probably. But back anywhere close to the current +9% level? Not likely. Even Chicago, with among the highest sales tax of any major city, is at 8.75%, fully 2.5% of which is locally added (the state income tax is 6.25%).
And, of course, if the “crooks” do go apeshit with the taxing and the spending, you can always vote ’em out. Or don’t you believe in democracy?
December 28th, 2005 at 11:41 am
I believe in our Republic, if that’s what you mean. But I believe that politicians are self-serving and craven when push comes to shove even more so… You can live with your head in the clouds if you like…makes it easier for them to reach into your wallet when you aren’t looking.
Your assumptions that it will creep up only slightly are yours and yours alone. The locals here will tell you that something rotten is going on in Nashville. Again, it’s about trust sir. Save your probably for someone else. Chicago also has local taxes out the ying-yang as well don’t they? Income tax didn’t solve their problems.
December 28th, 2005 at 1:29 pm
tgirsch, with a sales tax, only those on the borders are considered free-loaders. With an income tax, the free-loader rate goes way up. Like the federal income tax, TN’s income tax will be ‘fair’ so that the poor don’t pay ‘more than their fair share’. Translated: soak the rich.
I feel for the poor, as I was poor at one point in my life. My problem, however, is that the poor don’t pay much in taxes anyway. As has been proven before, the top 50% wage earners pay 95% of the taxes. Is that fair? Do I, as one the top 50% now, get more service from the government? No, we strive to the communist utopia of ‘from each according to his ability, to each according to his needs’.
One of the people from the TFT (Tennesseans for Fair Taxation) was on the radio this week and actually said that some people “have too much.” That seems to be the liberal mantra. While SayUncle is against any perceived violation of an amendment, I’m against this whole idea that some people are ‘over-advantaged’. The concept of ‘fair’ taxation or income redistribution stems from the idea that we should all have the same. Those with more are, by definition, evil.
December 28th, 2005 at 8:40 pm
Drake:
I don’t disagree. But this, to me, is a reason to hold them accountable to the electorate, not to hamstring their ability to do anything.
I make no such assumption. I only assume that it won’t creep right back up to current levels, and that if it starts to get anywhere close, those in power will be promptly voted out on their ass. Breaking that sort of promise will get you voted out. Just ask George Senior.
My problem (and it deserves its own blog post) is the complete and utter cognitive disconnect on behalf of the anti-tax crowd. They just repeat the “taxes are bad, taxes are evil” mantra while ignoring the fact that the vast majority of people tend to really, really like the things taxes pay for. Does that mean we should give corruption and waste a free pass? Of course not. But neither should we oppose any and all new taxes, tax increases, etc., just because we’d rather not pay taxes at all (or, at least, try really hard to avoid paying as much as we can avoid).
Would I like to pay less in taxes? Sure. Am I willing to throw schools, roads, etc., into the crapper to achieve that end? No. (The anti-tax wing at this point generally counters with one of two things: either that they’re “already” in the crapper, so cutting funding can’t make things much worse; or that the supply-side fairy will magically turn lower rates of taxation into more tax revenue overall. Both of these are obvious bullshit.)
JJ:
I’m sorry, but you’re utterly and completely full of shit. There’s no desire to “soak the rich,” and your statistics are sorry parrotted crap. For starters, the corollary to your “free-loader rate going up” is that you apparently support taxing a single mother who makes $19,000 per year at the same rate as Bill Gates. Which may be the case, but you’re not going to get much popular support for this (not even from Bill Gates). Secondly, you forgot to include “those with internet connections” in the group of freeloaders along with those near the borders. Ask Uncle about his big-box appliance purchases. Third, you seem to be operating from a different definition of “freeloader” than I am: you’re including everyone who doesn’t pay taxes (or doesn’t pay much), whereas I’m just talking about people who can otherwise afford to and go out of their way not to.
But this is the ultimate line of crap:
That depends. How big a share of the wages to the to 50% get? If it’s in the 90% range, then this seems quite fair. If, however, the top 50% of wage earners only get about 50% of the wages (as this oft-repeated statistics relies on its readers to presume), then it may very well be unfair. What’s the real number? I honestly don’t know.
Yes! How is it that you are able to earn your wages? What enables you to do this? The education, infrastructure, and security provided by the US government. And if you make $100,000 per year, then you’ve benefited from these (at least) five times as much as the guy who makes $20,000 per year. To that end, some level of progressive taxation absolutely makes sense.
Don’t like that example? Try a different one. Do you benefit more from the interstate highway system than a guy who can’t afford a car. Of course you do!
Now, in theory, people who earn more will pay more in sales taxes because they will generally spend more. But this suffers from three problems: the first is that it ties revenue directly to consumer spending; the second is that it can easily be circumvented by buying from out-of-state sources; the third is that since the poorest people must (by necessity) spend the most, they wind up paying the most relative to income. The net effect is that Tennessee’s tax structure is actually regressive, and can quickly become underfunded when the economy turns south.
Where we will agree is on the idea that people can “have too much” or that they should be taxed more simply because they have more (and for no other reason). But we’re probably not going to agree on what constitutes “fair” taxation. I’m well-compensated, and (at the federal level, at least) I pay quite a bit more than my aforementioned single mom. And that’s as it should be.
Now I’m more than willing to have a level discussion about fair taxation, but you’re going to have to turn down the rhetoric about five notches before we can get there.
December 29th, 2005 at 12:15 pm
Heh.. Where’s the sob story about New Yorkers who have to drive several hundred miles to save $5 PER PACK of cigarettes? For some reason the media treats them like criminals.
December 29th, 2005 at 3:04 pm
tgirsch, I thought long and hard about this response.
Let me first start off with my view on taxation liberals. There are three kinds:
1. Those who would benefit from high taxes through government subsidies.
2. Those who have much and feel they have the right to make decisions for others.
3. Those who are middle-class and mean well, but are misled.
With that said, I’m not going to classify you. I don’t know enough about you. If you think there is a 4th, let me know.
Let me ask you some questions? I know these are leading and show a bias, but I’m allowed.
1. Do you feel it is right for the government to seize personal assets?
2. Do you feel it is right to place a higher tax burden percentage on the successful in the world?
3. Do you feel that we all should have the expectation of being treated fairly under the law?
I do support taxing the single mother at the same percentage as the billionaire. I’m sorry, but it is the only JUST way to do it. To do it any other way is like making the penalties for crimes dependent upon income, as a matter of law. I know, I know, you’re going to spout the liberal line of how rich people get off with lighter sentences. I don’t care. Whether the position is popular or not doesn’t matter. What matters is whether the law is equitably applied to all persons regardless of social standing or income. A flat percentage tax, while not popular, is the only fair way to tax, in my opinion. Going out of state for purchases is something the state governments consider when they set sales tax. We have the right to vote with our economic choices, as well as the right to vote at the ballot box. It happens all the time, and it is legal.
Your example on government services is a line of mumbo-jumbo. I pay not only for my services, but I’m forced to pay for the services of others. How would you like it if I came to you and demanded 10% of your income for my church? Wouldn’t like it? It wouldn’t be fair. I do not ask that you give to my charities. Why do liberals believe they have the right to determine my charitable choices? TennCare is the most pressing example in TN.
Since I own a car, I pay additional taxes they don’t. Your example in this case doesn’t hold water.
If I make $250k/year, I bet I’ll pay more in sales tax than the “poor single mother” who makes only $19,000. I will spend more. Your statement that they must (by necessity) spend the most is crap and hokum. You are mixing your comparisons between comparing dollar amounts and percentages.
I don’t believe our “progressive” tax structure does anything other than pull an amoral Robin Hood. They will take from the productive and give to the unproductive. It is wrong.
I favor either a consumption based tax, or a flat tax. You can cry in your Chardonnay all you want about the plight of the poor, single mother. I don’t care. If law is only made on the worst case, it is bad law. Making tax structures unfairly favor the poor is bad law.