published Wednesday, May 30th, 2012

Big winners, many losers

It's hard to head into another hot summer without venting steam over the way Republicans in control of Tennessee's Legislature again left Nashville with ordinary Tennesseans paying among the nation's highest sales taxes on food, while they bragged about granting the state's richest citizens the biggest tax cuts the top 1-tenth of the top 1 percent has received in modern times. The unfair disparity could not be more glaring.

A large majority of states that levy sales taxes exempt both food and prescription drugs from such taxes. Of the five states that do levy sales taxes on food, just two apply higher sales taxes on food than Tennessee's new rate, which the Legislature reduced from 5.5 percent to 5.25 percent. Mississippi charges 7 percent in sales taxes on food, and Kansas puts on 6 percent. Alabama's food sales tax is 4 percent; and West Virginia's is 3 percent.

The cost to the state to cut the sales tax on food by a quarter of penny in Tennessee is estimated to be around $20.4 million. By contrast, the state expects to lose $104.1 million over the next four budget years when it finishes phasing out the state's inheritance tax, which falls mainly on a statistically tiny fraction -- in the thousandths of one percent -- of wealthy Tennesseans.

In the budget year now ending, for example, 845 families paid $98 million in state inheritance taxes. In a state of 6.4 million people, it's an exceedingly rare family that ever pays state taxes on inherited wealth. The phase-out raises the exemption on state inheritance taxes in the 2012-2013 fiscal year to $1.25 million; to $2 million in 2013-2014; to $5 million in 2014-2015, and then drops it altogether. Dropping the tax on estates of more than $5 million, the state Department of Revenue estimates, will leave just 39 families affected. (The Legislature's other gift to high-income Tennesseans this year was ending the tax on sizable cash gifts to families members and friends, a practice of more affluent citizens. That will cost the state another $15 million in lost revenue.)

This figures suggest at least two things: One is that the bulk of the state's inheritance comes from very wealthy families at the top end of multi-million-dollar estates. The other is that Gov. Bill Haslam's family, among the scions of his family's national Pilot Oil company, will richly benefit from the governor's personal drive to end the state inheritance tax on super-wealthy families like his own. That makes his crusade to end the upper-end of the estate tax a blatant conflict of interest.

The contrast with the state's treatment of sales tax on food, then, is all the more notable. Had Haslam cared more about Tennessee's ordinary working families, he would have better served the state by arguing for a more significant cut in the state sales tax on food. He could have lowered the rate five times his quarter-of-a-penny cut over the same time period -- to 4.25 percent -- and it would have cost the state less than ending the state inheritance tax.

As it is, the 1/4-penny cut will save a Tennessee family of four, making the state's median family income of around $54,000 a year (usually with two incomes), about $15 a year on grocery purchases of $5,200 a year, or $100 a week. Over a year, that's an invisible gain. Against inflation, it leaves ordinary Tennesseans going backwards -- and losing more ground to the most regressive tax in the state's revenue base.

It's no wonder that the income gap between ordinary Tennesseans and the ultra-wealthy continues to broaden in Tennessee, as elsewhere. What's amazing is how Republican lawmakers and Gov. Haslam think that is so wonderful.

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Don't you know, you're not supposed to mention the class warfare they're engaging in?

It might be seen as exploitative, and getting people outraged at injustice.

Only the Republican party is supposed to do that, and only when they can manufacture a false cause to distract everybody.

May 30, 2012 at 12:48 a.m.
joneses said...

What the libtard biased author failed to mention is Tennessee has the Hall Income Tax which is a tax on dividends specifically designed to take more from and penalize the wealthy. Also the author conveniently left out the fact that our tax system was established by the Dummycrats who had control of Tennessee State government for almost a whole generation. Why does the author not address the fact that Governor Bredesen, a Democrat, never attempted to lower the sales tax or implement a state income tax? The only governor in recent history to try and pass a state income tax was Governor Sundquist a Republican and it did not go well for him? Many Democrats did not vote for this state income tax because of public outrage against it. It is what the citizens want in Tennessee not the socialist libtards agenda of a dictatorship like they put in the White House. A sales tax is the fairest tax as everyone pays for the resources they use in Tennessee. The less fortunate use the roads, schools, public services as well and there is nothing wrong with them paying their fair share.

May 30, 2012 at 5:07 a.m.
joneses said...

The author also fails to mention when a wealthy person buys a luxury car they are paying more sales tax on that car than a poor person would pay in sales taxes on food for the whole year.

May 30, 2012 at 5:55 a.m.
EaTn said...

Were it not for the gullible middle-class voters believing the wealthy propaganda, we would not be having this discussion. Keep the voters dumbed-down and under control at the voting booth.

May 30, 2012 at 7:14 a.m.
conservative said...

Joneses got it right about the sales tax. The sales tax is a flat tax and a flat tax is the fairest tax. Even Lieberals dare not openly advocate that the wealthy pay a higher sales tax rate than someone less wealthy.

Also as Joneses pointed out the wealthy who can afford the higher price car or any item will pay a higher tax.

A flat tax takes much of the greed, envy, corruption and ideology out of politics.

May 30, 2012 at 10:42 a.m.
sjs823 said...

If you're going to make this a personal thing involving Gov. Haslam, I wish to point out that the Haslams are generous people who probably give more money to charity every year than the editorial writer has made in his lifetime. And if you want to state it on a percentage basis, they probably give a higher percentage of their income to charity than the editorial writer, if he is the typical chintzy liberal Democrat.

May 31, 2012 at 10:55 p.m.
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