Who loses?• 125,000 pay the Hall tax.• Nearly 6 million pay sales tax.• The five states with the highest average combined state-local sales tax rates are Tennessee (9.45 percent), Arkansas (9.19 percent), Louisiana (8.89 percent), Washington (8.88 percent), and Oklahoma (8.72 percent).
After a tidal wave of anti-tax sentiment swept Tennessee last Tuesday, the same lawmaker that brought Amendment 3 to ban a general state income tax and local payroll tax now is peddling a bill that would phase out the state's Hall income tax on stock dividends and some bonds.
If he succeeds again, our sales taxes will climb into double digits, and unless you never buy anything, your wallet - not the wallets of the wealthiest Tennesseans - will get thinner and thinner.
The Hall income tax affects about 125,000 Tennesseans and 21,000 entities - providing the state and Tennessee cities and counties with about $264 million.
Meanwhile, the sales tax - already the nation's highest - affects all of Tennessee's 6 million residents, and it is paid on everything from chewing gum to baby food to clothes to cars. It provides the state with about $7.2 billion.
The Institute on Taxation and Economic Policy, a liberal-leaning think tank, last spring estimated that if the Hall tax were eliminated, Tennessee's wealthiest residents with annual incomes of $970,000 would receive "a whopping 63 percent of the benefits of the tax cut." Another 23 percent would end up in federal coffers because those who paid the Hall tax would no longer be deducting state payments on their federal tax returns. The remaining 14 percent "would be spread thinly" among other Tennesseans with small investments who would save an average of less than $50 per year, according to the think tank analysis.
And here's a big reveal: The move to eliminate the Hall tax was backed last spring by Grover Norquist of Americans for Tax Reform as well as the Tennessee chapter of Americans for Prosperity, a group tied to billionaire brothers Charles and David Koch.
The richest want a tax break, and they don't care if we have to pay more sales tax to get it for them.
The bringer of both the income tax ban and the Hall tax elimination proposal was Tennessee state Sen. Brian Kelsey, R-Germantown, who was unopposed in 2014 after his first full term in office. Little wonder: this tea party-leaning lawmaker's top contributors are the health care and banking industries.
Thankfully, Chattanooga's own Gerald McCormick, another Republican and the state house majority leader fresh to his fourth term in office and without any opposition in 2014, is offering another idea for debate.
McCormick and Senate Majority Leader Mark Norris, R-Collierville, late last week filed a bill that would instead cut Tennessee's sales tax rate from 7 percent to 6.75 percent.
"In the rush to cut taxes I think we just need to put everything on the table," McCormick said last week.
It's true that nobody likes taxes - at least they don't like taxes when they think of them of as taxes.
But sometimes it's helpful to think of taxes as roads and bridges, as our children's education, as our state and local city law enforcement and first responders (under the Hall tax three-eighths of the money goes to local governments). Without Hall income tax revenues, many cities could face tough choices: cutting expenses and services or raising property taxes.
Those needs won't go away even if the taxes do. Ask Gov. Bill Haslam.
"Given where we are right now I don't see a way for us to do away with the Hall income tax," Haslam recently told reporters. "The reality is, if you look at the budget pressure we have, if you look at the breadth of revenue that we have to draw off of for now, I don't see a way to do it. ... I can't take $270 million out of our budget without something to replace it."
No taxes sounds really good until you really think about it. That's just what the anti-tax, anti-government crowd is banking on. That we won't really think.
Kelsey and his buddies touted jobs as the reason we needed Amendment 3 to forever ensure an income tax ban. They contended that if our state constitution clearly banned an income tax, jobs will flock here. But Tennessee already had no income tax and jobs were not flocking here. In fact, we have one of the highest unemployment rates in the South, higher than six of our eight neighboring states that do have state income taxes. Employers look at our low education ranking and tell us that we don't have a jobs-ready workforce!
In education, after years of ranking in the high 40s out of 50 states, our fourth-graders have finally climbed from 46th in math to 37th in the nation. In reading, they did even better, plowing their way up to 31 from No. 41.
Do we really want to threaten this fragile improvement?
Again, no one likes taxes. But we do like our children and our state and our good roads - and our mostly low taxes.
Let's not give the richest among us a tax break while the masses of us pay more.