Monday, February 12, 2007

State Republicans Are on the Right Track With Food Tax Elimination

Republicans in the state legislature have introduced a plan to eliminate the sales tax on food in Tennessee by 2018. In my opinion such action is long overdue, but as usual there's a catch. Backers of the plan have not proposed an alternative revenue stream.

Tennessee has possibly the country's most regressive system of taxation. Our mammoth sales tax, which is on average the nation's highest, is only slightly lower for groceries. Sales taxes, particularly those on necessary items, disproportionately target lower income persons and families.

Tennessee currently has a budget surplus, and Governor Bredesen (who opposes eliminating the food tax) has proposed tripling the cigarette tax. Both could soften the blow of losing hundreds of millions of dollars by phasing out sales taxes on food. But Bredesen would prefer this extra revenue be spent on much needed pre-kindergarten programs.

I agree with both the governor and the Republicans. We need to get rid of taxes on food and invest in early childhood education. Maybe we need to explore different revenue streams. I know that many Tennesseans, particularly talk-radio listeners, are philosophically opposed to a state income tax, but a graduated income tax is in my opinion the most just means of taxation. If Tennessee were to implement a graduated income tax, lower the state sales tax, and eliminate taxes on food and non-prescription drugs, most Tennesseans would pay less in taxes, but the state would generate more revenue.

Related: Back in 2002 I wrote this article on tax reform for the Nashville Scene. I like to think that it gives a good overview of the different perspectives on taxation in the Volunteer State.


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