Tennessee lags behind on taxation: it has consequences


As the state will become exempt from personal income tax by 2022, other taxes need to be reviewed or updated.

Tennessee residents voted overwhelmingly in 2014 to ban the state government from again levying a citizen income tax.

By a margin of 2 to 1 – 882,926 yes to 450,522 no – voters adopted Amendment 3, although it does not prevent the state from continuing to collect the Hall tax, a 6% levy on investment income.

This year, however, the Tennessee General Assembly and Governor Bill Haslam agreed to phase out the 87-year tax so that by 2022 the state would be exempt from personal income tax.

This is a godsend for the 200,000 or so people who pay the tax and who will put an average of $ 1,446 in their pockets once the tax is eliminated.

It also means the government will forgo tax revenue, which generated $ 303.4 million in 2015 – $ 197.9 million for the state and $ 105.5 million for cities and counties.

However, rather than deploring the loss of income, it is now an opportunity for elected officials to start discussing again whether current tax policies adequately meet the needs of Tennessiens. In short, they don’t.

Seventy-one percent of the state’s $ 34.8 billion budget is used for education or health and social services. The discussion must also expand to spending, with concerns from local school boards that the basic education program to fund public schools is inadequate and with ideas to expand, expand or reform TennCare as lawmakers seek to find an alternative to Insure Tennessee to provide health care. insurance for the working poor.

Gasoline tax

The state lags behind in funding transportation and infrastructure because the state’s gasoline tax has not been updated since 1989.

The 21.4-cent tax generates $ 670.2 million in revenue each year, according to the Tennessee Department of Transportation.

Since it was last revised almost three decades ago, fuel efficiency standards have risen, cars have improved, and road construction costs more, so the value of the tax has dropped sharply.

TDOT spends most of its budget on maintenance and does not have the means to build new roads.

Tennessee risks losing its status as the country’s third best road.

A report by the Transportation Coalition of Tennessee showed that there are nearly $ 8 billion in unfunded road and infrastructure projects.

Haslam sought to highlight those needs during his multi-city transport tour across the state last year, although critics accused him of wanting to propose a gas tax increase.

He stopped before he did, but he announced in his 2016 State of the State address his proposal to repay $ 130 million to the road fund – about half of the $ 262 million borrowed there. is ten years old but never reimbursed. He raised that to $ 142 million during the legislative session, which will help the state and local communities, but it’s far from a long-term transportation solution.

Even though raising the gas tax to keep up with inflation is not on the cards, lawmakers must make transportation needs a priority issue in 2017.

Tennessee’s continued growth and prosperity depend on it.

Sales tax

Despite being perceived as a tax-advantaged state, Tennessee still has the highest combined national and local sales tax in the country at 9.46%, according to the Tax Foundation, an independent tax policy research organization.

Hawaii has the lowest combined state and local sales tax at 4.35 percent, and five states have no statewide sales tax.

Unlike other states, basic items like food are not exempt from Tennessee sales tax.

Sales tax is considered a regressive tax because it creates a greater impact on the portfolios of low-income people.

However, this is important because every 55 cents per dollar of state revenue comes from sales tax, according to the 2015-16 Tennessee General Assembly Factbook. The second biggest slice of the pie comes from franchise and excise taxes, which represent 13 cents of every dollar received.

Property tax

Fifty-five of Tennessee’s 95 counties are or will be subject to property reassessments in 2016 and 2017, including Davidson, Williamson and Wilson.

In growing countries like Middle Tennessee, rising property values ​​and new construction are likely to result in windfall profits for local governments, but it could mean higher property taxes for some.

Not all will be able to afford it and stay at home.

Landlords may pass these increases on to tenants, who may be forced to rent elsewhere, further compounding the affordable housing problem in the area.

While there are relief programs based on age and income, state and local authorities should be proactive in helping landlords and tenants understand how they could potentially be affected and what their options are. There may also be policy or regulatory solutions that could provide additional relief.

The Metro Nashville-Davidson County government will likely see a record number of appraisals calls in an effort by landowners to reduce their tax burden.

Hopefully officials can avoid a record number of overdue tax payments.

Opinion Engagement Editor-in-Chief David Plazas wrote this editorial on behalf of the Tennessean Editorial Board. Call him at 615-259-8063, email him at [email protected] or tweet him at @davidplazas.

Editor’s Note: Due to a typo, an earlier version of this editorial incorrectly reported the Transportation Coalition of Tennessee figure on unfunded roads and infrastructure projects. The exact figure is almost $ 8 billion.



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