Tennessee says no to taxes ... again

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As states continue to explore ways to raise revenue in a bad economy, including the implementation of a so-called "millionaire's tax" and increasing and expanding sales taxes, at least one state is saying "no new taxes." The state of Tennessee is currently facing a vote on a constitutional amendment to declare an income and payroll tax unconstitutional. There's just one catch: It already is.

Under state law, Tennessee does not tax individual wage income earned by state residents. Tennessee does, however, collect taxes on unearned income such as interest and dividends.

So why the vote?




Opponents of the legislation say that the amendment is unnecessary and strictly political. Proponents, however, say it's necessary because desperate times may call for desperate measures. Sen. Brian Kelsey (R) introduced the bill in the Senate, claiming that the amendment is necessary because without it, state lawmakers may try to pass an income tax on earned income in the midst of a bad economy.

He said about the amendment, "There are some in this state that believe an income tax is constitutional; that's why we need to pass this at this time."

According to Sen. Kelsey, the amendment had been proposed before. However, it never generated much interest before. This time, the amendment passed in the Senate by a vote of 25-7 and will go to the House for discussion and a vote. An amendment to the constitution would have to be vetted by voters before it can be made law. The earliest an amendment could go before voters is 2014.

The bill, officially known as SJR 0763, was originally introduced in February 2010. Notes on the bill indicate that it:
"Proposes an amendment to clarify the constitutional language that currently prohibits the levying of a tax on any class of income, other than income derived from stocks and bonds, and to prohibit any tax levied on or measured by employer payrolls."

The bill has, to date, been amended at least once, to replace the introductory clause to be more forceful:

Notwithstanding any authority set forth in this paragraph or elsewhere in this Constitution, the Legislature shall not levy any tax upon personal income or any tax measured by personal income, except that the Legislature may levy a tax upon incomes derived from stocks and bonds that are not taxed ad valorem. Notwithstanding any authority set forth in this paragraph or elsewhere in this Constitution, the Legislature shall not levy any tax upon payroll or any tax measured by payroll, except nothing contained herein shall be construed as prohibiting any such tax in effect on January 1, 2010, or adjustment of such tax.

Semantics, perhaps? Or making an important statement?

Those opposed to the bill say that the entire bill is about pandering for votes and grandstanding and accomplishes nothing. That last part may be true, since realistically, the bill doesn't do much. Even the fiscal notes on the bill as reported by the Tennessee General Assembly refer to it as "not significant."

But a political victory may be viewed by voters as taking a hard line against tax increases. In a difficult economy, that may win some support. What do you think?
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