April 8, 2008

An Academic Exercise

Vanderbilt University law professor Herwig J. Schlunk is pushing for Tennessee to adopt a "broad-based income tax" on top of its retail sales tax. His 74-page paper is a theoretical exercise based on a series of assumptions and hypotheses, though Schlunk belies his politics with an odd out-of-the-blue jab at two renowned income tax foes - former state senator and now U.S. Rep. Marsha Blackburn, and radio talk show host Phil Valentine.

Throughout the paper, Schlunk rests his whole argument on three highly questionable assumptions: that all or most government spending is good and there is no waste, that government spending must go up rather than down, and that only a system which taxes both income and consumption is a fair system.

Schlunk is seemingly oblivious to the great debate over what, exactly, constitutes "fairness" when it comes to taxes - some say only a flat tax is "fair" because it taxes all people at the same rate, while others say only a system of progressive tax rates is "fair" because the wealthy should pay a higher rate. Fairness is subjective, not objective, though you wouldn't know it from reading Schlunk.

Schlunk then asserts that only a system which taxes both income and consumption is a stable revenue source long-term. By "stable" it is clear that he means "able to keep up with rapid growth in government spending." Except, it isn't true - during the last national economic recession, states that rely more on income taxes than sales taxes suffered much larger deficits in the last recession than states which rely mainly on sales taxes.

The biggest glaring hole in Schlunk's paper, though, isn't one of economics or fairness, but - rather strangely for a law professor - it is his failure to address the legal aspects of the income tax. Schlunk's paper attempts to build a theoretical case for Tennessee having a state income tax, but never addresses the elephant in the room: An income tax is unconstitutional in Tennessee. Period.

Three separate unanimous Supreme Court rulings say so.

The state constitution itself even says so. Explicitly:

Article 11, Section 9, of the state constitution says this: The General Assembly shall not authorize any municipality to tax incomes, estates, or inheritances, or to impose any other tax not authorized by Sections 28 or 29 of Article 2 of this constitution.

The language of Article 11, Section 9, of the Tennessee constitution clearly states that the legislature is not permitted to authorize municipalities to tax income. Section 9 also serves as commentary on Article 2 Sections 28 and 29, which list a variety of taxes the legislature is authorized to levy. Article 11 Section 9 makes it crystal clear that in income tax is part of the list of taxes that are "not authorized by Sections 28 or 29 of Article 2."

I've explained this numerous times over the past several years here at BillHobbs.com and not one single pro-income tax elected official, attorney general or activist has ever tried try to explain how an income tax can be constitutional in light of Article 11 Section 9. Because they can't.

It doesn't matter if an income tax would be more "fair," however you define fair. It doesn't matter if it would be a more "stable" revenue source (though historical data indicates it would not be). The income tax is not constitutional in Tennessee.

You'd think a law professor proposing a Tennessee income tax would have started there.