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« Hey Glenn, Ketchup Will Ya? | Main | TdF Update: No More Gifts » July 22, 2004Getting It Right
Currently the state is sitting on a roughly $380 million surplus, which depending on whom is asked, may or may not be an indication that the state's tax structure is sound."Other newspapers have reported a lower number, mislead by the fact that before the fiscal year was even finished the governor and the legislature were working overtime to spend the surplus - and, thus, to obscure the fact that, through the first 11 months of revenue collection for the current fiscal year, Tennessee has collected $380 million more in revenue this year than is needed to balance the budget. Cauthorn, who I've criticized on this blog before for getting the number wrong, deserves praise for getting the number right. [The City Paper's website appears to be down right now. When it is revived, I'll add the link to the story.] The rest of Cauthorn's story is worth reading, too. Reporting that the report from the Tennessee Tax Structure Study Commission is likely to "make little difference in state policy," Cauthorn notes that the commission's members have already agreed that the state's tax structure has an "elasticity" problem. It doesn't grow with the economy, the sales tax is burdensome to poorer families, the sales tax is too high, and business franchise taxes are too high...The commission, thus, echoes the platform of those who favor creating a state income tax, and makes it plain the commission - which was stacked with pro-income tax members - will recommend creation of a state income tax. Of course, the "elasticity" claim is a lie. During the recent recession, states that relied on income taxes suffered larger revenue declines than did states that relied on sales taxes, as I wrote about here in August 2002 and here in August 2003. Tennessee's tax structure, heavily dependent on a sales tax, regularly produces year-over-year revenue growth that mirrors the growth of the state's economy and provides more than enough revenue to offset rising costs due to inflation and population growth. It is only "inelastic" in the sense that it doesn't keep up with the big-spending dreams of legislators and governors who regularly exceed the state constitution's cap on the growth of spending, which is tied to the growth rate of the state's economy. Unfortunately, the commission was set up from day one to examine only the revenue side of the equation. It has not spent one day looking at how spending has grown faster than the economy, outstripping the ability of taxpayers to pay for it. It is not spent one day examining the frequency with which the legislature and every governor since Lamar Alexander in 1985 has exceeded the state constitution's limit on the annual growth of spending, by a cumulative first-year total of more than $3 billion - including this year by $105.1 million. Nor has the commission spent one day investigating how various governors - including current Gov. Phil Bredesen - routinely spend surplus revenue in a process that appears to circumvent the state constitution. And because it has not, the Tennessee Tax Structure Study Commission's report is worthless even before it is finished. Posted in Tennessee Budget & Tax Policy
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Skip is the most accurate reporter on Capitol Hill. He is fair and the City Paper consistently beats the Tennessean on state leg matters. Post a comment
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The Nashville City Paper's Skip Cauthorn, in a report updating the status of a commission studying Tennessee's tax structure, has become the first reporter to accurately report the size of Tennessee's tax revenue surplus: