Tennesee Tax Reform Problem Essay, Research Paper

Tennessee’s Tax Reform Problem

During the last couple months ,Tennessee’s Governor Don Sundquist, has been

trying to resolve a major problem brewing in Tennessee. The proposed budget for the

State of Tennessee has a budget shortfall of $382 million dollars. Representatives in

Nashville have been working vigorously to find a way to fix the deficit. Governor Don

Sundquist wants to impose a state income tax to meet the budget deficit. The state of

Tennessee has a rather outdated tax system(1999, paragraph 3). The tax system was

developed in the 1920’s, and was primarily based on sales taxes (1999, paragraph 6).

The problem that Tennessee has ran into time and time again, is that when the

economy is down, then state spending is cut drastically ( 1999, paragraph 18).

The citizens of Tennessee have been outraged by this proposal. Professor of

UTC, J.R. Clark says that income tax is not the answer for the budget shortfall (News

Free Press, 1999). Although, a UTK professor of economics suggests that an state

income tax is the only solution to the budget problem ( News Free Press, 1999).

Anti-tax citizens are wanting the government to cut the state’s spending. Governor Don

Sundquist says, “Our tax system is out-dated. It was designed in the early and middle

decades of this century; it is poorly suited to our state’s needs and to our citizen’s sense

of fairness.” Recently, a tax study was launched statewide to see how the citizens feel

about a state income tax.(1999, paragraph 21). So far, the tax study sessions have

heard views only of citizens supporting a new tax system. Many people agree that

Tennessee is falling behind other states, and that there is a major need for reforming

Tennessee’s tax system. Many citizens are wondering where Tennessee is spending

all the tax money. Out of each tax dolllar that they collect, twenty-four cents goes

toward health and social service, one cent goes toward business and economic,

fourty-two cents goes toward education, three cents goes toward resources and

regulation, eight cents is spent toward cities and counties, nine cents goes toward

transportation, ten cents is also spent toward law, safety, and correction, and last three

cents is spent on general government. Where does the state get all this tax money

from? The state gets fifty-five cents from sales tax, three cents from motor vehicles,

ten cents from gasoline taxes, three-cents from income and inheritance, four cents from

gross receipts and privilege, fourteen cents from franchise and excise tax, four cents

from insurance and banking tax, two cents from tabacco, beer, and alcoholic

beverages, and five cents from all other taxes. This is where all taxes are spent, and

from who they are collected.

The problem with the state budget all boils down to, the state does not have

enough money to fund state programs. The state of Tennessee doesn’t seem to know

where to get the money. Why is Tennessee needing to reform their tax system?

There are many examples why they need to reform. First of all, there are more and

more state programs that must be funded by court order (1999, paragraph 26). An

example of this is that the courts have ruled that Tennessee earlier school funding

method was unconstitutional (1999, paragraph 26). Therefore, Tennessee had to come

up with a new way to fund schools, which cost them more money. Another example of

this would be TennCare. The federal government provides two-thirds of the funding,

and the state of Tennessee has to provide the other one-third (1999, paragraph 30).

Costs to run the TennCare program are going up rapidly. Second, inflation alone has

added $55 million dollars a year to Tennessee’s K-12 education budget (1999,

paragraph 31). This is only to allow the state to keep doing what they are doing now. If

Tennessee wanted to see any improvements, that would require a total of $73 million

dollars more.( 1999, paragraph 31). Lastly, higher education is in need for more than

$400 million dollars worth of improvements (1999, paragraph 32). Only twenty percent

of Tennessee population have gone to college, and only sixteen percent has actually

received their degrees (1999, paragraph 33). Some of Tennessee’s brightest students

say that their is no opportunity in Tennessee (1999, paragraph 34). That could be the

reason why only eighteen percent of college bound students want to stay in Tennessee.

What if Tennessee had more opportunity for these graduates, would it boost our

economy? Governor Don Sundquist says, “yes.” Sundquist believes that other state

statistics prove that the more graduates the better a economy is (1999, paragraph 35).

For example, in North Carolina, forty-three percent of high school students want to

attend colleges in North Carolina (1999, paragraph 35). In Virginia, forty-five percent

want to also stay in-state (1999, paragraph 34). In Tennessee only eighteen percent

have applied to under graduate schools in Tennessee. Do you ever hear of those

states with budget shortfall problems? What’s wrong with the picture? Why are

educated Tennesseeans wanting to leave? It’s simply because Tennessee ranks very

low in higher education, and job opportunity.

Don Sunquist argues, that the state government has done a good job at limiting

government, and government spending is down. Tennessee now ranks forty-seventh

nationally in state spending, and fiftieth in taxes. Sundquist urges Tennessee citizens

to ask themselves a few questions. Sundquist asks, “ Is it worth it to us to remain fifth

in that nation in taxes, if our schools and public services are also the lowest ranked?”

He also asks, “ If we must raise more revenue, do we really want to do that by raising a

sales tax that is already one of the nation’s highest, or by thinking further with business

taxes that are among the highest in the Southeast?” These are questions that the

Governor wants every Tennessee resident to stop and think about. How should

Tennessee meet it’s tax reform problem? Is it through a state income tax, or other

budget cuts?

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