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 The state of Tennessee has a rather outdated tax system (1999, paragraph 3).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 dollar that they collect, twenty-four cents goes toward health and social service, one cent goes toward business and economic, forty-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 tobacco, 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 Sundquist 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 33 d.