Tennesseans rallied at the state capitol in Nashville last week to oppose a state income tax. It’s Déjà Vu All Over Again...and Again...and Again... This Time, Anti-Tax Proponents Call Out the ‘DOGS’

For the umpteenth time in the past four years (Read: Citizens Defeat Tennessee Income Tax Measure (Again)), Tennesseans rallied at the state capitol in Nashville last week to oppose a state income tax. And, for the umpteenth time, chants of "NO NEW TAXES" from thousands of angry taxpayers, and incessant horn-honking from citizens circling the capitol in their automobiles, won the day.

On May 29, House Speaker Jimmy Naifeh (D-Covington) and Republican Governor Don Sundquist fell five votes shy of the 50 needed to pass Naifeh’s 4.5 percent flat-rate income tax measure. Shortly after the vote, lawmakers adjourned for three weeks, leaving the House and Senate Finance Committees behind to craft a balanced budget with no new tax revenue. Under the state constitution, the Tennessee legislature is required to pass a balanced budget annually. June 30 marks the end of the fiscal year.

Tennessee is facing a nearly $500 million budget deficit, due in large part to out-of-control government spending and gross mismanagement of TennCare, the state’s health care program. (Remember Hillary’s national healthcare plan? This is the pilot program in action.) Moreover, the state is $950 million shy of Governor Sundquist’s proposed 2002-2003 budget, and Finance Committee members are busy hacking away.

The House Finance Committee began hearings this week on specific cuts within a no-new-taxes budget, formerly known as the Downsizing Ongoing Government Services (DOGS) budget. First on the chopping block is TennCare, as some are advocating its elimination. Additional recommendations include abolishing the state’s Tourism and Economic Development Departments, closing all state parks that are not self-supporting and an across-the-board 12.5 percent reduction in most other state government departments.

While Finance Committee members are busy slashing the size of government, Sundquist and Naifeh are mining for additional votes in the legislature, as they vow to bring the income tax measure up again when lawmakers return to Nashville on June 19.

Hypothetically, should income tax advocates obtain the necessary votes for passage, which is unlikely given the overwhelming opposition from the citizenry, a state income tax faces an even bigger and more important hurdle than the philosophical impasse on how to balance the budget. A state income tax violates the Tennessee Constitution.

Article II, Section 28 of the Tennessee Constitution states, "The Legislature shall have the power to levy a tax upon income derived from stocks and bonds that are not taxed ad valorem." The Tennessee Supreme Court on three separate occasions has unanimously declared unconstitutional a tax on personal income passed by the state legislature based on that clause.

In 1932, the court ruled in Evans v. McCabe, 52 S.W.2d 159, that Article II, Section 28 "conferred upon the Legislature the power to tax only one class of incomes," and "necessarily denied to the Legislature the power to tax incomes of other classes." In 1960, in Jack Cole Co. v. MacFarland, 337 S.W.2d 453, and again in 1964 in Gallagher v. Butler, 378 S.W.2d 161, the Tennessee Supreme Court upheld that earlier decision.

That’s not stopping Sundquist and Naifeh from continuing their quest to impose a state income tax. They point to recent state attorney general opinions claiming that a tax on income beyond that derived from stocks and bonds would be constitutional. Ironically, so did the legislatures that passed income taxes that were ultimately struck down in 1932, 1960 and 1964.

We can almost predict what’s going to happen when the legislature returns in a couple of weeks. Why? Because we have seen it before, time and time again. Pro-tax advocates will bring Naifeh’s measure up for a vote. People from across the state will show up in droves to protest the measure. And, it will ultimately be defeated, again. The legislature will unleash the "DOGS" and pass a balanced budget with no new tax revenue, again. And income tax advocates will not go away, as they go back into their little holes to draft a strategy for next year, again.

If, on the off chance they do succeed, there is every reason to believe that the Tennessee Supreme Court will strike it down, again.

Déjà Vu?

As defenders of federal and state constitutions, we believe it should never have to get that far. Perhaps it won’t. After all it is an election year, and Tennesseans are paying attention."

June 6, 2002
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