Saturday, October 25, 2008

Tennessee faces worst fiscal situation in nation; a state income tax must be enacted in new year

The Wall Street Journal reports that the state of Tennessee has the second worst drop in sales tax collections in the third quarter behind the state of Washington.

But Tennessee's situation is far worse than Washington. That state has an income tax to fall back on, and people hurting will ultimately pay less of their incomes back to the government. It can be raised to only touch those making more and able to pay.

Teneessee's reliance on sales tax, however, means everyone pays the same no matter how much they are hurting. That's unfair. And now it really can't be raised politically and economically. So deep cuts into the bone of government must follow.

Ultimately, that's price of cowardice and lack of integrity by radio talk show hosts and state leaders -- most prominently Gov. Phil Bredesen -- we the people must pay.

Bredesen campaigned twice for governor on the state not needing an income tax. He put getting into elected office his first priority over what was right -- a trademark of his political career. And he still calls himself a Democrat, and even touted himself as worthy of being Sen. Barack Obama's runningmate.

He is representative of the amount of political delusion and deception in Tennessee. And it's why the hard times coming to America are going to be even worse here.

A state income tax would reduce the tax bill for two-thirds of Tennesseans. It would also allow for the sales tax to be removed from food, something Bredesen has opposed.

The state faces a $600 million budget deficit for the current fiscal year when the General Assembly returns in January. And that is a conservative estimate, not taking into account a Christmas buying season that will be the worst in modern history because of growing layoffs and fear of people to spend.

Tennessee is one of 27 states considered to now be in the grips of a deep recession.

Here is what the Wall Street Journal -- a conservative publication -- sees for Tennessee's future:

The decline in state tax receipts has potentially broad economic significance. The federal government is expected to keep spending relatively steady to prop up the failing economy. But states generally have rules requiring balanced budgets, and so must either cut spending or raise taxes -- both the opposite of what many economists, including some deficit hawks, say is needed during the current economic downturn.

In addition, states often take measures that exacerbate the difficulties created by the recession, such as tightening Medicaid eligibility at a time when workers lose their jobs and health insurance.

Cuts in state spending "will take demand out of the overall economy and worsen the economic downturn," said Nicholas Johnson, co-author of the Center's new paper and director of the group's State Fiscal Project. "Furloughing teachers, or cutting reimbursements to Medicaid providers, or cutting grants to nonprofit social-service providers or raising tuition at public colleges, these are all things that take dollars out of families' pockets, and that's money they can't spend in their local economies."

So get ready for higher property taxes on your homes that are declining in value.

Get ready for teachers to be laid off in your child's school and larger classes sizes because the state of Tennessee must reduce the share of local aid it delivers to counties.

Be ready to possibly take on a parttime job and eating out less at restaurants or going to fewer Predators' games.

After your life and hopes get whipsawed, send a "thank you" note to Gov. Bredesen and his political cronies for failing to show the courage to do the right thing and enact a state income tax.

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