Tax Reform? 

Even the outlook for an income tax is better than before.

Gridlock. Stalemate. Deadlock. Standoff. Malfunction junction.

That's where Tennessee's General Assembly stands today, for the third year in a row unable and unwilling to solve the state's financial problems. It has an eerily familiar air of "been there, done that."

This week, a conference committee of 15 representatives and 15 senators will start trying to devise a tax plan that will get majorities of 17 votes in the Senate and 50 in the House. It is a decided understatement to say there is no consensus.

The experience of the last two years suggests that what will emerge is a makeshift, poorly reasoned effort to patch things together for another year, and the state's welfare be damned. The legislature may raid savings accounts, pull revenue estimates out of thin air, and raise a minor tax or two.

But there are murmurs of change on Capitol Hill, however muted they may be.

Legislative leaders, to their credit, have so far conducted budget discussions in public. With a growing public realization that the state's problems are real, they have dragged the back-benchers, some of them kicking and screaming, into the budget deliberations.

The glib advocates of budget-cutting have found that it is not as easy as it sounds and that state government is not the mismanaged mess they have assumed. Some of their budget cutting ideas are farcical: limiting the grave digging at state veterans cemeteries, undermining the efforts of public health doctors to treat hepatitis if it is borne by alien residents (and inviting a resumption of desegregation litigation that has already gone on for more than 30 years). Attorney General Paul Summers described it simply: "Stupid."

Critics have discovered that slashing the supposed budget monster, TennCare, is a difficult and often counterproductive exercise. And the fair-minded ones have to admit that TennCare is a pretty good bargain for the state and its massive public and private health-care infrastructure.

The sales tax, the old reliable standby for half a century when the state needed more money, has lost its luster. A recent poll with some veracity suggests that more than 80 percent of voters oppose more increases.

More than half the state's counties border other states with lower sales tax rates; as a result, some don't have a single supermarket. Businesses are seeing the results of taxpayers seeking lower prices not only across state lines but through the Internet.

The atmosphere of the legislature itself has changed during the past three years. A lot of the old camaraderie is gone. Members are frustrated and disillusioned by the annual pressure cooker. As a result, more and more of them are searching for a long-term solution that will not only help the state but the political climate on Capitol Hill.

The only viable long-term solution is tax reform and some variation of the once-dreaded income tax. And it no longer looks as fearsome as it once did. An income tax, of course, is a fundamental change in the state's taxing policy, and such changes don't come quickly or easily. The current state tax system simply doesn't factor in ability to pay as a standard of a fair tax policy.

From another perspective, Tennessee has had a forced income tax for years, masquerading as a sales tax. For working families who spend their income to make ends meet, it amounts to an 8.75 percent tax on their take-home pay.

More and more voters are figuring out the facts of life. A well-drafted income plan would mean less taxes on more than half of all Tennesseans, in the form of no sales taxes on food and a lower overall rate. It would also eliminate the Depression-era Hall Income Tax, which eats up 6 percent of many retirees' income from savings. In the end, most people vote their pocketbooks.

This may not prove to be the year for tax reform. But it is a lot closer than it was three years ago.

Larry Daughtrey is a columnist for the Nashville Tennessean, where a version of this column first appeared.


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