Tennesee Tax Reform Problem Essay Research Paper

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 The state of Tennessee has a rather outdated tax system(1999, paragraph 3).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