Dennis Potvin - Tennessee Democrat

Consumption Tax Down, Property Tax Up

There has to be a reliable method to pay for programs designed to help all members of a community, and taxes are the way to do it. We Tennesseans are proud to have no state income tax, and any lawmaker waving the banner of introduction of such a tax will likely have a short-lived political career. But we need to understand that having zero income tax favors the rich over the poor, as does our inflated sales tax.

Sales tax (oft referred to as consumption tax) is paid at the same rate by everyone. This means that a millionaire pays the same amount of tax on a gallon of milk as a poor person; in our case, about 9.5 cents on the dollar. Clarksville has easily the highest sales tax of similar American cities of our population, including Savannah (GA), Syracuse (NY), Dayton (OH), and Bridgeport (CT). All have sales tax around 6% to 7%. Ours is a whopping 9.5%, which includes 2.5% dedicated to our schools. We need to lower our sales tax to get in line with these other cities AND eliminate the 6% tax imposed on unprepared food (which very few states still allow). But how do we do it?

Most accountants will agree that, if there is a type of tax that people have to pay, with minimal loopholes available to tricksters, it is Property Tax. Property Tax is the amount you pay the municipality annually based on the assessed value of your property. Thankfully, the local government tells us what the assessed value is (avoiding a loophole), and we either pay the taxes or else a lien is placed upon your property OR it is simply reclaimed. For this reason, an increase in property tax may be the better solution to generate revenue to pay for programs benefiting our residents.

Unlike high consumption tax and zero state income tax (where billionaires pay the same rates as the poor), property tax actually favors the poor and forces the rich to pay their share. Rich people typically live in more expensive properties; thus they’ll have to pay more in taxes for that property. Likewise, factory and mall owners will have to pay their higher shares in greater value than will the poor. Those who live in lesser-valued property will see only minimal increases in taxes that will be nearly undetectable.

The 2016-2017 Tennessee State Budget asserts that we will have reserves of $668 million by the end of 2017. That’s a “rainy day” fund of taxpayer money sitting in a bank. With that much put away, Tennessee can safely lower its sales tax, lower the reserve and give the money back to us to spend the way we want.

© 2017 Dennis Potvin
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