NOTE: POST A MESSAGE TO MAKE SUGGESTIONS!

WHEREAS, Tennessee has a chronic structural deficit problem, a condition in which the tax structure (revenue)
does not keep pace (and has not for many years) with economic growth as evidenced by both per capita
income and expenditure needs; and

WHEREAS, the Tennessee state tax system is more than 70 percent dependent on sales (consumption) taxes that require frequent rate increases, or reductions in state services; and

WHEREAS, in 1996 Tennessee ranked 50th among states and the District of Columbia in state and local revenue as a percentage of personal income; this ranking is one of the many reasons why the state's revenues were
inadequate; and

WHEREAS, since 1999 the Tennessee legislature utilized one-time money to fund recurring items in the state
budget, compounded the fiscal problems by arbitrarily increasing revenue estimates, and eventually appropriated all the "current and future" tobacco settlement funds -- again one-time funds -- to meet on-going and recurring needs of the state budget for fiscal year 2001-2002; and

WHEREAS, following dramatic cuts to many state services during fiscal year 2001-2002, the downgrading of the
state's bond ratings from all the national experts, and utilizing almost all of the state reserve funds for '01-'02 operating deficits, with an escalating fiscal crisis in which the state revenues would still be "in the red" by over $500 million for 2002-2003, the legislature chose to increase state sales and excise taxes and various public fees after failing in an attempt to pass a state income tax; and

WHEREAS, Tennessee’s disproportionate reliance on sales taxes is extremely regressive -- the most regressive in
the nation -- and puts an unfair burden on low-and middle-income taxpayers; low-income families pay
more than three times the sales tax as a percent of income than the wealthiest Tennessee families pay; and

WHEREAS, a recent census analysis on the distribution of income showed there is a widening gap between rich and poor families and the trends in Tennessee fit that scenario with figures from the late 1980s to the mid
1990s showing lowest-income families real incomes declined by 15 percent, while those of top-income families
increased by 40 percent – these inequities and imbalance portend even greater future problems for a state overly
dependent on sales tax revenues; and

WHEREAS, Tennessee’s general fund revenues produced by the state tax system are grossly inadequate to provide
minimal levels of critical state services, witnessed by Tennessee’s performance in each of the following
areas:
• 49th in per capita elementary and secondary education;
• 46th in the percent of Tennesseans age 25 and over with a high school degree;
• 50th in total education spending per capita;
• 44th in state health ranking;
• 48th in TANF/Families First assistance payments per family; and
• 50th in home and community based care options for the elderly and disabled; and

WHEREAS, sales tax leakage due to internet and mail order sales, the border drain caused by consumers seeking the lower sales tax markets of any of the eight states touching Tennessee, and spending by Tennesseans on
gmbling in many states surrounding us and on lotteries in four of the states bordering ours -- all escalate the
diversion of funds from Tennessee’s tax system;

NOW THEREFORE BE IT RESOLVED, that TCSW supports a Tennessee tax system that embodies the five major principles that economists and fiscal experts agree are the characteristics of good tax policy and a
quality tax system:
• provides appropriate and timely revenue,
• distributes tax burdens equitably,
• promotes economic efficiency and growth,
• is easily administered, and
• ensures accountability; and

BE IT FURTHER RESOLVED, that TCSW specifically endorses tax reform that includes: 1) a broad-based personal income tax; 2) reductions in the sales tax rate; 3) removal of sales taxes on food; 4) measures that
hold harmless local governmental revenues; and 5) adequate, additional funding for essential services of state
government, such as health, mental health and substance abuse services, long-term care home and community-
based services, child care, children’s services, affordable housing, and educational services, among other needs, to
keep Tennessee from falling farther behind our state neighbors as well as the rest of the country; and

BE IT FURTHER RESOLVED, that TCSW joins forces with all organizations and entities who support the aforementioned principles to advocate that Tennessee reforms its tax system in the fairest manner possible.