UpdatedDecember 2010

A Brief History of Tennesseans for Fair Taxation

Tennesseans for Fair Taxation (TFT) traces it roots to 1984 when it was founded as an informal coalition of anti-hunger groups, welfare rights activists, faith groups, and others concerned about the unfair burden that Tennessee's tax system, and especially the food tax, placed on low- and middle-income families. However, it wasn't until 1996 and 1997 that TFT was formally incorporated and received its own 501(c)3 status. That's when the real coming of age began with its budget, staff, and membership more than quadrupling between 1997 and 2001. TFT also broadened its mission statement and began to tackle a variety of other tax and budget issues.

Today, TFT has grown into a statewide coalition with 30 member organizations and hundreds of supporters statewide. Through our coalition building, local organizing, and leadership development work, we seek to bring together a broad cross section of Tennesseans to work toward a more fair and progressive tax system that invests in Tennessee, its communities, and its people.

Ultimately, the kind of real investments that Tennessee needs ($3.4 billion to bring us up to the regional average) will require a state income tax as part of a progressive tax reform package. In the meantime, TFT is focusing energies on adding some fairness to the current tax system by pushing for fiscally-responsible reductions in one of the most unjust elements of Tennessee's tax system – the tax on food.

The Tax Reform Battles: 1999-2002

During the second term of Gov. Sundquist, from 1999 to 2002, Tennessee was engrossed in an intense debate over state tax reform, the likes of which few had ever seen, including establishment of a state income tax coupled with repeal of the food tax and a reduction in the general sales tax. TFT was at the center of that debate organizing scores of press conferences and rallies, testifying at hearings, generating hundreds of phone calls and thousands of emails to legislators, meeting face-to-face with legislators on the hill and in their districts, and even pitching tents for what became a 9-day, around-the-clock encampment on the Legislative Plaza known as “Camp Tax Reform” during the waning days of the battle.

In the end, legislators passed a sales tax increase instead of real tax reform. Despite this setback, TFT succeeded in making sure that the sales tax increase that did pass was not applied to grocery food. Now, for the first time in state history, food is taxed at a lower rate than non-food items. The food tax is still high with an average state and local rate of 8.35% (8.75% max) compared to the sales tax on non-food items at 9.35% (9.75% max).

Base-building and Outreach: 2002-2005

As the dust settled from that four-year struggle and a new Governor was elected, TFT was engaging in a strategic planning process. As a result of the strategic planning process, TFT shifted its focus away from the General Assembly and onto base building and education to build support for comprehensive tax reform with the goal of getting Gov. Bredesen to support tax reform, including a state income tax during his second term.

During this time, TFT spent little time at the State Capitol, instead focusing on forming new local organizing committees (LOCs), expanding the coalition, and most notably, launching the Workshop Facilitator Network. Through this network, TFT sought to train scores of volunteers who in turn would take the message of tax reform to community, church, and neighborhood groups across Tennessee through interactive and participatory workshops. Since the program was launched in late 2003 / early 2004, TFT has conducted 170 workshops in 31 counties reaching over 4,200 Tennessee voters.

New Initiatives: 2006-2007

In late 2005, the Gov. Bredesen disappointed members when he publicly declared that if elected to a second (and final) term, he would not support a state income tax. This forced TFT to again re-assess its strategy for passing tax reform. After extensive feedback from coalition partners and an extended Board discussions, an agreement was reached to continue working toward tax reform in the long-term with our education, base-building, and media work, but to identify short-term legislative initiatives that can be won in the next year or two. These initiatives should both support the values of TFT while also helping to set the stage for real tax reform.

From 2006 through early 2007, this new strategy resulted in a focused effort to pass a revenue-neutral tax swap that would reduce the food tax, paid for with an increase in the state cigarette tax. During 2006 and early 2007, TFT organized a media events, rallies, lobby days, and more to build support for and ultimately pass a fiscally-responsible reduction of the state’s high food tax, funded in this case with an increase in the state cigarette tax, currently one of the nation's lowest.

In the end, we succeeded in passing the first-ever reduction of the state food tax scheduled to take effect on January 1, 2008. The food tax reduction that passed this year of $40 million was funded indirectly with a larger $220 million cigarette tax increase, the remainder of which was used for education.

While the half-cent reduction (from 6 to 5.5%, or 8.35% to 7.85% once local taxes are added in) passed this year is modest, when combined with the previous victory TFT achieved by preventing the one-cent sales tax hike of 2002 from being applied to grocery food, it begins to add up. The 1.5% cumulative food tax savings amounts to five-and-a-half days worth of groceries for every Tennessee family each year. For many Tennesseans living paycheck-to-paycheck, this is a very significant savings.

On the heels of this victory, TFT began re-organizing in mid-2007 to push for another food tax reduction, this time funded with revenue recovered from closing a series of corporate tax loopholes. TFT built support for the new Food & Business Tax Fairness Act in 2008. As the session wound down, TFT succeeded in getting a study commissioned with the final report due in December. This report will help set the stage for another push in 2009.

Moving Forward: 2008

Closing Corporate Loopholes. TFT earned bipartisan, legislative support for a bill to close corporate loopholes and use the recovered funds for further reductions in the state food tax. As a result of this campaign, the Comptroller of the Treasury was required to determine the positive impact closing these loopholes would have in Tennessee.

Victories One Step at a Time: 2009

TFT introduced the Internet Parity Act to raise $300 million in revenue while leveling the playing field for small businesses. In addition, the FONCE loophole was closed, estimated to raise an additional $25 million in revenue for Tennessee.

Looking Ahead: 2010+

Raising Awareness and Promoting Progressive Taxation: Many of TFT’s legislative proposals have great influence on the administration’s own legislative proposals. For example, a partial reduction in the single article cap and a portion of our Food Tax and Business Fairness Act were proposed in the technical corrections bill in 2010.