How Tennessee Business Will Benefit with Tax Reform
As many business leaders have realized, Tennessee business will
be a major beneficiary of tax reform. Tennessee business will benefit from tax
reform in the following ways:
 Since
business pays approximately 31 percent of the sales tax which the state collects,
lowering the sales tax rate will allow business to reap additional profits. By spending less on sales taxes, people will have more to spend on goods and
services. With a lower sales tax rate, consumers will come back to Tennessee
to shop instead of shopping in neighboring states. If commodity prices do not
fall by the full amount of the sales tax reduction, business will increase its
profit margin.
The state legislature will not need to raise business
taxes periodically to balance the state budget. Tennessee has a history
of high business taxes as a result of its reliance on slow-growing revenue sources
and a narrow tax base. A broad-based, balanced tax structure will provide a
stable and sufficient revenue stream, thus eliminating our state's recurring
revenue crises. All the states surrounding Tennessee have an income tax. As
a result, in recent years many have reduced other taxes.
Adequate funding of education will create a more educated
workforce which will enhance Tennessee's economic development. Unfortunately,
Tennessee is currently near the bottom in the U.S. in education funding, in
number of people with a high school education, number of college graduates and
percentage of children living in poverty. If current trends continue, projections
by the Tennessee Department of Labor and Workforce Development show that Tennessee
will have a shortage of college graduates sufficient to meet business needs
by 2008. Adequate funding of early childhood development programs, K-12 education,
and higher education will create a more educated and skilled workforce. This
will help Tennessee's businesses expand and help our state recruit new businesses,
especially high-tech industries.
 Businesses
will be able to make forecasts with more accuracy. The unpredictability
of Tennessee's current tax environment makes it difficult for businesses to
plan for the future. With a predictable revenue stream, taxes will not be raised
every few years as they are now.
Business will flourish when Tennessee has a modern tax
base which is not overly reliant on sales tax as its base. Tennessee,
like the rest of the country, is moving away from goods and towards a service
economy. Many services aren't taxed and cannot easily be taxed. Tennessee needs
a balanced, modern tax system which is not overly reliant on sales tax as its
main source of revenue. As already mentioned, a lower sales tax rate will mean
increased profits for business.
A modern tax system will enable Tennessee businesses to
compete more successfully with businesses in other states and nations in the
21st century. Tennessee has the highest reliance on business taxes
for revenue of any state in the southeast. If tax reform is not passed, business
taxes are likely to be raised. This will put Tennessee businesses at a competitive
disadvantage with other states. If the legislature votes to increase business
taxes or tax certain services, some businesses, especially highly mobile service
businesses, may chose to relocate. This would further erode Tennessee's precarious
tax base.
The whole issue of tax reform needs to be addressed by looking
at the big picture. What will the future of Tennessee be if tax reform is not
passed? Where will the Bredesen administration and future administrations go
for money to keep the state afloat if tax reform is not passed?
|
