So why is the sales tax unfair?
Because as a general rule, the sales tax only applies to
tangible goods, including necessities like food and clothing,
but not the kinds of things higher income families spend
much of their money on.
A typical family with $15,000 per year take-home pay spends about 75% of their
income on items subject to the sales tax.
typical family with $100,000 per year take-home pay spends
only about 25% of their income on items subject to the sales
The result is an unfair tax system
Because Tennessee raises over 70% of its income from the
sales tax and selective sales taxes, low-income families
pay a much greater share of their income in state and local
taxes than higher income families do. In fact, according
to a report from the Institute on Taxation and Economic
Policy, low-income families pay more than three times the
taxes as the top 1% of income earners pay in Tennessee.
Key steps to create a more fair tax system
- Abolish the sales tax on food.
- Reduce the overall sales tax rate on all other items.
- Close business tax loopholes.
- Replace the lost revenue with a broad-based income
tax with generous per person deductions to give tax relief to middle- and
- This tax, on both earned and unearned income, would
replace the current Hall Tax that is applied to investment income only.
Such a system would distribute the
tax share more equitably.