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.

A typical family with $100,000 per year take-home pay spends only about 25% of their income on items subject to the sales tax.

 

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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 low-income families.
• 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.