ARTICLE

Drew Johnson As the word leaked of a $272 million state revenue surplus, special interest groups as diverse as cattle farmers and teachers’ unions scurried, hands outstretched, to the Tennessee Capitol looking for a cut. The governor and the state’s lawmakers met them at the door and greased greedy palms with pork projects and pay raises over the final days of the session. As the word leaked of a $272 million state revenue surplus, special interest groups as diverse as cattle farmers and teachers’ unions scurried, hands outstretched, to the Tennessee Capitol looking for a cut. The governor and the state’s lawmakers met them at the door and greased greedy palms with pork projects and pay raises over the final days of the session. A surplus exists because the state government taxed Tennesseans at a higher rate than was necessary to fulfill the $24.7 billion state budget and, as a result, taxpayers overpaid by $141 million during this fiscal year (FY). Tennesseans are targeted to overpay by another $131 million in the coming FY, for a two-year total of over $272 million in projected taxpayer overpayments. Why should elected officials give this overpayment of Tennesseans’ hard earned money away to favored campaign contributors and powerful lobbyists? When a customer pays more than an item costs in a store, the cashier gives change back. When taxpayers pay more than state services cost, the government pockets the money. Tennessee lawmakers are quickly proving unfit to run a lemonade stand, much less the finances of the state. Just like a customer in a store, taxpayers deserve their overpayment back, but how? With the average household in Tennessee overpaying by more than $108, mailing checks is a bureaucratic nightmare-in-waiting. The legislature passed a three-day sales tax holiday. But that saves Tennesseans only $7.3 million—less than 3% of the $272 million overpayment. The answer, according to a report by the Tennessee Center for Policy Research, is quite simple. The fairest and most effective approach to refunding taxpayer overpayments is by reducing the state sales tax on groceries. The sales tax on groceries is among the most regressive and least just taxes imposed by the Tennessee state government. Since grocery items are a necessary cost to any family, people who are poor or live on fixed incomes spend a larger portion of their income on food and, therefore, a larger portion of their income on taxes applied to that food. Thirty states avoid this burden on the poor by exempting grocery items from state sales taxes. Unfortunately, at 6%, Tennessee’s food tax is the second highest in the nation, only Mississippians pay more. In FY 2003-04, Tennesseans paid $424 million in state grocery sales taxes according to the state Department of Revenue. Tennesseans are on pace to pay $456 million in grocery taxes this year. The current two-year $272 million taxpayer overpayment for state government services is over 55% of the projected revenue generated by the state grocery tax in FY 2005-06. This means that, if the legislature had carried over the current taxpayer overpayment amount to the next fiscal year, it was possible to halt the state grocery tax for more than half of FY 2005-06 without costing a single state employee, program or service a dime. There was enough money as a result of the overpayment to exempt groceries from state sales taxes for over 200 days, from July 1—the beginning of the next fiscal year—until the 20th of next January. With the average family in Tennessee set to spend over $3,250 on groceries next year, the average household would have saved over $100 in grocery taxes had policymakers acted to pause the tax. Rather than lavishing favored interest groups with millions of dollars needlessly taken from the pockets of Tennesseans, the governor and every member of the Tennessee General Assembly should start fighting to return surpluses to taxpayers. It’s time that constituents become the only special interest group that matters to our elected officials. Using future surpluses to halt the state’s excessive grocery tax is a good place to start.