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Institute on Taxation and Economic Policy 1311 L Street, NW Washington, DC |
Wednesday, November 17, 1999 CONTACT: Michael Ettlinger, 202/626-3780 |
Tennessee Tax Reform Plans Cut Taxes for 60% of Tennessee Residents
Click here to see the full text of the analysis in HTML format.An analysis released today by the Institute on Taxation and Economic Policy (ITEP) finds that two leading tax reform proposals would provide tax cuts for a majority of Tennesseans while resolving the state's impending budget shortfall. ITEP's analysis finds that the Governor's plan provides greater tax relief to the poorest Tennesseans due to its sales tax rate reduction, while the "compromise" bill passed by the Senate Finance Committee on Tuesday provides broader tax relief for middle-income families due to the graduated structure of its income tax component.
"Either of these proposals would shift the tax burden away from middle- and low-income families and onto Tennessee's better-off taxpayers while at the same time raising more revenue to pay for important government services," said Michael Ettlinger, Tax Policy Director for ITEP.
The study also shows that Tennesseans who itemize deductions on their federal income tax would pay between $395 million and $420 million less in federal income taxes, since state income taxes can be deducted from the federal personal income tax.
"Tennessee has long had one of the most regressive tax systems in the nation," said Ettlinger. "Reducing reliance on sales taxes and adopting a broad-based personal income tax would move Tennessee to a more equitable tax structure."
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Net Effect of Both Tax Reform Plans Tax Year 2000, All Filers |
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| Income Group | Income Range | Average Income | Net Tax Change as a % of Income: | |
| Governor's Plan | "Compromise" Senate Plan | |||
| Lowest 20% | Less than $13,000 | $ 8,100 | –1.8% | –0.8% |
| Second 20% | $13,000–23,000 | 17,500 | –0.8% | –0.6% |
| Middle 20% | $23,000–36,000 | 28,600 | –0.1% | –0.4% |
| Fourth 20% | $36,000–57,000 | 45,300 | +0.7% | –0.0% |
| Next 15% | $57,000–110,000 | 76,300 | +1.3% | +0.5% |
| Next 4% | $110,000–261,000 | 158,000 | +1.5% | +1.6% |
| Top 1% | $261,000 or more | 737,000 | +1.1% | +2.1% |
| Source: Institute on Taxation and Economic Policy Microsimulation Tax Model, November 17, 1999 | ||||
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