Tennessee's Taxation Woes

In my Urban Social Problems class we recently discussed an issue that has become very controversial for the state of Tennessee. The issue is this:

Tennessee currently has the highest sales tax in the nation at nearly 10%, and it is one of only a few states in the nation that taxes groceries at the full rate. Since everyone’s got to eat, everyone pays this same tax at the same rate. This high sales tax is where the state derives most of its tax revenue, because there is no state income tax in Tennessee. This means that, whether you make $20,000 a year or $200,000 a year, you pay about the same amount of tax to the state—proportional only in relation to the cost of your groceries.

Although not in perfect agreement with his theory (because some funds are still taken away to be redistributed), this current arrangement is somewhat Nozickian in that you pay taxes proportional to what you buy , and everything else that you have justly acquired is yours to keep.

The problem with the combination of high sales tax and lack of income tax is—it gets a bit Marxist here—it widens the gap between the rich and the poor. The poor spend proportionally more of their money on groceries, so if they are paying the same amount in taxes as the rich, they are proportionally paying more taxes; in effect, the sales tax is regressive.

The proposed solution to this is to significantly lower the sales tax and implement a progressive state income tax. This will maintain a steady flow of taxes to the state, except instead of taking equally from everyone the rich will be paying more. It seems to me that this solution is classically Rawlsian in that it is a direct implementation of the Maximin Rule. Under the Maximin Rule, what is most rational and just involves adopting principles and rules to maximize the advantage of the least advantaged. To collect less in taxes from people of lower socioeconomic status would be of most benefit to them.

On another note, the disagreement over Tennessee’s taxing arrangement seems to me to exemplify the attitudes of liberalism and conservatism concerning taxation. Liberalism espouses the importance of a social market economy and positive freedom, which allows people to have the most prosperous lives possible: the proposed tax reforms (in accordance with the Maximin Rule) would do this by allowing the poor to keep more of their meager earnings. Conservatism (and, further on the right, Libertarianism), on the other hand, is in favor of natural rights to property and minimal taxes and opposed to government intervention; therefore, a base tax that causes everyone to give up the same amount (Tennessee’s current sales tax) would be more just.