But that’s not the direction things have been going: Last November, voters passed a constitutional amendment that banned the state from levying any income or payroll tax.
Williams’ group wants to get rid of the sales tax on food, and close some other tax loopholes. “It’s just totally upside down,” said Dick Williams, chairman of Tennesseans for Fair Taxation, which has advocated for a state income tax. Additionally, attorneys’ fees, services such as haircuts and massages, and goods for horses and airplanes are all tax-exempt. Tennessee has taken this strategy the furthest: The state has the most regressive tax system in the country, according to the study: It has no state income tax (though it does tax interest on stocks and bonds) and, instead, the state relies on sales taxes and other fees to fill its coffers, although many luxury items are tax-free. The Computer Glitch That's Keeping Poor People From Their Money.Many economists, including Thomas Piketty, believe that such systems can make inequality worse. According to a study by economists at the Federal Reserve, Tennessee, Mississippi, and West Virginia have structured their tax codes so that middle and lower-income families pay a bigger share of their incomes than wealthy families do. But some states have done all they can to reverse that. Higher-income households pay a higher share of their income in taxes. NASHVILLE, Tenn.-The federal tax system is, on the whole, progressive.
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