Isn the food tax the most stable part of TNs tax system?
A. Stability is not the primary problem with Tennessee’s tax system. The lack of natural growth is. While the food tax is fairly resistant to short-term economic fluctuations, it is an extremely slow-growing revenue source over the long term. Because of its heavy reliance on sales and other consumption taxes that do not grow with the economy, Tennessee has a persistent structural deficit in its tax system. As time goes by and inflation increases the cost of government, TN must pass new laws to raise the rate of its consumption taxes; the current tax base does not grow with the economy. Business taxes, by comparison, are fairly high-growth taxes over the long term. Substituting a portion of the food tax with revenue generated by closing corporate tax loopholes would help make Tennessee’s tax system more “elastic” or responsive to economic growth.
