In recent years, the Tennessee legislature has pondered the idea of adopting a state income tax in order to close an estimated $350 million deficit and generate state revenue.
But recent arguments within the legislature are questioning whether a state income tax is illegal or unconstitutional.
Robert Shulz, chairman of We the People Foundation for Constitutional Education, Inc., believes that all forms of income taxes, including state and federal, violate the U.S. constitution and various state constitutions.
According to Shulz, the 16th Amendment, also known as the “income tax amendment,” was illegally and fraudulently ratified in 1913. State and national archives concluded that the amendment was not legally approved by the required number of states. Therefore, if the federal law is supposedly flawed, then how can the state pass an income tax?
“Most states just piggy back federal laws. The 16th Amendment was illegally ratified, therefore there is no relevance for a federal or state income tax. Any income tax, whether state or federal, puts people in a state of unnatural servitude,” said Shulz.
The legislators that consider a state income tax unconstitutional believe that the evidence lies in the Tennessee Constitution.
Section 28 of Article 2 of the Tennessee Constitution allows the legislature to enforce income taxes on “merchants, peddlers and privileges,” and to “levy a tax upon incomes derived from stocks and bonds.” It also permits the legislature to tax ad valorem and personal properties. But the article fails to directly mention whether the legislature has the power to tax an individual’s income.
Opponents of the tax believe that only an amendment to the Tennessee Constitution can allow the General Assembly to enforce an income tax on the state.
According to Dr. Donald J. Polden, dean of the Cecil C. Humphreys School of Law at The University of Memphis, two Tennessee Supreme court cases have also led some legislators to view an income tax as unconstitutional. In 1932, in the case of Evans vs. McCabe, the Supreme Court enforced a graduated income tax. In 1960, the Supreme Court attempted to enforce a tax on corporate wages in the Jack Cole Co. vs. MacFarland case.
But not everyone agrees with Shulz and the idea that a state income tax would be unconstitutional.
Polden believes the Supreme Court will not follow the decisions of the Evans and Cole cases. He feels that the court system will support a state income tax proposal.
“There is nothing in the Constitution that prohibits a state income tax. I think that it is very likely that the Supreme Court will find it constitutional,” said Polden
According to Tennesseans for Fair Taxation, a series of state attorney generals issued three separate opinions on the issue in 1981, 1991 and 1999. Each attorney general agreed that a state tax would be constitutional.
The TFT believes that the myth behind the state income tax is based on a 70-year-old court decision. In 1931, the General Assembly passed an income tax, but it was ruled unconstitutional in 1932. Therefore, this court decision spawned a false belief about the constitutionality of a state income tax.
Both the TFT and Polden believe that the constitutionality of a state income tax may not be up to state legislators to decide. Instead, it may be left up to the Supreme Court.
“It isn’t the legislature’s job to decide whether a tax legislation is constitutional. It is the Supreme Court’s job to find that out,” said Polden.
