Federal District Court Poised to Impose Income Tax on Tennessee

Tennesseans should be prepared to start paying a state income tax based on an anticipated ruling by a local federal district court judge. The matter has received little attention, but Tennesseans need to understand what is going to happen. With federal district court Judge Kevin Sharp poised to strike down the pro-life Amendment 1 that Tennessee voters ratified in the fall of 2014, what makes you think he would not also strike down Amendment 3 that banned a state income tax?

The legal argument is quite simple and consistent with the arguments I heard when I was a state Senator trying to fight off a state income tax over a decade ago. It’s based on an equal protection argument under the U.S. Constitution.

The argument now, as it was then, is that Tennessee’s sales-taxed based tax structure is regressive, hurting the poor because they pay a disproportionate share of their overall income in taxes compared to the wealthy. This disproportionality, it is said, is a violation of equal protection.

The income tax advocates want the federal court to order the state to develop a graduated income tax coupled with a reduction in the sales tax. This, they say, would produce an overall tax system that would have each citizen paying approximately an equal percentage of their disposable income in state taxes.

At one time I would have considered the lawsuit a joke, because everyone knows that federal courts cannot make or pass laws, and to implement an income tax and to reduce the sales tax rate would require legislative action. But the U.S. Supreme Court’s decision in Obergefell v. Hodges last June has given the tax-equality folks the judicial precedent they need to press the case.

You may recall that in June the U.S. Supreme Court said that state statutes expressly allowing marriage licenses to be granted only to male and female applicants were effectively “amended” by the Court to require that licenses be granted to two people of the same sex.

The Obergefell Court disregarded:

  • Our constitutional amendment defining marriage,
  • Article VII, Section 1 of Tennessee’s Constitution that says only the state legislature can “prescribe the duties” of our County Clerks, and
  • Article II, Sections 1 and 2 of Tennessee’s Constitution that embodies the doctrine of the “separation of powers,” which says that only the legislative branch of government can enact new laws and amendments to existing laws,

and said that the U.S. Constitution allowed them to “amend” our marriage law to require clerks to issue marriage licenses to two people of the same sex even though the law says the applicants for a license must be a “male and female.”

The same rationale should apply here. The Court will say that the equal protection clause of the U.S. Constitution must trump the provisions of the state Constitution and the federal court must, by judicial order, “enact” or make the legislature enact the new tax plan in order for the constitutional rights to be protected.

Unfortunately, constitutional scholars who oppose an income tax have repeatedly said in private that there will be nothing our state can do. They say the U.S. Constitution is the “supreme law,” and a U.S. Supreme Court decision as to what the Constitution means is final and cannot be challenged. The state will have to comply.1


  1. The foregoing “report” is not related to a lawsuit actually pending in federal court, but if I can figure out how to make the argument, you know others will, too. But I hope the analogy to what the U.S. Supreme Court did in Obergefell and how its rationale can be applied to any number of things is obvious. Of course, an income tax mandate is unconstitutional, but for the same reason, so is the mandate that a state must pass a law allowing marriage licenses to two people of the same sex. What is real is that our state Attorney General has said, “There is nothing we can do. The Court has ruled.” Well, at FACT we don’t agree. We are doing something. We hope you will follow along in the coming weeks.

David Fowler served in the Tennessee state Senate for 12 years before joining FACT as President in 2006. Read David’s complete bio.

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