TVA – “taxation” without much representation

March 9, 2013

 What is more certain than taxes? Of course, it is more and more taxes. And TVA has screwed up the taxing system in the South big time. When states and communities have to depend on artifically derived taxes from government, you know there is trouble ahead. Tennessee is hit hardest by TVA’s so-called payments in lieu of taxes.

 Not only do these so-called taxes mess up the tax base for communities when TVA changes its payments to them, the amounts of money TVA doles out depends on how electricity is selling in Mississippi or the western tip of Virginia and the rest of TVA’s vast collection area.

 TVA’s plan from the start was to provide these so-called in lieu of tax payments as a kind of “protection money,” money to keep the people from complaining too much by providing them with subsidized electricity, to keep the politicians happy with “slush funds,” as former Ala. Governor Riley called them. This scheme has resulted in endless local discussions about who was to receive TVA’s “free” money that has no strings attached; there is no direct connection between the money they receive and the locality or state.

 Alabama is an example of how brabbling over this money turned into a royal battle between the dry counties, which received no money from taxed liquor revenues of the state controlled liquor stores, and the wet counties that did. Demanding no less attention than from then Gov. George Wallace, George designated a part of Alabama’s share of loot from the TVA to the dry counties, which had no TVA supplied electricity. After all, they received no money from liquor taxes, poor things, so George just dipped into the TVA “free” money. I believe to this day that he pulled off that trick in a spiteful way against the feds. This was a sore spot for decades in Alabama.

 Anyway, a few years ago, because the cities and counties in north Alabama hollered loudly that they were being deprived of their “rightful” TVA money, Alabama changed its law to feed the dry counties from the General Fund and to “give back” the in lieu of tax money to the northern tier of the state, TVA country. The fight continues over who shall get the money that TVA designates is Alabama’s share.

 These kinds of arguments are found all over the 80,000 sq. mi. TVA territory. And as the amount from TVA continues to shrink, the arguments become more intense. This warping of the tax structures of the seven states and many cities and counties involved has left them struggling with uncertain tax income futures. Dozens of legitimate taxing authorities depend on the machinations of TVA’s incorrect method of taxation.

 TVA has caused irreparable damage to southern states taxing entities, which by their very nature are separate and different. Everything fitting the same size is the TVA model. Of course, the solution is to liquidate TVA’s assets and to let normal taxing authorities use their best political judgments. How much states, counties, and local goverments have skewed their present “tax forgiveness” for businesses because of a dependance on TVA’s so-called payments in lieu of taxes is unknown. Likely a considerable amount, it is a subject worth exploring.  

 Ernest Norsworthy

Limited Government


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