[Congressional Record Volume 144, Number 141 (Friday, October 9, 1998)]
[Senate]
[Page S12179]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FORD:
  S. 2612. A bill to provide that Tennessee may not impose sales taxes 
on any goods or services purchased by a resident of Kentucky at Fort 
Campbell, nor obtain reimbursement for any unemployment compensation 
claim made by a resident of Tennessee relating to work performed at 
Fort Campbell; to the Committee on Governmental Affairs.


                 fort campbell tax fairness act of 1998

  Mr. FORD. Mr. President, today I introduce the Fort Campbell Tax 
Fairness Act. This legislation is designed to restore some sense of 
balance and maintain some level of fairness in the taxation of 
individuals who work at the Fort Campbell military installation in 
Kentucky and Tennessee.
  My colleagues may recall that earlier this month, an unprecedented 
provision was included in the Defense Authorization bill which granted 
special tax status for a single site--Fort Campbell--to Tennessee 
residents who work on the Kentucky side of the border. Even worse, the 
provision in the Defense bill preempted State tax law. It preempted the 
ability of my State to administer its own tax laws in a fair manner, 
and in a way in which the State determined was fairest and best.
  The provision adopted in the Defense bill exempts Tennessee residents 
who work in Kentucky at Fort Campbell from paying Kentucky state income 
taxes. This special exemption was snuck into the House version of the 
bill, and then maintained in the conference committee. It is extremely 
unfair.
  Mr. President, the Congress has no business dictating to States how 
they should administer their own tax laws. This is a matter for the 
States to determine by themselves. The basic principle of taxation is 
that income is taxed at the location where it is produced. There are 
exceptions to this rule, but generally they are worked out among and 
between States themselves. The only other exceptions of which I am 
aware relate to federal employees with a unique interstate aspect to 
their jobs, like members of the military or Members of Congress, or 
other employees with a special interstate job situation, like Amtrak 
employees or those involved in constructing interstate highways.
  I have never heard of a special State tax exemption for private 
sector employees at a single site. That is, I had never heard of it 
until I saw this year's Defense Authorization bill.
  But Mr. President, the provision in the Defense Authorization bill is 
a one way street. It preempts Kentucky state law for Tennessee 
residents who would otherwise be taxed within Kentucky's borders. But 
there is no comparable preemption of Tennessee state law for Kentucky 
residents who are taxed at Fort Campbell within Tennessee's borders.
  As a matter of basic fairness, if Tennessee residents are to be 
granted a special tax exemption while on the Kentucky side of Fort 
Campbell, Kentucky residents should be given equal consideration while 
on the Tennessee side of Fort Campbell. In addition, it is currently 
the case that unemployment compensation for any Tennessee residents who 
work on the Kentucky side of Fort Campbell are paid out of Kentucky tax 
dollars. This should no longer be the case now that Tennessee workers 
are being given a special tax status and are exempt from Kentucky laws.
  My legislation attempts to correct these new inequities created by 
the passage of this year's Defense Authorization bill. First, it would 
direct that Tennessee sales taxes imposed on the Tennessee side of Fort 
Campbell apply only to Tennessee residents. The distinguished Senator 
from Tennessee, in debate on the Defense Authorization bill, asserted 
that no such taxes are currently collected at Fort Campbell. Therefore, 
he should have no objection to this provision whatsoever. However, I 
have been informed that Tennessee sales taxes are in fact collected 
from private business operations within the Fort Campbell boundaries. 
So this provision is badly needed as a matter of fairness.
  Second, the legislation clearly states that the Commonwealth of 
Kentucky has absolutely no obligation to continue paying the 
unemployment benefits of Tennessee residents out of Kentucky tax 
dollars. Since Tennessee residents have been given this special tax 
status and preemption of State laws, Kentucky should no longer have any 
liabilities should these workers become unemployed. Those claims should 
be the responsibility of the State of Tennessee.
  Mr. President, I have always attempted to fiercely defend the 
interests of my State during my 24 years in the Senate. The special tax 
preemption provision tucked into the Defense Authorization bill was one 
of the most unfair provisions imaginable, singling out my State for 
unfair treatment. I realize the time is short in the current session, 
and the odds of enacting this legislation are not great in the days 
ahead. However, I am introducing this bill to go on the Record in 
advocating fairness for my State. It is my hope that when the Congress 
reconvenes vigorously pursue efforts to pass this legislation and 
correct an unfairness which has been imposed upon my State.
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