Posted: Friday, July 24, 2009 5:26 pm

NASHVILLE – The Tennessee Center for Policy Research today applauds the state Supreme Court for its ruling in favor of taxpayers and upholding the state Constitution. The high court announced its decision in Waters v. Farr, ruling that the so-called “drug tax” levied by the state is unconstitutional.

Since 2005, the state has been collecting taxes against Tennesseans charged with possession of illegal drugs. Upon arrest but before conviction, the state swoops in, seizes the defendants’ property, and declares that the defendants owe back taxes for failure to obtain a tax stamp.

The Supreme Court today declared the tax unconstitutional as beyond the scope of the state’s authority. According to the Court, the state is permitted to tax “privileges.” However, the state cannot tax something that is illegal in the first place. As the Court noted, “The legislature’s wholesale prohibition on the possession of unauthorized substances cannot be reconciled with the classification of the same activity as a privilege.”

“The Constitution prevailed over an unruly government today,” said Justin Owen, Director of Legal Policy at the Tennessee Center for Policy Research. “Exercising common sense and sound jurisprudence, the Supreme Court rebuked the Department of Revenue for scheming taxpayers out of money in a way that is outright forbidden by the Constitution.”

As previously revealed by the Tennessee Center for Policy Research, the tax often costs more to administer than it raises in revenue. “Not only is this a great day for the Constitution, but it puts an end to irresponsible fiscal policy. Only the government would spend more money to make less,” said the Center’s Executive Vice President Shaka Mitchell.

No word yet on how the Department of Revenue plans to react to the ruling, but an appeal to the United States Supreme Court is not an option, Owen noted, since this involves a state constitutional issue.

“Regardless, it is a shame that it took three court opinions to stop the Department from wasting so much time and tax dollars defending an unconstitutional law,” said Mitchell.