By DAVID MOON, Moon Capital Management
March 10, 2002

Now in the third year of the great Tennessee tax debate, I fear that the political "winners" (as inappropriate as is that term) are likely to be the folks with the most stamina. This is surprising from a legislative group whose building billows with cigarette smoke and few of whose members will be mistaken for marathon runners. But that is exactly what some of them are: political marathon runners. And when enough regular people tire of reading and hearing of the same daily arguments about revenues and TennCare, the last politician standing will decide what happens.

Personally, I am already there. Sales taxes. Gross receipts taxes. Double secret probation taxes. I am tired of watching this fiscal tennis match. Tennessee has a budget problem - for whatever reason. So do most states in the country. It does not appear endemic to only sales tax based economies. But we have a problem. And I am afraid that the solution to the problem will continue to look like a horse constructed by committee.

But even for interested people who are tired of the political wrangling and posturing, there are still plenty of interesting tidbits to grab our attention.

I read that the state balanced its budget last year with, among other things, the proceeds from the tobacco settlement from the US cigarette manufacturers. Wasn't this money supposed to pay for healthcare and anti-smoking education efforts? Of course, TennCare does consume a quarter of the state's budget, so one might argue that 25 percent of the money did go to state medical costs. But I don't remember the original settlement saying anything about money being deposited into the states' general funds. Not only is Tennessee one of the few states that spent none of the tobacco settlement money on anti-smoking programs, we actually used a portion of the funds to continue subsidizing the tobacco farmers who sold the tobacco to the cigarette companies in the first place! If I were Phillip Morris, I would sue the states to get my tobacco settlement money back.

Tennessee has granted Mike Tyson a licensee to box in the state. Why would the state even consider sanctioning a performer deemed to be too outrageous and immoral for Nevada, the casino capital of the world? Look at Mike Tyson. Do you think anyone ever considered he wasn't capable of biting off someone's ear? Is it even remotely possible that good ol' Mike might, in certain circumstances, be less than a complete gentleman with a young lady? Tyson is a thug. But if he will accept our invitation to fight in Memphis, at least he will be our thug. The biggest surprise is that every state with budget problems isn't trying to entice nice-Mike to their borders for a huge pay-per-view event. Let's see ' $49 per viewer times 10 million households would solve our budget problem. Just cut Don King out of the equation altogether. (And why does he get a cut of every pro fight anyway?)

I have also given some passing thought to a potential lottery in the state. If we ever decide to have a lottery, we ought to just legalize casino gambling and leave that business to the professionals ' and tax the heck out of it. But we can't have casino gambling in Tennessee because we are in the middle of the Bible belt. A friend recently told me that gambling was worshiping money and the Bible warns against that. But that just doesn't make any sense. Gamblers lose money; that why gambling is so profitable for the folks who own the tables - not the players. Gambling is a strange way to worship money; it is more like a way of sacrificing it. It seems to me that those of us who do not gamble are the ones who are worshiping money. I work too hard for mine to stick any of it into a slot machine or lottery machine. State sponsored gambling is just a tax on folks who are bad at math. And a voluntary tax, at that.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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