From Moon's column:

Based on purely overall macroeconomic measures, however, it's a good thing Tennessee doesn't rely on a state income tax for most of its revenue. The average income tax decline from the third quarter of 2008 to the third quarter of 2009 was a whopping 16.13 percent, or more than twice the 7.91 percent average decline in state sales taxes.

What Moon's analysis discounts--omits, really--is "time," specifically the time a state requires to fully recover from an economic downturn in a non-income tax (NIT) state versus in an income tax (IT) state.

Think about it this way: At the advent of an economic downturn in which unemployment is rising, how will a household in a NIT choose to cut personal spending FIRST? Will that household cut the housecleaning service, the lawn mowing service, and that recommended baseline colonoscopy, or will that household seek to cut spending on food and clothing? Obviously, a household struggling with lesser income will cut the "extras" first, as cutting the "basics" is more difficult.

You see, then, why the NIT state's household cutting these "extras" really hasn't impacted much on its state's revenue stream from sales taxes. After all, many of these "extras" aren't subject to sales taxes anyway.

What happens over time, though, as a NIT state's economy improves? Households' lost incomes are restored, but they don't generate more revenue for the state because they aren't subject to any tax. Discretionary spending again rises, but, as happened during the downturn, most of that spending is on services that don't generate more revenue for the state because they aren't subject to any tax, either.

Factor in even more time and not only have lost incomes been restored, they've risen, too. IT states are capturing 100% of that growth in incomes, but NIT states are not--because households in NIT states aren't going out and spending on taxable goods 100% of their new-found income.

Some of it they're again spending on services not subject to sales tax (generating no new taxes for the state), some of it they're saving and investing (generating no new taxes), some of it they may pay toward debt (generating no new taxes), and some of it they may give away as charitable donations (generating no new taxes).

In a recent column, Austin Peay's Dr. Thomas F. Dernberg summarizes the problem over time this way:

Under normal conditions, population and productivity growth raise the state's income. To maintain current services, public spending must rise at the same rate as the rise in state income. Revenues, therefore, need to grow at that same rate.

Despite this fact that revenues rise automatically as income rises, Tennessee's tax system is such that a 1 percent increase in the state's income yields only an eight-tenth of 1 percent increase in revenue. This means that in every year, regardless of economic conditions, Tennessee governments are confronted by revenue shortages and periodic budget crises.

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Moon extracts just four quarters of data from a continum and draws an erroneous conclusion because he fails to factor in "time."

Tennessee's state comptroller has estimated that our sales tax revenues won't match 2008 levels again until 2014. By then, IT states will have long since dug out of the hole posed by the current recession.