This report examines the Tennessee state-local tax structure to determine whether tax inequities have given rise to a situation in which taxes have contributed to an inadequate or inequitable flow of financial resources to the public schools. It investigates the possibility that some structural changes in the tax system might improve both tax equity and the distribution of funds to the schools. After an introductory chapter, chapters 2-4 define elements of a high quality tax system and ideal state-local intergovernmental relationship and then evaluate the Tennessee tax system according to these precepts. Chapter 5 discusses Tennessee's major state and local taxes in detail. Chapter 6 proposes alternatives to some tax and intergovernmental fiscal programs. In the proposals, a portion of the taxing responsibility is shifted from the local jurisdictions to the state. State funds are then suggested for transfers to local units, either on the basis of local tax relief, or of burden and effort equalization. Sufficient funds should be reserved for equalization purposes, with the remainder used for general relief of local taxes. This process, if carried to the ultimate, should equalize jurisdictional tax efforts and individual tax burdens. (Author/IRT)