I always assumed it was Jackson, Mississippi -- living in North Carolina, I've never heard of Jackson, TN. While not a small city (it had a population of 34,376 in 1960, a few years before the song was published) I'd assume that, while two people artists have associated the song with Tennessee, I'd assume the ties are those of convenience and regional pride more than anything: Tennessee was Daniels' adoptive home from age 34, and the Perkins joke likely highly tongue-in-cheek: Perkins was famously a very nice guy.