No on the Hall Income Tax phase-out

A bill (SB0033 by Burks/HB0046 by Sexton) has been introduced in the legislature to reduce the “Hall” Income Tax over time and eliminate it by 2015. Another bill (HB0122 by Sargent/SB0108 by Johnson) has been introduced to increase the amount of income exempted from the “Hall” tax to reflect inflation up to a maximum exemption of $2,500 for individuals or $5,000 for persons filing jointly.
In the Hall Tax, Tennessee actually has an income tax named after its 1929 sponsor. The 6% rate applies only to income derived of dividends from stocks and interest on bonds. Currently, the first $1,250 per individual or $2,500 per joint return is exempt. Since 2000, those exemptions were increased to $16,200 and $27,000 respectively for those over 65. Certain blind persons, quadriplegics, prisoners of war and several technical situations are completely exempt from the tax, as detailed in Title 67, Chapter 2 of Tennessee law (see http://www.tennessee.gov/revenue/taxguides/index.htm).
This tax is collected by the state, but more than one third of it is returned to the city or the county in which the taxpayer lives.
Legislators and the public rightfully believe that this tax is especially hard on retirees and others on fixed income. The current tax is counterproductive in encouraging saving and in attracting additional retirees to the State. However, with the current budget shortfalls in state and local governments, we cannot afford to lose in the range of $200 million in revenue per year without at least replacing it with a more appropriate revenue source.
Tennesseans for Fair Taxation proposes to replace our over reliance on a high sales tax, also hard on all persons on fixed or modest income, with a broad based tax system which will actually reduce taxes for 80 percent of Tennesseans. The solution includes:
♦ lower sales tax,
♦ no sales tax on food and
♦ a broad based tax on income with generous exemptions and modestly graduated rates.
Such a system could be designed to result in most Tennesseans paying less in state taxes while raising sufficient revenue to prevent most of the cuts in services and jobs anticipated in coming budget years. To learn more, visit www.fairtaxation.org or contact us.