Anti-tax advocates get early start hammering Hall

Maneuvering has already begun for a renewed effort toward repeal during the 2015 legislative session of Tennessee’s Hall income tax, which this year produced an unexpected $4.3 million surplus in revenue for the city of Knoxville, reports the News Sentinel.

Here’s Charlie Daniel’s take and, below that, an excerpt:


A bill to repeal the Hall tax — a 6 percent levy on dividend and interest income with resulting revenue split between state and local governments — failed in the 2014 session despite backing from national organizations that included Americans for Prosperity and Americans for Tax reform, depicted as part of the “Koch brothers advocacy machine” in a March Politico article on the effort.

This month, the Beacon Center of Tennessee presented what it describes as “a brand new reform package to make Tennessee income tax-free once and for all.”

Basically, the revised proposal would cut the tax by 1 percent per year, completing repeal over a six-year period, and require that the state absorb all the revenue loss. Local governments would be “held harmless” with state government sending payments from other revenue sources to local governments.

…Actually, the new Beacon Center proposal is similar to the final version of twice-amended legislation that failed last session in the Senate Finance Committee (SB1427) after Finance Commissioner Larry Martin, representing Gov. Bill Haslam’s administration, and state Comptroller Justin Wilson both said that, while they like the idea, it was not fiscally responsible given the state’s tight budget picture.

…The tax generated $264 million last year, the state receiving five-eighths of that amount under the current statute. The remaining three-eighths goes to local governments, with distribution among them based on the residence of those paying the tax. Some towns with a high population of people receiving substantial income from dividends and interest — the Nashville suburb of Belle Meade being a leading example — thus rely heavily on Hall income for government functions, while those in rural areas with few investors get very little.

Knoxville is somewhat in between, but has been doing better than expected in the last couple of years. The city had anticipated $4.9 million in Hall revenue in the 2013-14 fiscal year, but actually received $9.2 million. City Council members recently approved Mayor Madeline Rogero’s plans for spending the surplus on a variety of projects.