News release from Sen. Brian Kelsey
NASHVILLE — Senator Brian Kelsey (R-Germantown) today filed legislation which would repeal the Hall income tax next year. The Hall tax is a 6% tax on interest and dividends. Previously, Sen. Kelsey proposed phasing out the tax over three years, but this amendment to the original bill would abolish the tax next year.
“This is a bad tax, and it needs to go,” stated Sen. Kelsey. “It especially hurts our seniors and those who have saved for their retirement.”
Almost half of those who pay the Hall tax are 65 or older. Nearly 9 of 10 individuals who pay the tax have less than $34,000 per year in investment income.
Repeal of the tax has stalled in past sessions because critics claimed there was not enough state revenue to pay for the tax cut. This year Tennessee has a $600 million surplus in over-collections. The Hall tax costs only $167 million in state revenue to repeal. Economists now project that this money will be available in next year’s budget without any cuts necessary.
Economist Dr. John Gnuschke of the University of Memphis stated, “While substantial budget fluctuations occur, the natural growth of state tax collections should exceed $300 million. Over collections could exceed $300 million as long as state spending is held in check.”
Sen. Kelsey added, “Lawmakers who believe in limited government should commit to giving this money back to the taxpayers before it gets spent on pet projects.”
An additional $90 million in Hall Tax revenue is shared with the municipality or county in which the taxpayer resides.
According to Sen. Kelsey, “If cities will decide amongst themselves how to distribute their share of the revenue, the state should send that money back to cities. We can afford repeal of the Hall Tax next year without cutting one dime from state or local government.”
The General Assembly can consider legislation when it reconvenes in January. A copy of the amendment filed today with the Senate Finance Committee is attached. A similar measure by Sen. Mark Green (R-Clarksville) passed the Senate Finance Committee this year and awaits a vote on the Senate floor.
Senator Kelsey represents Cordova, East Memphis, and Germantown. He serves as Chairman of the Senate Judiciary Committee.
Note: The Kelsey proposal is filed as an amendment rewriting SB2, the bill filed last year to phase out the Hall over a period of years. The amendment text calls for the repeal to take effect Jan. 1, 2017.
UPDATE: Here’s a responsive news release from Senate Minority Leader Lee Harris:
NASHVILLE – Senate Minority Leader Lee Harris released the following statement on a proposal to cut taxes on stock dividends for the wealthiest Tennesseans:
“School systems across the state have waited, waited and waited for full funding,” Sen. Harris said. “Now they’re supposed to wait a little longer so we can give a tax cut to a small number of Tennessee families, when many of them are already wealthy. Some might call this the “Wait a Little Longer” bill. Let’s try to do something bigger, more transformative, that benefits all of us, during this time of budget surpluses.”
A recent analysis by the non-partisan Institue on Taxation and Economic Policy found that the average cut for the top 1% of Tennesseans would be $4,153, while the vast majority would see a cut of less than $15.