Haslam: Legislators ready to cut spending to cover lost Hall tax revenue

In a Knoxville appearance Tuesday, Gov. Bill Haslam said legislative leaders have assured him they will be ready to cut state spending to make up for loss of revenue from the Hall tax on investment income, reports Richard Locker.

“I told the Legislature my concern was they were promising to cut taxes without promising to make commensurate expense cuts, and if the economy slowed down and revenues didn’t continue where they are, then that would be a problem. Their leadership assured me that if that time came, they would make the appropriate adjustments,” Haslam said in a brief question-and-answer session with reporters after a speech to the Knoxville Rotary Club.

The governor also said the reduction and ultimate loss of Hall tax revenue by cities and counties who share in its proceeds didn’t weigh heavily into the decision to approve the bill.
Since the Hall income tax on certain dividend and interest income was enacted in 1929, its proceeds have been divided between the state and local governments, with 5/8ths flowing to the state’s general fund and 3/8ths to the city or county where the taxpayer resides.

That formula favors the most populous cities and counties and its most affluent suburbs where more people who own stocks and bonds live.

…Haslam said that from the state’s perspective, the Hall tax was never really fair because some communities were better able to rely on it than others. “Some local communities just happen to do really well because they have a lot of people who paid it, whereas a similar community wasn’t getting anything.”