The House and Senate voted Friday to repeal the state’s Hall tax on investment income, now at 6 percent, over a period the next six years at the rate of 1 percent per year.
From Richard Locker’s report:
Gov. Bill Haslam said later he would have preferred a bill with just a one-time tax cut, from the current 6 percent to 5 percent, leaving any additional cuts to future legislatures depending on the state’s fiscal condition at the time. But he stopped short of saying whether he will sign it into law or veto it.
“I would have been much more comfortable with having something that just did it this year, where we know what the state’s fiscal situation is every time we make that decision. But the General Assembly felt like it was good to put in a point certain (to totally repeal the tax) by 2022,” the governor said during a post-session news conference with legislative leaders.
“Like everything else, we will take it and study it and over the course of time will come back with a response,” he said.
…If Haslam approves the Hall tax bill, the tax rate drops from 6 to 5 percent effective with tax year 2016 on tax returns due by April 15, 2017. It also declares that “the legislative intent” is for the tax be reduced by 1 percentage point annually starting next year. The tax would be eliminated starting with tax year 2022.
The state Department of Revenue says 204,944 taxpayers filed Hall income tax returns for tax year 2014. (Returns for 2015 were due Monday and have not been fully compiled.) The average liability per 2014 return was $1,446. “However, it’s worth noting that the median liability per return was $266, which means that half of the returns filed had a liability of $266 or less,” said Revenue Department spokeswoman Kelly Nolan Cortesi.
Taxpayers 65 and older are exempt from the Hall tax if their total income from all sources is $68,000 or less for joint filers and $37,000 or less for single filers. In addition, the first $1,250 in taxable dividend and interest earnings for all single filers and the first $2,500 for all joint filers is tax-exempt.
The tax isn’t levied on interest earnned on savings accounts, certificates of deposit, government bonds, credit unions, bank money-market accounts and dividends from bank stock, insurance companies, credit unions and other sources.
The Hall tax, enacted in 1929, generated total revenue of $303.4 million in fiscal year 2014-15 — $197.9 million to the state and $105.5 to cities and counties. Under the law, 62.5 percent of its revenue is retained by the state and 37.5 percent is sent to the municipality where the taxpayer resides — or to the county if the taxpayer lives in an unincorporated area.
Cities and counties that receive the most money opposed the absence of a provision for replacing the lost tax revenue.
Memphis received $14.8 million in Hall tax revenue in fiscal year 2015, Nashville $14.6 million, Knoxville $10 million, Knox County $3.3 million, Germantown $3.1 million, Belle Meade $2.1 million, Shelby County $1.5 million, Collierville $1.2 million and Williamson County $1.2 million, according to the Revenue Department.