Tag Archives: taxes

Haslam signs Hall tax repeal despite misgivings; reaction rundown

NASHVILLE, Tenn. (AP) — Republican Gov. Bill Haslam has signed a bill into law that will phase out the state’s Hall tax on earnings from stocks and bonds.

The law reduces the tax by 1 percentage point in the first year and then requires future reductions to eliminate the tax altogether by 2022.

Haslam signed the bill Friday despite his administration’s earlier concerns about the measure for requiring the future cuts regardless of how the state’s economy performs.

The initial cut amounts to a 17 percent reduction for Hall tax payers. The change is projected to cause a loss of $28 million in state revenues, plus another $15 million from the communities where the tax is collected.

Some mayors of have warned warn they will have to try to make up the revenues elsewhere.

Note: Statement on the Hall signing from Haslam spokeswoman Jennifer Donnals:

The governor has long stated his wish to repeal the Hall Income tax. It penalizes saving and investing, and because it is concentrated on a small number of people coming or going from Tennessee, there can be significant shifts in revenue, making it undependable. He is concerned, however, with the approach taken to reduce and eliminate it. It is a small piece of a much larger puzzle we have tried to manage effectively and efficiently in state government. He often compares governing to a relay race, and he will hand off the baton to the next governor. As we move forward with this plan at this time, there will be more difficult decisions to be made. The state will not always have revenues like we had this year. The governor expects the legislators, advocacy groups and other stakeholders who have supported the automatic repeal of the Hall Tax to be equally strident in their support of this administration’s efforts to find the efficiencies needed to meet the aggressive timetable set forth in this legislation.

Note: Press releases in reaction to the governor’s signature are below. Continue reading

Sunday column: Politics makes veto of Hall repeal unlikely

After decades of justified bipartisan bragging on Tennessee’s fiscally conservative status, our state legislators enthusiastically embraced deficit spending this year on a somewhat bipartisan basis, blowing a $300 million-plus hole in budgets of state and local governments for the sake of political popularity.

For the same reason, Gov. Bill Haslam is highly unlikely to veto the bill repealing the Hall tax on investment income, even though he has repeatedly preached on the fiscal irresponsibility of taking such an action without a plan to replace the lost revenue.

There is no such plan, of course. On the last day of the session, legislators basically said to state and local governments that the tax will disappear in six years, so deal with it. The governor sent his two top aides, Finance Commissioner Larry Martin and Deputy Governor Jim Henry, to politely tell lawmakers late in the session that the amended version of SB47 was basically a fiscally stupid idea.

As the final week of the session began, the administration and legislative leadership had reached a somewhat complicated agreement on the Hall: The 6 percent levy would be cut to 5 percent in the coming year and, in future years, a “legislative intent” was declared to repeal another percentage point each year — if state revenue increases otherwise by 3 percent or more in that year.

This year, the state enjoyed a $600 million budget surplus. The first year of the tax cut could thus be easily absorbed, it was reasonably argued, and the language left wiggle room to accommodate unforeseen future fiscal and political realities.

Martin said the 3 percent trigger did not seem very wise. It would mean that, regardless of what happens, cutting the Hall would have priority over all other things that a 3 percent revenue bump could go toward — increasing teacher pay, for example, or the predictable annual increase in other education needs as enrollment goes up, the annual increases in medical costs that send TennCare spending up every year, a costly lawsuit — two are pending that could conceivably add multiple millions to education spending — or, well, any number of things we cannot imagine today.

But for the sake of political expediency, the administration was ready to ignore such concerns and go along, leaving the possibility of changing “legislative intent” to arguments in future years when further Hall reductions could be pitted against other priorities. That wasn’t good enough.

The final version says the tax will be fully repealed, come hell or high water, in six years, barring the unimaginable possibility that legislators in the future will vote to repeal the tax cut now mandated and be accused of voting for a tax increase.

The governor, a billionaire in Forbes magazine’s estimation, presumably is way up toward the top of the 200,000 Tennesseans paying the Hall tax — probably well into six figures as opposed to the statewide average annual payment of $266. But as a policy matter, he has set aside personal financial interest to oppose the plan as fiscally irresponsible for the businesslike operation of government.

Setting aside political interest, though, is another matter. A veto, which would stand since the Legislature has adjourned without an override session scheduled, would provide ammunition for opponents in any future political endeavor — a U.S. Senate race, maybe? — and would lead to a highly-publicized effort to pass the bill again next year that would doubtless succeed, even as he contemplates pushing a gas tax increase.

Two right-wing groups, Americans for Prosperity and Beacon Center of Tennessee, both claimed to have gotten more than a million views on sponsored videos against the Hall tax and to have contacted thousands of voters otherwise. With some justification, they claimed credit for putting the legislative train on track.

Only two Republicans — Reps. Bill Dunn of Knoxville and Steve McDaniel of Parkers Crossroads — had the political courage to vote against the bill, though a dozen or so dodged a vote one way or the other. Several Democrats voted for it; a couple dodged.

The governor has a dodge opportunity as well. He can let the bill become law without his signature, which would indicate that he does, indeed, have future political plans that outweigh pragmatic policy considerations. A veto would indicate he does not and stands on principle.

Legislature votes to repeal Hall tax on investment income

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.

Final approval given bill to legalize and tax fantasy sports betting

By Sheila Burke, Associated Press
NASHVILLE, Tenn. — Tennessee’s Legislature passed a bill that would make clear that fantasy sports betting is legal, but would also regulate it and put a tax on it.

The Senate passed the Fantasy Sports Tax Act on Tuesday, and the bill (HB2105) is now on its way to the governor. The legislation follows a state attorney general issued legal opinion issued earlier this month that said fantasy sports contests are illegal gambling.

The measure says online companies that offer the contests must be licensed by the state. The measure also generally limits players to betting no more than $2,500 per month, unless they can show that the limit should be increased. And it would allow the state to impose a 6 percent gambling tax on the adjusted revenue of fantasy sport operators.
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Legislature raises fees for county audits, sets up historic preservation funds

Legislation raising fees that counties pay for audits by the comptroller’s office and diverting new revenue from the state’s real estate transfer tax to historic preservation funds has won almost unanimous approval by the Legislature.

State law requires annual audits of county governments and In 89 of the state’s 95 counties, the comptroller does the auditing. Under current law, those counties pay a fee based on population — 30 cents per resident.

Under SB2654, the fee will be increase to 36 cents per resident starting next year with the comptroller granted authority to raise the cost another 3 cents per resident in each of the following years. The Republican sponsors, Senate Majority Leader Mark Norris of Collierville and House Finance Committee Chairman Charles Sargent of Franklin, said the extra money is needed to cover increased costs — and if the future increases are not necessary, they won’t be implemented.

The Fiscal Review Committee estimated the cost to the counties would be about $230,000 next year. Six of the state’s most populous counties, including Knox, hired their own auditors and do not rely on the comptroller.

Another provision of the bill creates two new uses for money collected from the state’s real estate transfer tax —— purchase of Civil War sites and purchase of historic properties. The Fiscal Review staff estimates that the two funds will split about $1 million next year as a result of the bill’s enactment.

Currently, funds from the tax are earmarked for four other funds — one for wetlands acquisition, one for state park land acquisition, one for local park acquisition and the Agricultural Resources Conservation Fund. Under the bill, those accounts will be frozen at their current levels of annual funding and all growth money will go to the new funds.

The bill passed the Senate 31-1 and was approved 92-1 in the House. The no votes came from Senate Minority Leader Lee Harris, D-Memphis, and Rep. John Mark Windle, D-Livingston.

‘Bike trail bill’ taken off the legislative road

A controversial legislative bill restricting Tennessee cities and counties’ use of gas taxes for parks, greenways, bike lanes and similar infrastructure is dead for the year, reports the Times-Free Press.

Rep. Mike Carter, R-Ooltewah, confirmed he took the bill off notice (Thursday) after it became clear the Senate Finance Committee wouldn’t proceed with the companion measure (SB1716) sponsored by Sen. Todd Gardenhire, R-Chattanooga.

The bill drew opposition from biking enthusiasts as well as concerns from at least some cities.

“It got pulled in the Senate so there’s no reason to run it,” Carter said.

…”What it does is it says here’s what we’re going to spend your gas tax money on. So the next year when the gas tax bill runs, people can decide ‘I want to raise my money for this purpose or for this purpose.’ And they can decide.

“It’s actually an honesty in government bill, which is revolutionary and would be very difficult to pass.”

Bike Walk, an advocacy group, mobilized members to oppose the legislation. The bill was amended substantially and provided a number of exceptions. For example, one provision would have let local governments continue to use fuel tax revenues for bike lanes and sidewalks on roads with posted speed limits under 35 miles per hours. But it required an engineering study.

Legislature approves state budget, cut in Hall income tax

By Eric Schelzig, Associated Press
NASHVILLE, Tenn. — State lawmakers on Thursday approved a nearly $35 billion annual spending plan for the budget year beginning July 1, sending the measure to Republican Gov. Bill Haslam’s desk.

While hot button topics like social issues and guns tend to draw much attention during the legislative session, passing a balanced budget is the chief responsibility for members of the General Assembly.

The Senate voted 32-1 in favor of the budget, while the House approved it by an 87-7 margin.

Lawmakers had spent much of the week hammering out agreements over smaller budget items, while leaving intact most of the spending proposal Haslam proposed at the start of the session.

One last-minute measure approved by lawmakers is a 17 percent reduction in the state’s Hall tax on income on stocks and bonds. The change is projected to cause a loss of $28 million in state revenues, plus another $15 million from the communities where the tax is collected.
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State wins $13M tax fight with Verizon Wireless

News release from Administrative Office of the Courts
Nashville, Tenn. – The Tennessee Supreme Court has upheld a decision by the Tennessee Department of Revenue to impose a tax variance on the parent company of Verizon Wireless. The Court held that the Commissioner of Revenue was within his authority to impose the variance, in order to keep the company from avoiding paying Tennessee franchise and excise taxes on over a billion dollars in revenue from sales to Tennessee customers.

The lawsuit was filed by Vodafone Americas Holdings, Inc., a multistate wireless telecommunications corporation, and its subsidiaries (Vodafone), doing business throughout the United States as Verizon Wireless.

From 2000-2006, Vodafone filed Tennessee franchise and excise tax returns and paid taxes totaling more than $13 million on the revenues Vodafone received for services provided to its Tennessee customers. In 2007, Vodafone filed a lawsuit asking the trial court to require the Department of Revenue to refund nearly all of the Tennessee franchise and excise taxes Vodafone had paid for the years 2002 through 2006. Vodafone claimed that, if the apportionment formula in Tennessee’s franchise and excise tax statutes were applied correctly, Vodafone would owe virtually no taxes on its sales receipts for cell phone services provided to Tennessee customers, receipts that totaled over a billion dollars in revenue to Vodafone.
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McCormick drops bill inspired by Armstrong case

House Majority Leader Gerald McCormick has dropped an effort to change state law so that future legislators would be prohibited from dealing in cigarette tax stamps as Rep. Joe Armstrong is accused of doing.

Armstrong, D-Knoxville, faces trial in August on federal tax evasion charges stemming from what the indictment says was a profit of about $500,000 from cigarette tax stamp transactions in 2007. After reading reports of the indictment, McCormick, R-Chattanooga, said he was surprised that the transaction itself was legal and introduced HB1440 — also sponsored by Senate Majority Leader Mark Norris — to make it illegal.

But McCormick said he had encountered concerns with the legislation on several fronts and ultimately decided to drop the push for passage. Officially, he took it “off notice” last week in the House Agriculture Subcommittee, which has now closed for the 2016 session.
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Repeal of newspaper tax exemption abandoned

NASHVILLE, Tenn. (AP) — The sponsor of a proposal to end a Tennessee sales tax exemption for newspapers has removed the bill from consideration for the year.

State Sen. Todd Gardenhire said he introduced the bill (SB1846) because of questions about whether the exemption “was justified in today’s environment.” The Chattanooga Republican said there are too many exemptions in state law, and that he wants to re-examine the issue next year.

According to a legislative analysis, the state forgoes about $11 million a year because periodicals aren’t subject to the tax. Local governments miss out on another $3.9 million.

Gardenhire also sponsored a bill to allow legal notices to be published online instead of in printed newspapers. That measure failed to receive a motion in the State and Local Government Committee last month.