A proposal by state Sen. Brian Kelsey, R-Germantown, to amend the Tennessee Constitution to ban the Hall income tax passed the Senate Finance, Ways and Means Committee 9-2 Tuesday morning, according to a recent news release.
Senate Joint Resolution 494 proposes additional language in Article II Section 28 of Tennessee’s Constitution, which would eliminate state and local government’s authority to levy state or local tax upon income derived from stocks and bonds.
“The Hall Tax on interest and dividends discourages saving and investment and disproportionately impacts senior citizens on fixed incomes,” Kelsey said. “More and more citizens are relying on interest from stocks and dividends to fund their daily living expenses when they retire. Not only is the Hall tax oppressive to these seniors, but it encourages them to move out-of-state.”
In recent years, Republicans in the Tennessee General Assembly have worked to phase out the Hall tax, which is the only tax on personal income in Tennessee. After several reductions over the past years, lawmakers approved legislation last year to incrementally phase the tax out by 2021.
Kelsey’s amendment would, however, prohibit the General Assembly from ever levying or permitting any state or local tax on income derived from stocks and bonds.
In order for the amendment to be approved, it must be approved by a simple majority during the current 110th General Assembly and a two-thirds majority in the 111th General Assembly. After that, it would be placed on the ballot for consideration by voters during the 2022 gubernatorial election, where it must get a majority of votes from people voting in the governor’s race.
Rep. Micah Van Huss, R-Jonesborough, joined other Republican legislators in supporting Kelsey’s proposal. He said he’s happy with any legislation that “puts more money in the pockets of his constituents.”
“That’s great,” he said of the proposal. “We want to incentivize more people to come to Tennessee, and I think we do that by cutting taxes.”
State Sen. Rusty Crowe, R-Johnson City, is another local legislator who supports Kelsey’s proposal.
“I have always considered the Hall tax on investment income as a ‘double tax’ on general income dollars already taxed by the federal government; and as a tax on incentive and production,” Crowe wrote in an emailed statement to the Johnson City Press. “Many of our seniors rely on this income in their retirement years and some have moved from Tennessee as a result.
“Although we are phasing it out currently, this constitutional action would ensure future legislatures could not simply reinstate it by merely passing legislation to do so.”