3 Down, Hall Tax to Go

Now that Amendment 3 has passed, Senator Brian Kelsey is making good on an earlier promise. He told our Midtown Republican Club that once we got a ban on state income tax, he would address the problem of the Hall tax.

The Tennessean reports:

Noting Tennesseans’ recent support for no state income tax, state Sen. Brian Kelsey, R-Germantown, is renewing a push to repeal the state’s investment tax.

Kelsey pre-filed a bill Thursday that would repeal the Hall tax, a 6 percent tax on investments. After 66 percent of voters supported Amendment 3, which changed the constitution to include language that officially forbids a state income tax, Kelsey said the time is ripe to remove the Hall tax.

“I am glad that an overwhelming majority of Tennesseans voted to ban a state income tax and local payroll tax with Amendment 3,” Kelsey said in a news release from state Republicans. “Now it’s time to eliminate the Hall tax.”

The tax isn’t popular among Republicans, who have a supermajority in both chambers of the state legislature. Gov. Bill Haslam recently renewed his opposition to doing away with the tax. He said he doesn’t like the tax either, but it’s not feasible to repeal it considering current budget restraints.

“The reality is, if you look at the budget pressure that we have, if you look at the revenue and the breadth of revenue that we have to draw off of, for now, I don’t see a way to do it,” Haslam told reporters in late October.

“I don’t think it’s a good tax, but I can’t take $270 million out of our budget without something that I know will replace it.”

Kelsey’s proposal would gradually repeal the tax, rolling it back 2 percent for three years so that it is eliminated by 2018.

“My hope is that the state revenues will continue to increase enough that we will not have to cut to eliminate the Hall tax,” Kelsey said Friday afternoon. He said he’s confident that is a realistic expectation of growth, looking at growth in revenue during the past three years. But the state can re-evaluate those prospects in the spring, he said.

“I think most legislators would like to eliminate the Hall tax. The only real question is: What’s the best way to do it in a responsible fashion?” Kelsey said.

Last session a House bill proposed cutting the tax 1 percent per year starting in 2017 if state revenues maintained consistent growth. A different proposal from the Senate would’ve cut the state’s portion of the tax but left in place a 2.25 percent levy that would still go to local governments.

The senator who proposed the bill withdrew the legislation after it was changed to a full repeal in committee.

In the past Lt. Gov. Ron Ramsey, House Speaker Beth Harwell and some Democrats have supported a cut to the tax. In a statement, Ramsey said he hadn’t reviewed Kelsey’s proposal but thought there would be many similar calls to repeal or cut the tax during the upcoming session.

“Obviously, in the tight budget times we live in, any proposal to reduce the tax must be offset by spending cuts. But I look forward to looking closely at the various proposals to attack this pernicious tax,” Ramsey said in a statement.

Last week Harwell said budget issues would be the state’s top priority heading into the next legislative session.

Senator Kelsey understands that this tax is unfair to retired people who need their investment income to live on. His plan to diminish it should get the support of our Republican supermajority.

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