Hall Tax Reduction Is Right For Tennessee - And Response (2)

  • Monday, May 2, 2016
  • Reps. Kevin Brooks and Dan Howell and Senators Mike Bell and Todd Gardenhire

In a move to make Tennessee more economically competitive and give relief to state of Tennessee taxpayers, the General Assembly passed major tax reform legislation this year by reducing the state’s Hall income tax and establishing a timeline for full repeal. 

While Tennessee is always included in the list of nine states with no income tax, we often see an asterisk by our name. Though the state does not tax personal wage income here, it does tax investments by levying a six-percent tax on capital gain, dividend and interest income. This tax is referred to as the Hall income tax and is currently paid by more than 200,000 Tennesseans. 

In place since 1929, the Hall tax unfairly punishes entrepreneurs, business owners and especially seniors who rely heavily on their invested retirement income to make ends meet. Taxing those who have worked hard their entire lives, been fiscally responsible and frugal in their budgets, and saved for their futures is simply not the Tennessee way. 

By cutting the tax by one-percent this year and setting up a timeline to completely phase the Hall tax out by January 2022, we are helping preserve the nest eggs of retirees, removing barriers that negatively affect economic growth, inspiring our job creators to take new risks in the market and attracting new companies to our state by showcasing our friendly business environment. 

Obviously, all four of us — as members of the same legislative delegation — have strong views on this issue. We share this perspective because it’s what we are hearing from Tennesseans, and it is Tennesseans who have offered their voice to us. 

Because the Chattanoogan has offered this joint statement opportunity to us as a published “Viewpoint,” and because we each have our own perspectives, three of us are sharing a few words as individuals. 

They are presented as follows under separate subheadings for each of us. 

Tennessee State Rep. Kevin Brooks, 24th Legislative District:

“Passage of the Hall Tax reduction is long overdue in Tennessee. We get letters and emails every year from senior citizens, business owners and job creators in Cleveland, asking for us to reduce the unfair Hall tax. In fact, I don’t need a calendar to tell when we are getting close to April 15. Our emails to eliminate the Hall Tax from local taxpayers let us know every year.” 

In total, the legislation passed this year to phase out the Hall tax will result in a nearly $350 million tax cut per year for Tennessee taxpayers and rep- resents the single largest tax cut in state history. 

Tennessee State Rep. Dan Howell, 22nd Legislative District:

"For 87 years, thousands of Tennessee retirees, who depend on their 401k and Mutual Fund dividends to live, have suffered under the unjust burden of double taxation. Statistics show the majority of them are middle-class citizens who worked hard to ensure they had a decent retirement. It's time these people get a tax break.” 

By eliminating the Hall tax, the nonpartisan Tax Foundation cites, “Tennessee will see its state business tax climate ranking improve from 15th to the nation’s 11th best.” This means more money in the pockets of taxpayers across the state — exactly where it belongs. In addition, the phaseout means no more asterisk on our otherwise praiseworthy tax record, making our state even more enticing for new businesses and new retirees to relocate. 

While some local governments are concerned that cutting the Hall tax means less taxpayer dollars in the coffers to be spent on community projects, let’s be clear: Revenues from the Hall tax make up less than one-percent of the total state budget and less than four-percent, on average, of local revenues. Under such low numbers, the argument made by pro-Hall tax supporters that local projects will be hurt sim- ply does not hold water when compared to the harm the tax inflicts on taxpayers and the overall economy. 

Under Republican leadership in the General Assembly, we are fiscal conservatives and true tax cutting Tennesseans. At the state level, we are balancing our budget, saving for the future, eliminating waste and abuse, and reducing taxes. It would be nice for our federal government to do the same. 

Our vote to phase out the Hall tax is the biggest victory for Tennessee taxpayers this year, and we are proud to stand with our colleagues in eliminating this tax that unfairly hurts senior citizens and our job creators. 

Tennessee State Senator Mike Bell, 9th Senatorial District:

"The Hall tax punishes senior citizens who have saved all their lives For the fourth year now, the and utilize investments as their retirement income. It is also a job killer. Many businesses have either chosen to go to another state or left Tennessee due to the Hall tax, taking their jobs with them. I am very pleased that this legislation has passed and believe that Tennessee will see an increase in new jobs because of it." 

Please rest assured that Our full legislative delegation — all four of us — support this needed reduction in the Hall tax. 

By cutting the Hall tax, our state can fulfill its status as the nation’s friendliest environment to grow a business, raise a family and plan for a future — all while being uninhibited by government regulations, burdensome red tape and excessive taxation. 

Repealing the Hall tax is the right choice for Tennessee’s future.

Reps. Kevin Brooks and Dan Howell and Senators Mike Bell and Todd Gardenhire 

* * *

Ask yourself this question: when was the last time you paid the Hall Income Tax? If you’re like me, never. So who exactly does this benefit, well it doesn’t take a scholar to figure this one out. 

According to the United States Census Bureau Tennessee has an estimated population of over 6.3 million. Of this 6.3 million around 200,000 will see a direct tax benefit, so around 6.1 million will be directly unaffected by this extraordinary piece of legislation. 

Analysis performed using the ITEP Microsimulation Tax Model shows almost 63 percent of the tax cuts would go the wealthiest five percent of the population while just around 14 percent to the other 95 percent. Now you may be asking yourself where the rest goes, that is the other 23 percent. Well, that 23 percent finds its way to the federal government  instead of in the hands of Tennesseans. 

Don’t buy the rhetoric that this is the largest single tax break for TN and a victory for taxpayers unless of course you are in the top five percent. Now if you are in the top 5 percent, congrats on your tax cut. And to the other 95 percent get ready to make up the difference as Dan Howell reported to the Bradley County Commission, Bradley County alone stands to lose $800,000. 

Mike Lynn
Cleveland 

* * * 

Last year the Tennessee General Assembly voted to reduce property tax benefits for 100 percent service connected veterans and their survivors. This tax cost me personally almost $1,000. As the widow of a combat related disabled veteran, that is a lot of money. I happen to have a $4,000 money market account which I made 14 cents interest in March. (That type of interest is not subject to the Hall tax.) 

A person who qualifies for the Hall Tax pays 6 percent of income over $1,250 (or $2,500 for married persons filing jointly), which they receive in capital gain distributions, annual interest on dividends, income from investment trusts and mutual funds. Few common folks have that kind of income. Part of the spin handed out to the voters is that around 50 percent of those who pay the tax are retired people.  At the same interest rate my $4,000 gave me, those poor folks have a mighty big nest egg, because it would have to have been over $2,000,000 if my ordinary interest rate was applied. Also, being blind and other disabilities might exempt them from the tax entirely. Different rules for them than the disabled veterans? 

Notice that the state senators who sponsored this bill to get rid of the Hall Tax are a doctor, a lawyer and a CPA. The sponsors in the House were a commercial real estate broker, a business owner and a public relations professional. Look at those professions and guess who deleting the Hall tax benefits. Those same politicians in the Tennessee General Assembly (100 percent of the state Senate, and almost 100 percent of the state House) were telling us that our veteran population was growing to the extent that the state might not be able to sustain the expense any longer.  

Incidentally, the expense to the state of Tennessee to decrease the benefit to the veterans was under $10 million annually. The loss in income to the state of Tennessee from the Hall Tax will be over $200 million each year. Our wealthiest citizens, whether over 65 or not, benefit with the removal of the Hall Income Tax. Jerry Reed’s song “She Got The Goldmine, I Got The Shaft” comes to mind.     

Consistently in my life, I have voted conservatively. I will not vote for any of the current batch of politicians, Republican or Democrat. And until I wrote this, I considered myself sold on Ted Cruz. My new rule is that I will vote for anyone who runs against the current crop. That is just one vote, but it is mine. My new second rule is that all of my future campaign contributions will be for newcomers, whatever their party affiliations. 

Maybe if Rhonda Thurman gets tired of the School Board, she can skip past the county, and run for state office. I do believe she listens, and tells the truth as she sees it.      

Bonnie White
Hixson

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