A proposal by State Senator Brian Kelsey (R-Germantown) to amend the Tennessee Constitution to ban the Hall income tax passed the Senate Finance, Ways and Means Committee by a vote of 9-2 this morning. Senate Joint Resolution 494 proposes additional language in Article II, Section 28 of Tennessee’s Constitution which would eliminate state and local governments’ authority to levy state or local tax upon income derived from stocks and bonds that are not taxed ad valorem.
“The Hall Tax on interest and dividends discourages saving and investment and disproportionately impacts senior citizens on fixed incomes,” said Senator Kelsey. “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.”
The Hall income tax, enacted in 1929, is the only tax on personal income in Tennessee. It is currently a four percent tax on income derived from dividends on stock or from interest on bonds after the General Assembly has made several reductions over the past several years. Legislation was approved last year to incrementally phase the tax out by January 2021. However, Senator Kelsey’s proposed amendment would constitutionally prohibit the General Assembly from ever levying or permitting any state or local tax upon income derived from stocks and bonds.
“Enshrining the Hall Tax repeal in the Tennessee Constitution is a pro-growth move that will encourage investment and reinvestment in the State, its companies, and its people,” Senator Kelsey added.
In order for a constitutional amendment to be approved, it must be receive approval by a simple majority during the current 110th General Assembly, and a two-thirds vote in the 111th General Assembly. It would then be placed on the ballot for consideration by voters during the 2022 gubernatorial election, where it must receive a majority of votes cast in the governor’s race.
Senator Kelsey represents Cordova, East Memphis, and Germantown. He serves as chairman of the Senate Judiciary Committee.