Haslam signs bill to halt Hall Tax

NASHVILLE – Gov. Bill Haslam signed a measure into law Friday that statutorily phases out the Hall Income Tax and sends Tennessee on its way to income tax-free status by January 2022.

First sponsored in 2012 by state Sen. Mark Green, R-Clarksville, the proposal to remove the tax on income that results from investments was an annual legislative proposal with public support based on the principle of double taxation and the disproportionate impact to retirees.

Our citizens should never be penalized to work or to save. Any income tax does just that and this law ends the taxation of savings and investment, said Green, vice chairman of the Senate Commerce Committee.Whether a couple saving for their future or an investment group creating jobs in our state, Tennessee has just removed a barrier to economic freedom in our state.

Initially implemented in 1929 to tax the investment income of the wealthy of the day, over time the Hall Tax has impacted a larger segment of the states population levying a 6-percent tax rate on any investment disbursement that exceeds $1,250 per individual or $2,500 for married couples. According to IRS data, within the last five years, 56 percent of state taxpayers who reported receiving dividends were households earning less than $75,000 annually. Further, 40 percent of the state households receiving a dividend earned less than $50,000.

“Unlike the government out of Washington, Tennessee continues to be an effective steward to our citizens with a balanced budget and prioritized spending. The end of the Hall Tax keeps your money in your budget, not the government’s,†said Green.

The new law says the tax rate will be reduced from 6 percent to 5 percent, a 17-percent cut from the total dollars collected by the state for fiscal year 2016. The intent of the General Assembly in successive years is that the tax on investment and dividend income would be cut 1 percent annually, but is not bound to any specific rate reduction charged to respond according to the economic health of each fiscal year. By January 2022, the Hall Income Tax will no longer be collected and eliminated as a legal means of taxation in Tennessee.

Tennessee will soon join seven other states – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – as completely income tax free.

State Rep. Charles Sargent, R-Franklin, sponsored the bill in the House.