Tennessee’s Hall Tax, as of this coming Friday, will cease to exist.
Experts say that will bring new opportunities to Tennessee and make the state’s economy more competitive.
The Hall Tax, instituted in 1929, applies a 6 percent tax to Tennesseans’ interest and dividend income. In 2016 members of the Tennessee General Assembly phased out the Hall Income Tax over years of scheduled reductions.
On Monday, members of the Nashville-based Beacon Center of Tennessee said that “the Hall Tax had long existed as an ‘asterisk’ to Tennessee’s proud claim to be income tax-free.”
“The repeal of this tax was due in large part to the aggressive campaign by the Beacon Center,” Beacon staff said in an emailed press release.
Beacon is a right-of-center think tank.
“On January 1st, Tennessee will finally become truly income tax-free,” Beacon Center CEO Justin Owen said in the press release.
“This has been a long time coming and thanks to the work of both Beacon and the legislature, it has finally come to fruition. Tennessee is now an even more attractive place for retirees and businesses alike to put down roots.”
Members of the Arlington, Virginia-based American Legislative Exchange Council, in their 2017 edition of Rich States, Poor States said that “Americans in states with poor economic policies increasingly vote with their feet and move to states with better opportunities and brighter horizons.”
And Tennessee benefits, said report authors Art Laffer, Stephen Moore, and Jonathan Williams, in 2017. Laffer was on President Ronald Reagan’s Economic Advisory Board and is credited as “the father of supply side economics.” Moore wrote for The Wall Street Journal. Williams is ALEC’s chief economist.
Their report examined state migration trends and how tax policies affect those trends.
“Taxes on investment income are often assumed to apply mostly to the rich, but not so with the Hall Tax, where more than half of those paying it earn less than $75,000 per year,” the report said.
“Most of those paying the 6 percent tax are hopeful entrepreneurs, working-class families, retirees and soon-to-be retirees who especially depend on their savings and investments for retirement.”
The authors said the tax forces fewer individuals to partake in those activities. Revenue from that tax comprised less than 1 percent of Tennessee’s budget, making it “unlikely to harm the state’s ability to fund its budget,” they added.
Repealing that tax and the state’s death tax make Tennessee more competitive, the report said.
“By repealing the death tax, lawmakers helped more small businesses and farms remain family-owned and put Tennessee on even footing with the majority of states in terms of attractiveness for retirement and estate planning,” the authors wrote.
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