By Nick Clay
New legislation signed by Governor Bill Haslam will phase out the Tennessee Hall Tax over the next six years. An estimate of over 200,000 taxpayers who reside in Tennessee paid the Hall Tax in 2014 at an average amount of $1,400 and in fiscal year 2014 the Hall Tax accounted for more than $303 million in revenue.
So what is the Hall Tax? The tax, which was established all the way back in 1929, is a Tennessee state tax on interest and dividend income from investments and it is the only tax that is levied on personal income. The current tax rate is 6%, which is applied to all taxable interest and dividend income in excess of $1,250/person ($2,500 for married filing jointly). The revenues from the tax are shared with the government of the municipality or county where the taxpayer lives.
For years the tax has been the subject of heated debate, mainly because of its regressive nature and the negative impact on retired people. Many people, including Senator Mark Green who sponsored the bill, believe the repeal in the Hall Tax will stimulate more investment in the state of Tennessee. In theory it should continue to make Tennessee a competitive state when it comes to economic growth due to the tax break this will provide retirees and entrepreneurs.
As mentioned the Hall Tax will be eliminated over the next six years. The legislation initially will cut the Hall Tax from 6% to 5% before it ultimately is phased out by year 2022.
