Last week, a few mayors and Tennessee state legislators, a group of think tank leaders and a contingent of press met in a room at Tennessee's Legislative Plaza to mark the "beginning of the end of Tennessee's income tax."
The Beacon Center of Tennessee, a nonprofit, nonpartisan policy research organization, kicked off the press conference with President Justin Owen noting the purpose of the gathering: to launch a legislative effort to end the state's Hall Tax, a tax on personal investment income.
The Hall Tax was initiated in 1929 and ruled by Tennessee's Supreme Court to be a "privilege tax" to avoid conflict with our state's constitution that prohibits an income tax. Yet, the Hall Tax, levied on the income an individual receives from the interest from savings and dividends resulting from mutual fund and stock investments, is truly a personal income tax.
Doubt that? Go to the state's online portal to file your payment electronically, and you're greeted with the banner from the Department of Revenue, "Individual Income Tax."
Joining the Beacon Center were the legislative sponsors who have written the bill to gradually end the Hall Tax over a 6-to-7-year window of time. State Sen. Mark Green, R-Clarksville, and Rep. Charles Sargent, R-Brentwood, discussed the bill that would begin upon passage to reduce the current rate of 6 percent taxation on taxable interest and dividend income over $1,250 per person ($2,500 for married couples filing jointly) for those under age 65.
The proposal reduces this rate by 1 percent annually with an eventual elimination. The legislation addresses the mechanics of shared revenue to county and other municipalities by increasing the percentage received locally as the rate is reduced.
Why the big deal? The population that is disproportionately harmed by the Hall Tax is the seniors -- retired citizens who live off of retirement plans and savings they made through discipline and planning.
But the retired are not the only ones who pay this tax.
The Tax Foundation, a nonpartisan research group, has published data showing 56 pecent of Tennesseans paying the Hall Tax earn less than $75,000 yearly, and 40 percent of those taxed on this personal income make less than $50,000 yearly.
No, this is not a tax proposal to benefit the rich or some corporate conspiracy. This common-sense legislation encourages savings and removes the incentive for retirees to leave the state.
Gov. Bill Haslam has already increased exemptions for our senior citizens to exclude the first $10,000 in income of those over 65 years of age with a pledge to further reduce the levy that represents 0.9 percent of the total collections of taxes in Tennessee.
I know, lots of numbers, lots of talk, but what does it mean to the average person?
As you invest in your retirement plans and develop your nest egg for the future, you'll keep a little more of the money you've earned, and the state government will be forced to make budget priority decisions just like we do at our kitchen tables.
With this one piece of legislation, if signed into law, our state will move from a ranking of 15th, according to the Tax Foundation, for a favorable tax climate for investment to 11th.
With the passage of this bill by Rep. Sargent and Sen. Mark Green, the disclaimer and asterisk will be removed in the record books, with Tennessee becoming one of only eight states with the authentic designation of having no personal income tax.
Asterisk-free ... it's the Tennessee way.
Robin Smith served as chairwoman of the Tennessee Republican Party, 2007 to 2009. She is a partner at the SmithWaterhouse Strategies business development and strategic planning firm and serves on Tennessee's Economic Council on Women.