Hall tax repeal dies in committee

Green said amendment would have adversely affected local tax bases

Sen. Mark Green has withdrawn a bill that would have phased out the Hall tax, which taxes income from investments and dividends. Green said changes from Chairman Randy McNally, R-Oak Ridge, added in committee Wednesday afternoon, would have violated promises he made to constituents to phase out the state portion of the tax while keeping the local portion to help fund local governments.

“We were basically going to take the state out of the Hall tax business and leave the communities whole,” said Green, who told reporters moments after pulling his bill in committee he was emotional about the afternoon’s developments. “Some of these communities, 80 percent of their budget is from the Hall tax.”

Of the 6 percent tax the state charges on taxable income, 3.5 percent now goes to the state and 2.5 percent is given to local governments.

Conservative groups have pressed lawmakers to cut away at the tax, although Gov. Bill Haslam has said this is not the time to set up further rollbacks while the state struggles with lower-than-expected business and sales tax revenue and giving up raises for teachers and state employees.

Green’s bill would have begun to roll back the state portion of the Hall tax contingent on the state’s fiscal health improving, which included adding an extra year of wait time given the state’s current budget situation. The amendment offered by the Finance Committee Chairman would have rolled back the Hall tax by 1 percent a year contingent on the state hitting certain revenue and economic triggers. In a best-case scenario, said McNally, the state would completely phase out the tax in 10 years.