The Hall tax especially hurts our seniors and those who have saved for their retirement, as almost half of those who pay the tax are 65 or older. Not only that, nearly 9 of 10 individuals who pay the tax have less than $34,000 per year in investment income.
Now is the time to repeal the Hall tax forever. Opponents of repealing the tax have prevailed in past sessions by claiming there was not enough state revenue to off-set repeal. That objection is off the table this year.
Tennessee has a $600 million surplus in over-collections, and the Hall tax brings in only $167 million in state revenue each year. Economists project that at least half of this year's budget surplus will be available in future years to "pay" for the repeal without any cuts necessary.
For example, University of Memphis economist Dr. John Gnuschke recently stated, "While substantial budget fluctuations occur, the natural growth of state tax collections should exceed $300 million. Over collections could exceed $300 million as long as state spending is held in check."
I, for one, intend to hold state spending in check. All lawmakers who believe in limited government should commit to giving this money back to the taxpayers before spending it on pet projects. Many such projects have already been proposed, but Republican supermajorities should reject them in favor of tax cuts.
We can no longer rest on our laurels from 2012. That year, the legislature repealed the gift tax, reduced the sales tax on groceries, and phased out the inheritance tax over four years. That phase out will be complete January 1, 2016. The logical next step in Tennessee tax relief is to repeal the Hall tax effective January 1, 2017.
A final objection to repealing the Hall tax comes from local government. An additional $90 million in Hall tax revenue is shared with the city in which the taxpayer resides or the county if the area is unincorporated. As you might expect, some cities receive far more of this revenue than others. Cities and counties should decide among themselves how to distribute their share of the revenue, and the state should send that money back to local government. Tennessee can afford repeal of the Hall Tax next year without cutting one dime from state or local government.
This legislation won't be voted on until the General Assembly reconvenes in January, but I hope you will let your state legislators know now how you feel about this tax.