Mar 30 2010
07:31 am

Tom Humphrey:

The Senate approved 25-7 Monday night a proposed amendment to Tennessee's constitution that would prohibit a state income tax.

I thought it was already unconstitutional, or at least that's what they keep telling us. Unless you are subject to the Hall Tax, that is.

jah's picture

I'm not seeing it in Tom's

I'm not seeing it in Tom's article, but every time this has come up recently, it's said no "new" income tax and has specifically said that it wouldn't affect either the Hall income tax or the business Franchise & Excise tax, which has an income tax component.

Tamara Shepherd's picture


The Tennessee Constitution presently allows the Hall Income Tax via the very last line of Article II, Section 28, which reads:

"The Legislature shall have power to levy a tax upon incomes derived from stocks and bonds that are not taxed ad valorem."

My understanding is that the proposed Constitutional amendment would leave this enabling text as-is (and would therefore leave the Hall income tax as-is), but would add to the text specific language prohibiting any tax on earned income.

It's because the Constitution fails to specifically address the allowability of a tax on earned income that legislators' presently disagree on whether such a tax is constitutional. This amendment would clarify that it is not.

I'd share a link, but I can't recall where I read this...

R. Neal's picture

I guess Sub-S distributions

I guess Sub-S distributions fall under "stocks" in Tennessee, and ordinary income at the IRS. State sovereignty and all that.

jah's picture

I've lost several clients by

I've lost several clients by making them pay the Hall income tax on S corp distributions. It's really frustrating.

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