Tennessee is often touted as a state with no income tax—but anti-tax crusader Grover Norquist says that comes with an asterisk, because the state still taxes interest and dividends from investments.
Standing beside state lawmakers today, Norquist called for the end of the Hall income tax.
In 2012, 135 thousand people paid the Hall income tax. As a percentage of the state’s overall budget it’s tiny, but it adds up to more than a hundred million dollars annually.
Lawmakers hope to phase it out over several years. Norquist says in the meantime, Tennessee has competition in a kind of race to cut taxes.
“We have no income tax in eight states, and there’s sort of no income tax in Tennessee. You want to be competitive, and the other states are going to zero now. The guys in Kansas will be in zero, before the Hall tax goes away. North Carolina will be in zero—under this bill—before the Hall tax goes away.”
Some Tennessee towns depend heavily on revenue they get from the Hall tax. Backers of the legislation say as the tax winds down, local governments will have time to adjust—but they’re on notice they can’t bank on that money forever.