Feisty Conservatives in Tennessee State Legislature Phase Out ‘Hall Tax’ on Unearned Income

NASHVILLE, Tennessee–In a powerful victory for conservatives, the Tennessee General Assembly voted to phase out the state’s controversial “Hall Tax” on unearned income in a drama filled final week of its 2016 session.

The unexpected victory — an annual reduction over the next six years in the current 6 percent tax on unearned income that will completely eliminate the tax by 2022 — came when two Republicans, State Rep. Billy Spivey (R-Lewisburg) and State Rep. Mark Pody (R- Lebanon ), decided to challenge the bill passed in the State Senate earlier in the session to reduce the tax by one percent next year while “intending” to reduce it further in subsequent years. The lawmakers acted with the encouragement of Americans for Prosperity-Tennessee and the Beacon Center of Tennessee,

Tennessee, which has never had a state income tax on earned income, is now on its way to having no state income tax on income of any kind.

“As we started the session there was not a lot of hope for the repeal of the Hall Tax bill, but we kept pushing,” Andy Ogles, state director of Americans for Prosperity-Tennessee, tells Breitbart News.

“We worked hard. We’ve been working on it for several years. The Beacon Center of Tennessee has been working on it for several years. It all came to a head this year at the end of the session because people were making sure that their voices were heard,” Ogles adds.

On Wednesday, Rep. Spivey, who is retiring from the House after four years of service, introduced an amendment to the House version of the Senate bill that removed the conditional nature of the phase out. When that amendment passed in the House the same day, the revised bill was sent to the Finance Committee, chaired by Rep. Charles Sargeant (R-Franklin), where it was approved on a voice vote Thursday morning and sent back to the full House, where the amended bill passed later that day.

Late Thursday, a conference committee of the Senate and House conferees was convened. The committee’s report agreed to remove the contingency and guaranteed the phase out of the Hall Tax over six years.

On Friday, the Senate first approved the conference committee report by a 29 to 1 vote, and the House quickly followed suit, passing it by a 66 to 17 margin.

The bill now goes to Governor Bill Haslam, a Republican, and will become law upon his signature, or ten days from its passage should he not sign it. He could also veto the bill before that ten days is over.

“I can’t speak for the governor, but we’ve been told by a member of the Finance Committee the governor has indicated he does not intend to veto the bill,” AFP’s Ogles tells Breitbart News.

Ogles explains how the dramatic final days played out.

“In the last hour Tuesday evening I met with Rep. Pody and Rep. Spivey and I asked them if they would be willing to put together an amendment to force a full repeal of the Hall Tax with certain triggers,” Ogles says.

Both Pody and Spivey had long advocated the repeal of the Hall Tax.

In fact, the vast majority of the members of the Tennessee General Assembly have long sought its repeal.

“Two years ago, we had 102 legislators commited to repealing the tax,” Ogles notes, but it did not happen because the bill never made it to the floor of either house.

But Spivey, Pody, Americans for Prosperity, and the Beacon Center of Tennessee wanted to try again.

“We were figuring there was a fairly low probability [of the full repeal passing], but we wanted to make a point,” Ogles tells Breitbart News.

“We wanted to illustrate ‘intent’ to repeal wasn’t good enough. It was really a stand for conservativism on principle,” he notes.

When Rep. Spivey introduced the amendment to phase out the Hall Tax in a complete over a 6 year period on Wednesday, the momentum for its passage among Republican House members spread like wildfire.

“House Finance Chairman Sargeant eventually went along with us,” Ogles notes.

“The amended bill went to the Finance Committee on Thursday morning. By that time we had such momentum and bi-partisan support, the train was rolling out of the station,” Ogles adds.

“The Finance Committee knew their House members wanted the bill on the floor,” he adds. It passed out of the committee on a unanimous voice vote.”

“Suddenly it went from a possibility to a reality. The appetite for passing this was on the House floor. The trick was getting it to the House floor,” he notes

“That’s why we did this at the last minute. We simply used the rules to our advantage,” Ogles says directly.

The bill is equitable, and is fair to retirees in Tennessee, Ogles says.

“You’re talking about $250 million that comes to the state, most from retirees. A little over half of those who pay the income tax are retirees… middle class retirees who’ve worked hard, they’ve invested in their 401ks or mutual fund, and now they’re having to pay 6 percent tax. So this gives them tax relief,” he notes.

The economic benefits to the state coming from the repeal of the Hall Tax will be significant, Ogles notes.

“The other issue is the dollars that are leaving the state because of this tax. It’s projected… there’s a variety of tax rankings out there, foundations…if you’re a CEO looking to move your company to the state of Tennessee, we’re ranked roughly fourteenth in the nation, as far as being an attractive state to be able to move to… It’s projected that if we repeal the Hall income tax, we go from fourteenth to roughly eighth,” he adds.

Ogles says the repeal of the Hall income tax now makes Tennessee an even more attractive destination for retirees and owners of Subchapter S corporations.

“We are totally income tax free once this is fully implemented.”

“I was talking to a gentleman last night. His company is a Subchapter S Corporation. The way his company was structured, if he attempted it in Tennessee he was going to have to pay the Hall tax on incomes from that business, so he relocated it to Alabama. So you have 40 or 50 jobs that could in Tennessee that are now in Alabama, because this guy did not want to pay the additional Hall tax.”

That negative business location incentive, Ogles notes, will now be gone, after the full repeal of the Hall income tax by 2022.

Ogles hails the Tennessee General Assembly’s phase out of the Hall Tax as an indication of the success of conservative grassroots activism in the Volunteer State.

“You look at some of the bills that failed, and, really, the bills that succeeded were the bills that had the loudest grassroots support.”

Ogles adds that it was a good lesson for conservatives, noting that you can’t win if you don’t try to fight.

“We could easily have accepted the [one time only partial cut of] one percent. That would have been a great tax cut for Tennessee. Roughly $40 million. Two thirds of that goes to the state, a third goes to the local governments. That’s a lot of money. We just felt that when you look at the constituency, the voters out there, they wanted more,” Ogles says.

Several local municipalities in Tennessee opposed the repeal of the Hall Tax because it means a reduction in their revenues.

While that is true, supporters of the repeal point out that retirees throughout the state of Tennessee we unfairly carrying the tax burdens of many municipalities. Municipalities should look to other revenue sources to make up the shortfall, they argue. Alternatively, they can simply cut their budgets.

As for the conservatives in the Tennessee General Assembly and their supportive conservative grassroots activists around the Volunteer State, it was a victory for standing on principle and not cutting deals with the political establishment.

“We took a shot. It was the fourth quarter. Two minutes to go. If you don’t try, you’ll never get it,” he points out.

Ogles confirms to Breitbart News what had long been rumored in Tennessee—key members of the establishment had earlier offered a deal that would have repealed the Hall Income Tax but only in return for an increase in the state’s gas tax.

“At the beginning of the session, there was a deal offered to me at AFP that if we would stay neutral on the [proposed state increase in the] gas tax, we would get the Hall Tax repeal, and I declined. I said, you know, we’re going to get the Hall Tax repealed on its own merits, and we’re going to fight the gas tax on its own merits. But we’re not going to cut the deal,” Ogles tells Breitbart News

“Initially, the offer was made from someone in the House, in leadership, and I declined. Then, two weeks ago, the offer was made again from the Senate side. .. The offer was made twice, and we declined both times,” he emphasizes.

Ogles gives credit to local conservative talk radio, especially Nashville’s 99.7 FM WWTN, for helping make the legislative victory possible.

“I would give WWTN FM. 99.7 radio for giving us the opportunity to come on the air. I was on the radio two or three times [Friday, the day the bill passed] giving kind of real time updates. I challenged listeners, if you have your legislator’s cell phone, you need to call them, text them right now. I think it had a tremendous part [in this victory],” Ogles says.

“Obviously, you have to do your blocking and tackling. But 99.7 really broadcast that out exponentially. It was kind of a force multiplier,” he concludes.


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