The income tax Hall is a Tennessee state tax on interest and dividend income from investments. This is the only tax on personal income in Tennessee, which does not collect public income taxes in general. The rate of tax before 2016 is 6 percent, applies to all taxable interest and dividend income of more than $ 1250 per person ($ 2500 for married couples filing jointly). Revenues are shared with municipal governments or areas where taxpayers live. In 2016, the state cuts Hall's income tax to 5% with the intention of eliminating it entirely. On April 26, 2017, Governor Haslam signed an IMPROVE Act into law, which implements the following time line for exit from Tax Hall:
- Effective Date for Tax Rates
- 4% for tax year starting January 1, 2017, and before January 1, 2018
- 3% for tax year starting January 1, 2018, and before January 1, 2019
- 2% for tax year starting January 1, 2019, and before January 1, 2020
- 1% for tax year starting January 1, 2020, and before January 1, 2021
- Full retraction for tax year starting January 1, 2021
Video Hall income tax
History
Hall Tax was established by the Tennessee General Assembly act in 1929, by Chapter 86, Public Acts of 1929, enacted on 10 April 1929. Named for Frank S. Hall, the state senator who sponsored the law. The tax authority comes from the 1870 amendments to the Constitution of the State of Tennessee, which grants the General Assembly the power "to levy a tax on income derived from shares and bonds which are not taxable ad valorem ." The 2004 analysis shows that the country's constitutional provisions are intended to overcome the difficulties experienced by the Tennessee government in its attempts to apply property taxes to intangible property. The Tennessee Supreme Court's opinion in 1929, published in the case of Shields v. Williams and written by Chief Justice Grafton Green, discovered that Hall's tax is a privilege tax, not a property tax. This means that Hall's tax is not subject to state constitutional provisions requiring all property to be taxed uniformly.
Initially the tax rate is 5% and all revenue collected is directed to the state government. In 1931, the General Assembly amended the law to require that 45% of revenue be distributed to local governments. It has the effect of allocating 2.75 percentage points of taxable income to the state government and 2.25 points to the local government.
In 1937, the tax rate was raised to 6% and the portion allocated to the local government was reduced to three-eighths of the total, thus keeping the local government share at 2.25 percentage points of taxable income reported by the local jurisdiction population. This rate remains in effect since 2014.
In 2002, the Tennessee Department of Revenue set up an electronic filing system for Hall's income tax and terminated previous practices to submit tax forms to taxpayers believed to be taxed.
In 2016, Governor Bill Haslam signed a bill to reduce Hall's income tax for fiscal year 2016, with the goal of finally eliminating taxes as state government revenues increase year by year.
Maps Hall income tax
Enforcement
Hall taxes apply to interest and dividend income earned by people who maintain their official residence in Tennessee, including part-time residents who live in the state at least six months of the year.
Dividends are subject to dividend taxes from companies, investment trusts, and mutual funds, including the distribution of capital gains from mutual funds. Forms of taxable interest include interest on bonds issued by persons, corporations, churches, joint-stock companies, business confidence, US states and local political subdivisions outside of Tennessee, and foreign governments; and interest on mortgages, securities, and other written obligations that mature more than six months after the date of issue. The tax does not apply to income from government obligations issued by the federal government of the US and the state of Tennessee or local government. Dividends from shares in banks and similar institutions (but not holding companies), as well as some Tennessee businesses, are exempt from taxes. Interest paid on bank accounts and credit union is also not subject to the Hall tax, regardless of the location of the bank.
The first $ 1,250 of the interest and dividend income of a person who otherwise would be taxable Hall was exempt from tax. Married couples may apply for a joint refund, in which case $ 2,500 of taxable couples' interest and dividend income are exempt. Blind people and people over 65 whose total annual earnings are $ 33,000 or less ($ 59,000 for joint reporters) are not subject to Hall's income tax. Some interest and dividend income received by quadriplegics are also excluded.
Hall income tax violations may be claimed as Class E crimes, with a penalty of up to two years in a state prison and up to $ 3000 in fines. The Tennessee Department of Revenue uses the Internal Revenue Service data to help identify unreported taxable income.
Revenue collected
The Hall's income tax accounts for about 2% of the Tennessee state tax collection. Revenue from Hall taxes peaked at $ 289.7 million in the 2008 fiscal year (FY), when nearly 192,000 households paid Hall income tax based on proposed returns for the calendar year 2007. The Hall's income tax collection totaled $ 213.9 million and $ 172 million for calendar year 2008 and 2009, respectively (paid in FYs 2009 and 2010 countries). Approximately 156,000 state households paid taxes in FY 2009 for revenue received in 2008.
Income from Hall income taxes varies significantly from year to year, making it difficult for governments to predict. Some of the biggest year-on-year changes occurred in FY 1998, when the collection increased 25.5% from the previous year, and FY 2002 and 2009, when the collection fell 26.1% from previous years. The main reason for the great variability in income is the application of taxes to the distribution of capital gains from mutual funds. A 2004 report by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) observes that capital gains from investments have shown "roller-coaster behavior" over the previous eight years. TACIR identifies this variability, coupled with increased investor participation in mutual funds, as the main cause of fluctuations in Hall's tax collection over the same period.
Distribution to cities and counties
Three-fifths of Hall's income tax payments are distributed to municipalities or areas where taxpayers live. There is no limit on how local governments use the money. This distribution arrangement may be related to Hall's tax origins as a property tax on intangible property.
Distribution to the city is generally larger than the distribution to the region. In FY 2003, the combined distribution to all the municipalities of the country amounted to $ 42,332,061, or an average of $ 13.22 per city dweller, while distribution to the district was $ 8,184,443, an average of only $ 3.30 for any population living outside the boundary city. In FY 2003, Hall's largest income taxpayer per capita was Belle Meade, a rich enclave in Metropolitan Nashville-Davidson County, which received per capita distributions of $ 491.68. At the lower end, 14 municipalities have no income from Hall taxes. Distribution per capita to the district ranges from $ 15.41 to Williamson County up to as low as $ 0.40 to Hancock County.
Although Hall income taxes are a relatively small source of income for most local governments, this is a major source of funds for some small municipalities, especially those with a wealthy population. The City Government of Belle Meade receives more than a third of its income from Hall's income tax. Other Tennessee towns that are heavily dependent on taxes, based on 1997 data, are Forest Hills, Allardt, Lookout Mountain, Slayden, and Walden.
In FY 2010, combined payments to Knox County and municipalities included (including Knoxville) totaled $ 12.5 million, the highest of any county in the state. Shelby County and the municipality (including Memphis) received a total of $ 11.4 million, while Davidson County and the municipality (including Nashville) received a total of $ 10.4 million. Other countries where combined payments to districts and cities exceed $ 1 million are Hamilton County ($ 5 million), Williamson County ($ 4.5 million), Sullivan County ($ 1.4 million), and Sumner County ($ 1.3 million). At the bottom end, Hancock County and the municipality received a total of $ 2,755.
Critics and proposals for change
Hall income tax has been the subject of chronic criticism, mainly because it is regressive and has a negative impact on retirees. Periodically, there are legislative proposals to change them, including eliminating them, replacing them with general personal income taxes, or changing tax rates or exceptions. Sometimes there are also legislative proposals to increase state government revenues by reducing part of Hall's taxes distributed to local governments; some such proposals were made in the late 1990s and early 2000s.
Proposals for major changes to Hall's taxes usually fail because of the lack of alternative sources of income to replace them. Hall tax is Tennessee's sole tax on personal income; the state does not levy personal income taxes in general. In 1974, the Tennessee Supreme Court has consistently stated that the state constitution allows only three types of taxes: tax privileges, property taxes, and taxes on income from interest and dividends. In decisions in 1932 and 1960, the court rejected proposals for general personal income taxes. More recently, in 1981, 1991, and 1999, three different Tennessee Prosecutors issued an opinion stating that the general income tax would not violate the state constitution.
In December 2004, a commission set up to study the tax structure of the state criticized Hall's income tax as regressive, anti-competitive, and "unjustly selective." But not all analysts agree about tax regression. The Institute of Taxes and Economic Policy (ITEP) has found that Hall Tax is actually the only major progressive tax levied in Tennessee - 0.4 percent of revenues for high-income taxpayers compared to 0.0 - 0.1 percent for the Tennesseans less prosperous. The Tennessee Tax Structure Research Commission signifies taxes as "extremely dangerous for retirees with limited incomes primarily derived from investments," notes in a final report that low-income pensioners with dividends and interest income pay taxes, but low-income people with incomes from other sources do not. The commission's report also confirmed that Hall tax "effective (sic) encourages retirees to leave the country." The Commission recommends canceling Hall's income taxes, reducing or canceling other state taxes, and enforcing a general personal income tax on their premises. Other critics argue that the tax is preventing people from saving and preventing efforts to encourage retired people living in Tennessee. Organizations including the Tennessee Voters League and Tennesseans for Fair Taxation have endorsed the withdrawal of Hall's income tax as part of a comprehensive tax reform that includes the adoption of a broad-based private income tax. In the "Legislator's Guide to Issues" issued in 2009 and 2011, the Tennessee Policy Research Center calls the 6 percent "big enough" level and says the tax "makes Tennessee an unpleasant place, especially for retirees and the rich." The organization recommends canceling taxes "to encourage rich people and retirees to move to Tennessee" and cut state spending to offset lost revenues.
In May 2011 the General Assembly passed an act, sponsored by Speaker Ron Ramsey in the Senate and Cameron Sexton's Representative from Crossville in the House, to increase the exclusion of income for people over 65 by $ 10,000, to $ 26,200 for individual taxpayers and $ 37,000 for joint rapporteur. The change is expected to make about 4,725 taxpayers eligible for exclusion, reducing Hall tax revenues by about $ 1.65 million, including $ 1 million for the state and $ 650,000 for local governments. Governor Bill Haslam previously supported this proposal, saying: "If you have retired and lived on a dividend basis, I am not sure why you should be treated so differently from someone living on a salary." This is the only bill to pass between eight bills to reduce or eliminate Hall taxes introduced at the General Assembly in 2011. Sexton Representatives and State Senators Charlotte Burks of Monterey sponsored a proposal to get out of Hall's tax by reducing the value each year until 2015 , when it will be reduced to 0%. Both sponsors of the bill represent Cumberland County, a retirement community location including Fairfield Glade and Tansi Lake. In explaining his reasons for the bill, Sexton said that his goal is to protect senior citizens in this community and other retirement communities from "punishing [d]... at the end of their lives when they try to live in a fixed place of income." Other legislative proposals in 2011, sponsored by Senator Jack Johnson and Representative Charles Michael Sargent, both Republicans from Franklin, will increase the taxpayer's interest and dividend income exempted from Hall's taxes, eventually earning the first $ 2,500 ($ 5,000 for non- people filing together) is not paid off.
References
Source of the article : Wikipedia
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