Ed Wood "The Right Stuff" Published March 20, 2002

We've got one already!

With all the talk about the possible adoption of a state income tax, I wonder just how many people know that we already have a Tennessee state income tax.
It's called the "Hall" tax. And I'll admit, we lived here for three years before I knew it existed. Then I had to go pay up!

So why is the Hall tax so little known, and even less discussed? Because only a relatively small percentage of the people pay it; mostly senior citizens and those on limited income.

Let me explain: Hall is a tax on income received from stock dividends and bond interest. It was named, no doubt, for some state legislator who did not own any stocks or bonds! If it is a tax on stock and bond income, then it is supposed to be just for the wealthy. But it really doesn't work out that way.

Most of us understand that Social Security alone will not pay enough to provide for our senior years. So we are encouraged to work and save for old age, and depend on the income from our nest eggs to make up the difference. And that difference is precisely what's targeted by the Hall tax.

After a personal exemption of $1,250, or $2,500 if filing jointly, Hall takes 6 percent of the remainder. It's the last swipe the tax collector gets before the undertaker arrives ... and then, of course, he gets up to 55 percent of whatever is left in the form of a "death" or estate tax. The Hall tax is the penalty the state of Tennessee imposes on those who try to provide for their senior years.

But that's only part of the story. The Hall tax is sold as being "fair," since a little over a third of the total (less an "administrative fee," of course) is returned to the taxpayer's local government. To a municipality, if the taxpayer lives in a city, or, if not, then to the county in which the taxpayer resides. This means that cities with the greatest accumulation of senior citizens who are trying to live off their nest eggs get most of the money.

Last year, Belle Meade, a wealthy Nashville suburb with no school system and a population of only 3,000, received $2.8 million in Hall money. Van Buren County, with a school system and a population of over 5,000, received only $882.

So you see, the Hall tax is taken largely from those individuals who need it most, and given to those communities who need it least. I guess there's logic in there somewhere, but for the moment it escapes me.

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Ed Wood is a resident of Sparta, TN. His column is published each Wednesday in the Crossville Chronicle.