(The Center Square) – The Tennessee Legislature is considering the removal of a $400 annual “privilege tax” on certain professions in Tennessee.
The state levies an annual $400 professional privilege tax on individuals licensed or registered to practice in any of seven professions: attorneys, securities agents, broker-dealers, investment advisers, lobbyists, doctors and osteopathic physicians.
Senate Bill 884 would eliminate the tax for attorneys, physicians, investment advisers and lobbyists. Sen. John Stevens, R-Huntingdon, who sponsors the bill, said the legislation is likely to change as the Legislature continues budget negotiations in the coming weeks.
“This bill is designed to be a vehicle for the elimination of the professional privilege tax,” Stevens said Tuesday during a Senate Finance, Ways and Means Revenue Subcommittee.
The bill received a positive recommendation from the subcommittee with bipartisan support during the committee’s last meeting of the legislative session.
Tennessee’s professional privilege tax previously was levied on 22 professions, including accountants, architects, dentists, pharmacists and veterinarians. The General Assembly approved legislation in 2019 to eliminate the tax for 15 of the 22 professions.
Nearly 200,000 professionals pay Tennessee’s professional privilege tax. Total elimination of the tax would cost the state about $67 million in revenue, Stevens said.
During Tuesday's committee meeting, Sen. Todd Gardenhire, R-Chattanooga, said 77% of the people who pay the tax live outside the state, accounting for about $57 million in tax revenue.
“This is a recurring revenue stream,” Gardenhire said. “Tell me what recurring expenses you’re going to cut to offset $57 million from out of state people paying this.”
Stevens agreed that with any decrease to state revenue there should be a corresponding programing cut, but cuts would be negotiated as budget discussions continue.
“It would likely not be constitutional to treat those out-of-state folks differently than the in-state folks,” Stevens said.
A companion bill in the House has been placed behind the budget.