(The Center Square) – Tennessee’s last vestige of income tax will end on Jan. 1, as the longtime Hall income tax on interests and dividends is finally phased out.
Tennessee is one of nine states that does not collect a general income tax. However, the state does collect taxes on interest and dividends earned on investments – a form of income tax known as the “Hall tax.”
Enacted in 1929, the Hall tax was previously a 6% tax levied on interest earned on bonds and notes and dividends from stock. In 2016, the state legislature enacted a six-year incremental phase-out of the tax. Gov. Bill Haslam signed the phase-out into law on May 13, 2016.
Each year since, the tax rate has been incrementally reduced, and will be completely eliminated beginning Friday.
“Tennessee continues to be a national leader in cutting taxes and eliminating regulations,” Congressman John Rose said in a statement. “This week, the #HallTax will be repealed once and for all. No longer will Tennesseans be punished for saving and investing their money.”
Tennessee will become the second state in history to repeal an income tax, according to the Beacon Center of Tennessee.
“Eliminating the Hall Tax is a great way to start off the New Year for Tennesseans,” Americans for Prosperity Tennessee State Director Tori Venable said. “Our state is now officially income-tax free, helping attract more businesses, jobs, and retirees.”