- Associated Press - Friday, October 2, 2015

NASHVILLE, Tenn. (AP) - Gov. Bill Haslam agrees with fellow Republicans’ criticism of the Hall income tax on earnings from stocks and bonds in Tennessee, but argues that the state must balance efforts to do away with the levy with other funding needs in areas like education, roads and health care.

Proposals to get rid of the Hall tax are perennial favorites in the state Legislature, but they mostly run aground on concerns about how to make up for lost revenues both on the state and local level. In the last budget year, the tax brought in $302 million, with about one-third of that amount directed back to the cities and counties where the levy was paid.

“I’ve always said it’s easy to say, ‘Let’s do away with this,’” Haslam told reporters after a veterans’ job fair on Thursday. “It’s a lot harder to say what are you going to do about that revenue going away.” 

An early bill filed by Republican Sen. Brian Kelsey of Germantown seeks to redirect surplus budget revenues to make up for abolishing the Hall tax. He would also have the state reimburse local governments for losing their $189 million share of the collections.

While the tax makes up a relatively small portion of the state’s $10.68 billion in general fund collections, it can make up a hefty portion of budgets in affluent cities. For example, the Davidson County community of Belle Meade has fewer than 3,000 resident but brought in $2.1 million in Hall tax revenue.

Memphis and Nashville received the most money - nearly $15 million each - from the Hall tax collections last budget year. Next were Knoxville with $10 million, Brentwood with $4.2 million and Chattanooga with $4.2 million.

Kelsey points to the more than $550 million surplus that the state collected this year, and that similar amounts should be expected in future years as the economic recovery improves. The money to make up for abolishing the Hall tax would remain available if lawmakers agree to “hold state spending in check,” Kelsey said.

Haslam said cutting the Hall tax isn’t the only spending priority in the state, noting that school districts are clamoring for more education money; TennCare costs are rising; prison guards and children’s services workers could use pay raises; and another GOP senator has already filed legislation to spend $270 million of the surplus on road funding.

“I’ve made a joke that of our surplus this year we’ve spent it three times already,” Haslam said.

The governor also noted that the collections left over from the higher-than-projected budget collections is considered one-time money, meaning that that is not necessarily expected to represent future revenues.

“I certainly wouldn’t want to appropriate one-time money assuming it’s always going to be there,” he said.

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