Amendment To Ban State Income Tax Begins Its Legislative Trek

The state Senate Thursday began a two-year political journey to allow voters to decide whether Tennessee could ever have an income tax.

Specifically, voters could get a chance to change the state constitution to ban an income tax.

Brian Kelsey, a Memphis Republican, proposed such a constitutional amendment in the state Senate, where it passed on the first of three mandatory readings.

If the Senate and House both pass the resolution, and the next General Assembly also approves it, the referendum question could go on the ballot in 2014.

Eight years ago, the General Assembly refused to pass a flat income tax proposed by Republican Governor Don Sundquist. The bill died as angry citizens drove in circles around the Legislative Plaza, honking their horns in protest.

Kelsey says he wants to put the issue to rest.

“Well my hope is that we will never have to face an income tax battle again, that we will be through with this issue, we’ll send it to the people and I have very much confidence that the people will vote against an income tax.”

Kelsey changed the resolution to allow Tennessee’s Hall income tax, which taxes income on stocks and bonds. But he says eventually, he’ll go after that tax too.

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The state constitution supposedly already says that the state may not tax the method by which a citizen makes his living, although a tax on income from stocks and bonds is specifically allowed (Section 28, next to last sentence).

That’s based on three court cases, quoted in the resolution.

When the state legislature briefly considered such a tax in 2002, advocates assumed that the resulting law would be tested in court.

The resolution is SJR 763. It had already passed two readings in the Senate, but because it was changed (amended), the rules require that the Senate begin over again, with first reading.

Kelsey says his current amendment spells out the ban on an income tax, instead of relying on case law.

The amendment allows the Hall income tax to continue. The Hall income tax brings in about 2 percent of total state tax dollars.

“This current amendment would just say that any tax that is already in effect, could continue in the future but doesn’t necessarily have to continue in the future.”

Kelsey was elected to the state House in 2004, two years after the income tax fight, as part of a wave of Republicans who ran on an anti-income tax platform. He was elected to the Senate this year in a special election to complete the term of Paul Stanley, who had resigned.

Changing Tennessee’s constitution requires approval by two successive General Assemblies before a referendum can take place, so it’s already too late to put the bill on this year’s gubernatorial ballot.