Tennessee Debates Express Constitutional Ban on Income Tax

March 22, 2010

Tennessee does not impose a state income tax on wages, like Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming. (New Hampshire and Tennessee but not the others tax capital income.

Tennessee residents are proud of their no-income-tax, as I can attest. When we posted our map of state sales tax rates where Tennessee ranks the highest, we received a lot of outraged e-mails from Tennessee residents who said we should have noted on there that Tennessee has no income tax. We concluded that there are better places for such a notation but let no one say that the Volunteer State isn’t determined to avoid an income tax.

Thus, this news caught my eye from the Tennesseean:

The state Senate is taking up a proposal that would explicitly place a ban on the tax into Tennessee’s constitution. The vote, which could take place as soon as Thursday, would set up an election-year litmus test for legislators and move voters a step closer to a statewide referendum on the ban in 2014.

Tax reform advocates say the constitutional amendment would make it harder for state officials to manage future budget crises. The income tax’s foes, however, say a constitutional amendment is needed to drive a stake through the heart of the issue before it resurrects.

A state income tax was last proposed in 2002, and the state supreme court has ruled three times that the state has no authority to tax wages and salaries. But I guess you can never be too sure?

More on Tennessee here.

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