NFIB
supports Amendment 3, which would ban a personal income or payroll tax, state
or local, in Tennessee. A detailed explanation of the amendment is below,
provided by Donna Barrett, a former state representative who serves on the
Tennessee State Election Commission. In order for a constitutional amendment to
pass, the number of YES votes MUST be greater than one-half the number
of TOTAL votes cast in the governor’s race.
Official Ballot Text of Amendment No. 3
Shall Article II, Section 28
of the Constitution of Tennessee be amended by adding the following sentence at
the end of the final substantive paragraph within the section:
Notwithstanding the authority to tax
privileges or any other authority set forth in this Constitution, the
Legislature shall not levy, authorize or otherwise permit any state or local
tax upon payroll or earned personal income or any state or local tax measured
by payroll or earned personal income; however, nothing contained herein shall
be construed as prohibiting any tax in effect on Jan. 1, 2011, or adjustment
of the rate of such tax.
Overview
Following is what the last sentence of
Article II, Section 28 currently states:
“The
Legislature shall have power to levy a tax upon incomes derived from stocks and
bonds that are not taxed ad valorem.” (The proposed amendment would be
added to the end of this sentence.)
NOTE:
In 1934, 1960 and 1964 the Tennessee Supreme Court ruled unanimously that a
general state income tax was unconstitutional.
What a YES Vote Means
This amendment will clearly state what
the Supreme Court has unanimously ruled in three separate cases; that the
General Assembly will not be able to enact a state income tax. Also, it
will clearly be added that the state cannot not allow any local government to
enact a local income tax either.
The Supreme Court has ruled that the
Hall Income Tax, a tax on income derived from investments in stocks and bonds
is taxable. The Hall Income Tax will remain in effect.
What a NO Vote Means
The General Assembly will still be
prohibited from enacting a state income tax as three Supreme Court rulings have
declared in three separate rulings.
While Supreme Courts very rarely
overturn past rulings, should a challenge to the current prohibition of a state
income tax be considered by future Supreme Court, the Court ruling is not
guaranteed.
The Supreme Court has ruled that the
Hall Income Tax, a tax on income derived from investments stocks and bonds are
taxable. The Hall Income Tax will remain in effect.
History
Many
of you will recall the 1999-2001 “discussions” of implementing a state income
tax. There was also an unsuccessful effort in the 1991-1992
administration to implement a state income tax. The following history illustrates the legal basis for the failure of those
efforts.
In
1932, in Evans v. McCabe, the Tennessee Supreme Court unanimously held
that the Constitution conferred upon the Legislature the power to tax only one
class of incomes, and necessarily denied to the Legislature the power to tax
incomes of other classes; therefore, a tax on personal income enacted by the
Legislature was unconstitutional.
In 1960, in Jack Cole Co. v. MacFarland, and in 1964, in Gallagher v. Butler, in unanimous opinions by
the five judges, the Supreme Court followed the ruling of the Supreme Court in Evans
v. McCabe and ruled a state income tax unconstitutional.
Thus, in those three cases, the Tennessee Supreme Court
unanimously ruled that a tax on any class of income other than the income from
stocks and bonds is prohibited by the Tennessee Constitution.
In 1971, the call to the Constitutional Convention expressly
prohibited the Convention from considering a personal income tax. At the
end the constitutional convention, the income tax provisions of Article II,
Section 28 as amended in 1972, were adopted verbatim, thus remained unchanged
and did not invalidate the three Supreme Court rulings.
