Senate Committee Approves Income Tax Ban

But this constitutional amendment has a long way to go before becoming law.

A measure aimed at guaranteeing Tennesseans never have to pay a state income tax is headed to the Senate floor soon, perhaps even later this week.

Senate Joint Resolution 763 cleared the Senate Finance, Ways and Means Committee on a 7-3 vote today. It passed out of the Senate Judiciary Committee on Feb. 16.

Under the language of the measure, the Tennessee Constitution would be amended to ensure an income and payroll tax is “forever banned in Tennessee,” said Sen. Brian Kelsey, R-Germantown, the amendment’s sponsor.

The full text of the amendment, which would alter Article II, Section 28, reads, “The Legislature shall not levy any tax upon personal income or any tax measured by personal income, except that the Legislature may levy a tax upon incomes derived from stocks and bonds that are not taxed ad valorem. The Legislature shall not levy any tax upon payroll or any tax measured by payroll.”

It would replace this sentence: “The Legislature shall have power to levy a tax upon incomes derived from stocks and bonds that are not taxed ad valorem.”

The three “nay” votes came from Democrats, including the chamber’s party leader, Jim Kyle of Memphis, who recently dropped out of the race for governor. Sens. Joe Haynes and Douglas Henry, both from Nashville, also voted against the amendment. Sen. Roy Herron, D-Dresden, voted “yes.”

Kelsey expects relatively smooth sailing on the Senate floor. Already 15 other senators have signed on to the bill besides him, so he only needs one more vote to pass it.

After that, it heads to the House of Representatives.

If both chambers approve of the constitutional amendment, the process will repeat next year — only lawmakers will need to approve it by a two-thirds vote in both houses. If that attempt is successful, the language will be posed to voters on the 2014 general election ballot.

Whether state lawmakers could, legally speaking, impose an income tax on Tennesseans at present is a matter of some debate.

Some, like Kyle, say the constitution already bans an income tax.

“Regardless of how the people vote, one way or the other, we’re still going to have an unconstitutional income tax. This is a political event. This is not a substantive event,” Kyle told committee members. “It’s always good politics to be against and income tax.”

But a 1999 Tennessee Attorney General opinion predicted that a carefully worded income tax proposal could be legal.

The group Tennesseans for Fair Taxation maintains that an income tax is indeed legal, and they advocate for the establishment of one.

The organization’s director, John Stewart, called Kelsey’s attempt to clarify the constitutionality of the issue “obnoxious.”

“They think they have all the answers,” he said of lawmakers who support banning an income tax. “But the truth is they’re not that smart. Nobody’s that smart.”

Two Memphis Democrats, Sen. Reginald Tate and Rep. Johnnie Turner, are proposing the creation of an income tax this year, but neither bill has received a committee hearing.

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