Tennessee Income Tax Prohibition, Amendment 3 (2014)

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Amendment 3
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Type:Constitutional amendment
Constitution:Tennessee Constitution
Referred by:Tennessee State Legislature
Topic:Taxes
Status:On the ballot
2014 measures
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November 4
Amendment 1
Amendment 2
Amendment 3
Amendment 4
Endorsements
Local measures

The Tennessee Income Tax Prohibition, Amendment 3 is on the November 4, 2014 ballot in the state of Tennessee as a legislatively-referred constitutional amendment. The measure, upon voter approval, would prohibit the legislature from levying, authorizing or permitting any state or local tax upon payroll or earned personal income.[1]

The amendment was sponsored in the Tennessee Legislature by State Senator Brian Kelsey (R-31) and State Representative Glen Casada (R-63) as Senate Joint Resolution 1.[1][2]

In Tennessee, a legislatively-referred constitutional amendment must earn a majority of those voting on the amendment and "a majority of all the citizens of the state voting for governor.”

Text of measure

Ballot title

The official ballot text reads as follows:[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 January 1, 2011, or adjustment of the rate of such tax.
□ Yes
□ No[4]

Constitutional changes

The proposed amendment adds a paragraph to the end of Section 28 of Article II of the Constitution of Tennessee:[1]

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 January 1, 2011, or adjustment of the rate of such tax.[4]


Fiscal note

The fiscal note developed by the Tennessee General Assembly Fiscal Review Committee reads as follows:[5]

ESTIMATED FISCAL IMPACT:
Increase Local Expenditures – Up to $10,000/FY14-15*

Assumptions:

• Theproposedconstitutionalamendmentreceivedtherequiredconstitutionalmajority vote with passage of Senate Joint Resolution 221 by the 107th General Assembly. The required publication was made on May 6, 2012.
• Following first passage by two successive General Assemblies, and pursuant to Article XI, Section 3 of the Tennessee Constitution, it shall be the duty of the General Assembly to submit such proposed amendment to the people at the next general election in which a Governor is to be chosen.
• Tenn. Code Ann. § 2-5-211(b) requires the county election commission to publish a sample ballot in a newspaper of general circulation or mail sample ballots to registered voters at least five days prior to early voting.
• The requirement to add this constitutional amendment to the 2014 general election ballot will increase the size of the sample ballot.
• Given the size of the sample ballot will increase, and because publishing costs are generally based on the number of words published or the number of document pages printed, local government expenditures are expected to increase.
• Based on information provided by the Secretary of State, the total statewide increase in local government expenditures is reasonably estimated as an amount up to $10,000 in FY14-15.[4]

Background

There is no general state income tax in Tennessee. There is, however, an income tax on dividends from stocks and interest on certain bonds. This income tax is known as the “Hall Income Tax.” The tax rate is 6%. Constitutionally, Tennessee could enact an income tax on wages, salaries and so on. Amendment 3 would amend the constitution to prohibit the possibility of an income tax in the future.[6]

Support

The campaign in support of the amendment is being led by Yes on 3 Tennessee.[7]

The measure was supported in the legislature by Sen. Brian Kelsey (R-31).

Supporters

Officials

Organizations

  • Beacon Center of Tennessee[11]

Arguments

Travis H. Brown, a columnist for Forbes, called the amendment "absolutely critical." The following is an excerpt from his article on Amendment 3:

... By prohibiting the future implementation of an income tax, Tennessee is lighting a bright neon “Open” sign that will attract families and businesses alike...

Anyone with an interest in data should quickly see why Tennessee must set its no-income-tax status in stone. As my Wealth of States coauthor, the esteemed economist Dr. Art Laffer, often says, “Taxation doesn’t generate revenue, it moves people,” [sic] Between 1992 and 2011, the state gained $10.55 billion in net adjusted gross income, with the lion’s share coming in from such high-tax states as California, Michigan, and Illinois. The nonpartisan Tax Foundation ranks Tennessee as 15th-best in the nation on its 2014 State Business Tax Climate Index. And it’s not just small to mid-sized businesses that are taking note of Tennessee’s sunny tax climate; global players like Amazon have opened giant warehouses in the state.

Tennessee is a significant player in the Heartland tax revolution, creating real opportunities for working families while Washington, D.C., sputters and stagnates on tax reform. Heartland states understand the need to compete, both on a national and international stage. A yes vote on Amendment 3 sends the clearest of messages: In order to stay competitive, Tennessee must eliminate the possibility of an income tax, today and tomorrow... [4]

—Travis H. Brown[12]

Other arguments in support of the amendment include:

  • Sen. Brian Kelsey (R-31) argued, "This is going to help us bring in jobs to Tennessee. We can say not only do we not have an income tax, but we'll never have an income tax."[10]

Opposition

The campaign in opposition to the amendment is being led by Vote No on 3.[13]

Opponents

Officials

Organizations

  • Tennesseans for Fair Taxation[10]

Arguments

  • Tennesseans for Fair Taxation’s Jim Von Bramer called the amendment “irresponsible.” He argued, “Permanently blocking an income tax lets the wealthiest Tennesseans walk away from paying a fair share of state and local taxes forever while the rest of us pay much more of our income on food taxes and the basic necessities we buy from our local retailers. Our state budget gap will likely only grow as the federal budget shrinks. We are headed into a dark place, and now the state Senate says we should throw away our flashlight.”[10]
  • Dr. John Gnuschke, director of the University of Memphis Bureau of Business and Economic Research, said, "It will limit future options for state legislative leaders and that is not a good idea in a state that struggles to maintain a balanced budget and still provide high quality public services. The passage would increase the burden on sales and property taxes, the principal sources of revenue for state and local areas. States that have income taxes have revenues that grow as the economy grows and allow government to respond to the demand for public services. Practical limitations on property and sales tax rates are already being faced in many areas of the state."[8]

Path to the ballot

See also: Amending the Tennessee Constitution

The proposed measure was filed in the Tennessee Legislature on January 13, 2011 by Sen. Brian Kelsey (R-31).

The Tennessee General Assembly was required to approve the amendment in two successive sessions. In the first session, the measure required a simple majority for approval. In the second session, the proposed amendment needed to earn a two-thirds vote for approval. SJR 1 was approved by the Tennessee Senate for a second time on February 14, 2013. SJR 1 was approved by the Tennessee House of Representatives for a second time on April 8, 2013.[14]

Senate vote

February 14, 2013 Senate vote

Tennessee SJR 1 Senate Vote
ResultVotesPercentage
Approveda Yes 27 87.10%
No412.90%

House vote

April 8, 2013 House vote

Tennessee SJR 1 House Vote
ResultVotesPercentage
Approveda Yes 80 90.91%
No89.09%

See also

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External links

Basic information

Support

Opposition

References