About the Tax Relief and Reform Act of 2001
House Bill 1873 / Senate Bill 1808
The Tax Relief and Reform Act of 2001 fully implements the Tennessee Fair Tax Plan developed by grassroots leaders across the state. This plan will lower taxes for 80% of Tennesseans while still raising much needed revenue. Below is a summary of the Plan.
Click here to see examples of how the Act will affect different families.
Click here for printable fact sheets about the Tax Relief & Reform Act. |
Impact of the Tax Relief and Reform Act
 |
80% will pay LESS taxes,
15% will pay about the same,
and only 5% will pay more.
|
About 80% save under the Tax Relief and Reform Act
| Income Group |
Bottom
20%
|
Second
20%
|
Middle
20%
|
Fourth
20%
|
Top 20%
|
| Next 15% |
Next 4% |
Top 1% |
| Average Income |
$8,100 |
$17,500 |
$28,600 |
$45,300 |
$76,300 |
$158,000 |
$737,000 |
| Tax Effect Before Federal Deductions |
-3.0% |
-2.8% |
-2.1% |
-1.2% |
+0.1% |
+2.6% |
+5.3% |
| Savings from Federal Itemized Deductions |
-0.0% |
-0.0% |
-0.0% |
-0.1% |
-0.3% |
-1.0% |
-2.2% |
| Tax Effect After Federal Deductions |
-3.0% |
-2.8% |
-2.2% |
-1.3% |
-0.2% |
+1.7% |
+3.1% |
Notes: Addition discrepancies due to rounding. The state income tax
calculations above account for the Hall Tax savings as it is replaced with
the income tax. The state income tax can be used as an offset to federal
taxes and reduce the federal tax liability as noted above. Calculations
provided by the Institute
on Taxation and Economic Policy (ITEP).
|
Key Aspects of the Tax Relief and Reform Act
- It eliminates the state food tax entirely.
- It reduces the state sales tax on other items from 6 to 3.25%.
- It eliminates the Hall Tax.
- It establishes a graduated personal income tax with generous personal deductions.
Note: As in the other tax reform proposals, the local option sales tax charged by cities and counties will remain in place at a maximun of 2.75%. In counties with the maximum sales tax, the total food tax will be 2.75% and the total sales tax on other items will be 6%.
Real tax reform is about fixing Tennessee’s unfair, outdated, and fiscally unsound tax system for the betterment of Tennessee and all who live here.
How the graduated income tax will work:
|
For a single person with no dependents:
- 0% on the first $15,000 of income.2% on the next $15,000 of income.4% on the next $15,000 of income.6% on the next $15,000 of income.
- 8% on all income over $60,000.
For a head of household filer:
- 0% on the first $22,500 of income.2% on the next $22,500 of income.4% on the next $22,500 of income.6% on the next $22,500 of income.
- 8% on all income over $90,000.
|
Married couples with or without children / dependents:
- 0% on the first $30,000 of income.2% on the next $30,000 of income.4% on the next $30,000 of income.6% on the next $30,000 of income.
- 8% on all income over $120,000.
Additional Exemptions:$2,500 - Additional deductions per dependent.
$2,500 - Additional deduction for seniors. |
Revenue Estimates for the Tax Relief and Reform Act:
| Eliminate the Hall Tax |
-$207,400,000 |
| Eliminate the Food Tax |
-$408,600,000 |
| Sales Tax Reduction |
-$1,662,800,000 |
| Establish Graduated Income Tax |
+$2,805,600,000 |
| New State Revenue |
+$526,800,000 |
| Federal Tax Savings |
-712,400,000 |
| Net Tax Effect (Savings) |
-185,600,000 |
| Some positive uses for new revenue. |
Note: The Tax Relief and Reform Act, along with previously introduced bills including the Governor's Proposal and the 1-3-5 Plan, all raise roughly $400 to 500 mill. to address the budget shortfall.
Tax reform is about creating a more equitable and fiscally sound tax system that meets the state’s financial needs.
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