SB 1013 / HB 1858 sponsored by Sen. Roscoe Dixon,
Rep. Mike Kernell, Rep. Henri Brooks, Rep. Larry Turner, and Rep. Kathryn
Bowers.
See also
sample families and
6 reasons to support the Tax Relief & Reform Act.
Major Provisions:
- Completely eliminate the state and local tax on grocery food.
- Completely eliminate the state and local tax on nonprescription drugs.
- Reduce the state sales tax on other items by 2% (Leave tobacco and
other ‘sin’ taxes at their current level).
- Eliminate the Hall Tax
- Establish a two-tier income tax with the following tier structure:
|
Single
|
Head of House
|
Married (MFJ) |
| Base exemption |
$0-14,999 |
$0-22,499 |
$0-29,999 |
| Taxed at 3.5% |
$15,000-29,999 |
$22,500-44,999 |
$30,000-59,999 |
| Taxed at 6.5% |
$30,000+ |
$45,000+ |
$60,000+ |
Note: All taxpayers will receive an additional $2,500 per dependent deduction.
|
Why should legislators support this bill?
- 80% of Tennesseans will pay less taxes (see chart and graph)
- It will create a more level playing field (see graph)
- It will raise an additional $660 million in much needed state revenue.
- Because the state income tax can be deducted from federal taxable income,
Tenn. tax payers will save over $580 million in federal taxes. In
other words, over 80% if the additional state revenue will be paid for by
federal tax savings.
80% of Tennesseans will Pay Less:
Impact as a percentage of income on families by quintile, with
the top quintile broken out into three groups for added detail. Analysis
provided by the Institute on Taxation and Economic
Policy.
| 2002 Income Group |
Lowest 20% |
Second 20% |
Middle 20% |
Fourth 20% |
Next 15% |
Next 4% |
Top 1% |
| Repeal Hall Tax |
–0.0% |
–0.0% |
–0.0% |
–0.0% |
–0.0% |
–0.2% |
–0.7% |
| Enact Income Tax |
— |
+0.3% |
+0.7% |
+1.4% |
+2.7% |
+4.3% |
+5.4% |
| Exempt food, nonprescription drugs |
–1.6% |
–1.2% |
–1.0% |
–0.8% |
–0.6% |
–0.3% |
–0.1% |
| Lower sales tax rate |
–1.4% |
–1.4% |
–1.2% |
–1.0% |
–0.8% |
–0.5% |
–0.3% |
| Net Impact |
–3.0% |
–2.4% |
–1.5% |
–0.4% |
+1.3% |
+3.3% |
+4.3% |
80% Will Pay Less with the Tax Relief and Reform Act
Change in Relative Tax Burden by Family Income Group
The Tax Relief and Reform Act will Help Create a Level Playing Field
Total state and local taxes as a percentage of income
before and after passage of the Bill. Distributional analysis does
not include the effects of federal tax deductibility.
Distributional Analysis of the Tax Relief and Reform Act of 2003 provided by
the
Institute on Taxation and Economic Policy.
