Kelsey constitutional amendment prohibiting income tax passes Finance Committee

Contact: Darlene Schlicher  (615) 741-6336

(NASHVILLE, TN), March 9, 2010 – A constitutional amendment permanently banning an income tax and a payroll tax passed the Senate Finance Committee today.  The bipartisan vote was 7 to 3 and clears a major hurdle on the way toward final passage. 

Today marks the first time that such an amendment has ever passed a legislative committee in Tennessee.  The amendment next will go to the Calendar Committee, which will schedule the bill for a floor debate in the full Senate, which could come as early as next week.  The amendment, Senate Joint Resolution 763, clarifies that the legislature as well as Tennessee counties and cities shall be prohibited from passing either an income tax or a payroll tax, which is a tax on employers that is measured by the wages they pay their workers. 

“The last thing Tennesseans need to be worrying about in these difficult economic times is having to pay a state income tax or a payroll tax,” said Senator Kelsey.  “I am very pleased this amendment will advance to the floor of the Senate for final consideration.”

Opposition to the resolution in the committee centered on the possible need to impose an income tax during hard times like during the Depression, when the first income tax was proposed in Tennessee.

“The income tax is a very real problem facing Tennesseans today,” said Senator Kelsey.  Currently, eight state lawmakers have filed “The Tennessee Income Tax Law of 2010,” House Bill 3597.

“Tennesseans need the assurance that they will not have to face an income tax, especially in these difficult economic times.  If this amendment passes, the people will be able to vote on the issue, and we will never have to face another income tax battle again,” said Sen. Kelsey.

There have been three cases before the Tennessee Supreme Court throughout the state’s history that have upheld that the income tax is unconstitutional.  The most recent case was decided in 1964, and this case has never been overturned.  However, in 1999 the State Attorney General issued an opinion saying an income tax was constitutional.  There is also concern that a new State Supreme Court will interpret the law in the same manner.

A payroll tax has been proposed in recent years by elected officials as a way around an income tax.  This includes a 2.5 percent payroll tax withheld from each employee’s paycheck in Shelby County.

If passed by a majority vote in the Senate, the constitutional amendment would next need to be approved by a majority vote of the House.  It must then be approved by a two-thirds vote in each chamber during the next General Assembly in 2011-2012.  After that the amendment would be placed on the next gubernatorial ballot for ratification by the people in November 2014.

Senator Kelsey represents parts of Bartlett, Cordova, East Memphis, Germantown, and Hickory Hill in the State Senate.  He served five years as a State Representative and was recently elected to the State Senate in a special election on December 1. 

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