The Oak Ridge Chamber of Commerce building is pictured above.
The Oak Ridge Chamber of Commerce acknowledges the need for tax reform in Tennessee, but the organization has opposed changing the Hall income tax in a way that would hurt local governments, an official said Thursday.
Specifically, the Oak Ridge Chamber opposes modifying or ending the Hall income tax in a way that would result in a negative financial impact to local governments, Chamber President Parker Hardy said.
The Tennessee General Assembly passed a bill Friday that would lower the Hall tax on stock and dividend income from 6 percent to 5 percent in the 2016 tax year. The tax would be reduced by 1 percent per year after that until it is eliminated by 2022.
Oak Ridge officials expect to lose between about $100,000 and $120,000 in the fiscal year that starts July 1. There is an impact on other local communities as well—including Anderson County, Clinton, and Roane County—but none of them will lose as much as Oak Ridge.
The eventual repeal of the tax could cost Oak Ridge as much as $700,000 per year or more. The city collected $708,454 from the Hall tax in 2015.
“In a community the size of Oak Ridge, that’s a fairly big piece of change,” Hardy said.
Oak Ridge City Manager Mark Watson has said the revenues vary between about $500,000 and $700,000 per year.
Tennessee Governor Bill Haslam has not said whether he will sign the bill or veto it. The legislature would appear to have the votes to override a veto, but it’s not clear yet if members would return to Nashville to override the veto.
Supporters of the reduction-and-repeal bill, including Senator Randy McNally, an Oak Ridge Republican, have said that the tax falls mostly on the elderly who have saved money for retirement, while critics say the legislation primarily benefits the rich and those few families with large amounts of wealth.
Some supporters have said that repealing the tax could encourage retirees to move to Tennessee rather than to a competing state like Florida, where there is no income tax. Others have said they shouldn’t have to pay taxes on their planned retirement funds to finance everyone else.
But a half-dozen local and regional officials interviewed by Oak Ridge Today said they have heard no complaints about the Hall income tax, and they haven’t heard that it has hurt the recruitment of retirees to Tennessee.
Lots of communities pursue retirees, Hardy said, because they’re a low-cost population that doesn’t require schools and generally has few police calls, among other things.
But that’s not the demographic that Oak Ridge needs to recruit, Hardy said.
“The hole in our demographic is the young person 25-45 years old,” he said. “That’s where we need to be recruiting people with an adequate housing stock and adequate lifestyle amenities.”
Those are the people who are very productive in the workforce, and that helps industrial recruitment, Hardy said.
Also, “those are the people who are prone to spend more in retail establishments and for goods and services in the community,” he said.
The younger demographic requires public schools, which are expensive, but they spend more at local restaurants and local grocery stores, Hardy said. They consume more but also inject more into the local economy, he said.
City officials had advocated for a “hold harmless” provision in the Hall income tax legislation that would have made payments to local governments equivalent to the loss in revenue. But there is no “hold harmless” provision in the bill, and other local governments have also lobbied against the bill.
Hardy said that even with the Hall tax, Tennessee is probably not at a significant disadvantage, including when it is recruiting retirees who move from a state like New York to another like Florida and then on to another state in the South such as Tennessee. The cost of living is still low in Tennessee, and taxes are just one part of the equation, Hardy said.
More information will be added as it becomes available.
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