Tennessee recently became a true no-income-tax state, but a professional privilege tax is still on the books and paid by members of seven professions. The occupations hit with this discriminatory tax include osteopathic physicians, physicians, attorneys, securities agents, broker-dealers, investment advisors, and lobbyists.
This tax had originally applied to 22 professions, but two years ago Governor Bill Lee and Tennessee legislators repealed the professional privilege tax for 15 professions. The tax was repealed for accountants, architects, athlete agents, audiologists, chiropractors, dentists, engineers, landscape architects, optometrists, pharmacists, podiatrists, psychologists, real estate brokers, speech pathologists, and veterinarians.
While the list of occupations required to pay this tax has substantially decreased, continuing to impose this tax, even if only on seven professions, wrongly assumes that working and making a living is a privilege granted by the state. To help make Tennessee an even more attractive destination for people and businesses, Tennessee Representative Ron Gant (R) has introduced HB 519. This bill and its companion Senate bill, SB 884, would eliminate the remainder of the professional privilege tax.
HB 519 was discussed in the Tennessee House Finance, Ways, and Means Subcommittee on March 10. During that hearing, Representative Chris Todd (R) commented that the bill was “long overdue.”
“Tennessee’s professional ‘privilege’ tax, used unfortunately to balance budgets ‘temporarily’ in 1992 and again in 2002, is one of only six such taxes, along with similar taxes in Alabama, Connecticut, Delaware, Montana, and North Carolina,” explained a joint letter sent by a coalition of business community associations and taxpayer organizations to Governor Bill Lee and Tennessee legislators. That letter noted that “Tennessee is a very good state in which to conduct business, but we believe it’s an opportune time to: 1) send a clear, across-the-board message that it’s a right and not a “privilege” to run a business in Tennessee; 2) eliminate a double tax on professionals who already are paying licensing fees; 3) provide relief to many professionals who practice infrequently, primarily offer charity services to low-income individuals or are paying off graduate school debt; 4) end a cumbersome process to pay the tax online; 5) address the constitutionally suspect nature of this discriminatory tax; and 6) improve our business environment by reducing the indirect costs that many of our customers wind up paying.”
All of those are fantastic reasons for Tennessee lawmakers to do away with this discriminatory levy once and for all in 2021. With the completed phaseout of the Hall Tax, a tax on investment income, Tennessee became the eighth state in the U.S. to not impose any form of state income tax at the start of 2021. The professional privilege tax is Tennessee’s last vestige of an income tax and pretty soon that will hopefully meet the same fate as the Hall Tax, which would be great news for Tennessee taxpayers.