COLUMN: Tennessee Should End Discriminatory Professional 'Privilege' Tax for Good

Date: April 05, 2022

NFIB State Director Jim Brown’s column originally ran in the April 4 edition of The Tennessean.

How would you like to be taxed simply to go to your job?

In Tennessee, unfortunately, this happens regularly. Thousands of professionals in seven jobs are paying a $400 tax annually for the so-called “privilege” of working, regardless of their income.

Tennessee is one of only a handful of states that’s taxing professionals, and at a much higher level than others.

While Gov. Bill Lee included a $100 reduction of the tax in this year’s budget many believe now is the time to fully repeal this tax or aggressively phase it out.

The tax originated in 1992 to help plug a hole in the budget, starting at $200 a year. In 2002 during the income tax debate, and again with a budget deficit, it was expanded to $400 for 23 professions.

In 2019, with a budget surplus, lawmakers eliminated this tax on 16 professions. Your veterinarian, dentist, landscape architect, podiatrist, speech pathologist, and others no longer had to pay it. But seven professions – attorneys, securities agents, broker-dealers, investment advisers, lobbyists, osteopathic physicians, and physicians – were left in.

My association, NFIB, is a proud member of the “No Taxation on My Occupation” coalition, which includes the Tennessee Bar Association, Tennessee Medical Association, Tennessee Bankers Association, Beacon Impact, Americans for Prosperity Tennessee, Americans for Tax Reform, Tennessee Lobbyists Association, NAIFA Tennessee, Securities Industry and Financial Markets Association (SIFMA) and the Financial Services Institute.

There are many good reasons to eliminate the tax, and doing so has strong bipartisan support (one bill, House Bill 519/Senate Bill 884, has nearly 90 co-sponsors).

  • First, Tennessee has a tradition of returning excess revenues to taxpayers. With unprecedented budget surpluses and a tax base that continues to expand, our state is in a very good position to deliver meaningful tax relief. Because of Tennessee’s sound business and fiscal policies, our state also is in a good position to weather any future economic slowdowns.
  • Second, the tax is not only discriminatory but also constitutionally suspect. It likely violates the uniformity clause in Article 2, Section 28 of the state constitution, as well as due process. Targeting a few professions is likely unlawful.
  • Third, professionals who already pay licensing fees are essentially being double-taxed as they must also pay the tax annually – even when they conduct no business and just to maintain their licenses.
  • Fourth, there is a perception that these professionals “can afford to pay it.” However, many either are not taking home big paychecks, are paying off significant educational debt or are making no income while performing volunteer work in their communities.

Eradicating the tax will send a clear, across-the-board message that it’s a right to be a professional, not a privilege. It also sends a message not to tax other professions, perhaps yours, in the next economic downturn.

Eliminating the tax will improve our business environment by reducing the indirect costs that many customers wind up paying.

It will help our communities by attracting more professionals into pro bono work, and it will help our medical community, which is struggling to keep up with our growth and efficiently serve nearly seven million Tennesseans.

On behalf of our coalition, we appreciate the ongoing efforts of the Tennessee General Assembly and ask state leaders to finish the job and end this discriminatory tax, once and for all.

Related Content: Small Business News | Tennessee

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