January 13, 2015


State & Local Taxes in 2015


Tennessee Tax Code Features

Progressive Features

• Narrow personal income tax includes interest, dividend and capital gains income

Regressive Features

• No broad-based personal income tax

• Comparatively high reliance on sales taxes

• State sales tax base includes groceries, though taxed at a lower rate

• Local sales tax bases include groceries

• Fails to provide tax credits to low-income taxpayers to offset sales, excise, and property taxes

• Fails to use combined reporting as part of its corporate income tax

Tax Changes Enacted in 2013 & 2014

• Sales tax on groceries lowered from 5.25 to 5.0 percent

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Tennessee has the 7th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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