Research Areas
Tennessee
The Facts on Tennessee’s Tax Climate
Here are some basic facts on Tennessee’s tax system and how it compares to other states:
Tax Freedom Day Arrives on April 5 in Tennessee
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2009, Tennessee taxpayers had to work until April 5 to pay their total tax bill, ranking it 36th highest in the nation. This is eight days before national Tax Freedom Day (April 13). The Tax Freedom Days of neighboring states were: Kentucky, April 3 (ranked 41st nationally); Virginia, April 16 (ranked 6th nationally); North Carolina, April 9 (ranked 25th nationally); Georgia, April 12 (ranked 17th nationally); Alabama, April 2 (ranked 44th nationally); Mississippi, March 28 (ranked 48th nationally); Arkansas, April 4 (ranked 37th nationally) and Missouri, April 6 (ranked 34th nationally).
Full study of Tax Freedom Day, nationwide and in each state
Tennessee's State/Local Tax Burden Among Nation's Lowest
During the past three decades Tennessee's state and local tax burden has consistently ranked among the nation's lowest. Estimated at 8.3% of income, Tennessee's state/local tax burden percentage ranks 44th highest nationally, well below the national average of 9.7%. Tennessee taxpayers pay $3,160 per capita in state and local taxes.
Tennessee's State-Local Tax Burden, 1977-Present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008
Tennessee's 2009 Business Tax Climate Ranks 17th
Tennessee ranks 17th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Kentucky (34th), Virginia (15th), North Carolina (39th), Georgia (27th), Alabama (21st), Mississippi (19th), Arkansas (35th) and Missouri (16th).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)
Tennessee's Individual Income Tax System
Tennessee's personal income tax system consists of a flat 6% rate on exclusively dividend and interest income. No other personal income is subject to state taxation. Tennessee's 2006 individual income tax collections were $32 per person, which ranked 43rd among states levying personal income taxes.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita
Tennessee's Corporate Income Tax System
Tennessee's corporate tax structure consists of a flat rate of 6.5% on all corporate income. Among states levying corporate income taxes, Tennessee's rate ranks 30th highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $183 per capita, which ranked 18th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2009
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006
Tennessee Levies Sales Tax above National Median; Cigarette Tax among Lowest in Nation
Tennessee levies a 7% general sales or use tax on consumers, well above the national median of 5.5%.State and local governments combined collected $1,360 per capita in general sales taxes in 2005, which ranks 5th highest nationally. Tennessee's gasoline tax stands at 21.4 cents per gallon, ranking 34th highest nationally. Tennessee's cigarette tax stands at 62 cents per pack of twenty and ranks 35th highest nationally. The sales tax was adopted in 1947, the gasoline tax in 1923 and the cigarette tax in 1925.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005
Tennessee Property Tax Collections Low
Tennessee's local governments collected $683.96 per capita in property taxes during fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. Tennessee is one of the13 states that collect no state-level property taxes. Its per capita property tax collections in FY2006 rank 42nd nationally.
State property tax collections per capita by state
Federal Tax Burdens and Expenditures: Tennessee is a Beneficiary State:
Tennessee taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, Tennessee citizens received approximately $1.27 in the way of federal spending. This ranks the state 19th highest nationally and represents a rise from 1995 when Tennessee received $1.07 per dollar of taxes in federal spending (25th highest). Neighboring states and the amount of federal spending per dollar of federal taxes collected were: Kentucky ($1.51), Virginia ($1.51), North Carolina ($1.08), Georgia ($1.01), Alabama ($1.66), Mississippi ($2.02), Arkansas ($1.41) and Missouri ($1.32).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state
