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 March 27 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 2011, Tennessee taxpayers work until March 27 to pay their total tax bill, ranking it 49th highest in the nation. This is 16 days before national Tax Freedom Day (April 12). The Tax Freedom Days of neighboring states were: Kentucky, April 2 (ranked 42nd nationally); Virginia, April 12 (ranked 14th nationally); North Carolina, April 6 (ranked 27th nationally); Georgia, April 3 (ranked 37th nationally); Alabama, April 2 (ranked 43rd nationally); Mississippi, March 26 (ranked 50th nationally); Arkansas, April 3 (ranked 35th nationally) and Missouri, April 4 (ranked 33rd nationally).
Full study of Tax Freedom Day, nationwide and in each state
Tennessee's State and Local Tax Burden Among Nation's Lowest
Throughout the past three decades Tennessee's state and local tax burden has consistently remained one of the nation's lowest, currently estimated at 7.6% of income (47th nationally), below the national average of 9.8%. Compared to the 1977 data, Tennessee had a tax burden of 8.2% (47th nationally), decreasing 0.6% overall. Currently Tennessee taxpayers pay $2,752 per capita in state and local taxes.
Tennessee's State-Local Tax Burden, 1977-Present
Other States' State/Local Tax Burdens
Map of U.S. Showing all State's Burdens and Ranks
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2009
Tennessee's 2012 Business Tax Climate Ranks 14th
Tennessee ranks 14th 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 rank as follows: Kentucky (22nd), Virginia (26th), North Carolina (44th), Georgia (34th), Alabama (20th), Mississippi (17th), Arkansas (31st) and Missouri (15th).
50-State Comparison of Business Tax Climates (data only)
2012 State Business Tax Climate Index, Ninth 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 2008 state-level individual income tax collections were $47 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 29th highest nationally. In 2008, state-level corporate tax collections (excluding local taxes) were $162 per capita, which ranked 17th 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 Sales and Excise Taxes
Tennessee levies a 7% general sales or use tax on consumers, above the national median of 5.85%. In 2007 combined state and local general and selective sales tax collections were $1,709 per person, which ranks 10th 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 38th 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, cigarette, gas, beer, wine, and spirits tax rates
50-State Table of State and Local General and Selective Sales Tax Collections Per Capita
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
