NASHVILLE (AP) - Tennessee municipalities are keeping a close watch on proposed legislation to eliminate or reduce the Hall tax.

The Tennessean (http://tnne.ws/1iBGOAL) reports that's because cities use funding from the tax in their budgets and losing it would cause a large dent.

The state currently imposes a 6 percent levy on income from dividends and investments. Lawmakers are discussing whether to reduce the tax or eliminate it gradually.

Gov. Bill Haslam recommended in his budget proposal earlier this week that no changes be made to it.

Metro Nashville Finance Director Rich Riebeling said losing revenue from the Hall tax would leave a big hole in the city's budget. He said the amount from the tax fluctuates, ranging from $7.4 million in 2010 to nearly $14 million in 2013.

"It's a significant source of revenue and one that would be difficult to replace," Riebeling said. "It would force us to take a look at possibly curt ailing some services."

The city of Brentwood receives about $2.2 million a year from the tax. City Manager Kirk Bednar said there would be noticeable effects if the funding stopped.

"When that Hall tax goes away, the impact on our ability to do capital improvement projects would be significant," said Brentwood City Manager Kirk Bednar.

Meanwhile, Mt. Juliet receives about $100,000 a year from the Hall tax.

"Hall provides revenue in good economic years and declines in bad years," said John Rossmaier, Mt. Juliet's finance director. "Obviously, elimination would cost the city over 1 percent of its revenue, but it is not like the surrounding suburbs in Nashville, like perhaps Belle Meade, (whose) residents probably pay a lot of Hall income tax."

Cities have recently begun putting together budgets for the next fiscal year, which begins in July.