First Step toward Greater Tax Relief for Tennesseans

June 15, 2007

First Step toward Greater Tax Relief for

NASHVILLE, Tenn. – After the idea of cutting the sales tax on food was advocated by Senator Mae Beavers (R – Mt.Juliet) for years, the House and Senate approved legislation this session to reduce state sales tax on grocery food and food ingredients from 6 percent to 5.5 percent. The plan to offer tax relief in the form of a sales tax reduction on food was up in the air throughout much of the budget process as the Senate and House Finance Committees heard amendments to the appropriations bill and pieced together the final numbers of the Governor’s budget.

It became apparent that the state would still enjoy a budget surplus even after allotting $588.4 million to Education, approving a cigarette tax increase that will bring in $229.3 million, and putting $253 million in the state’s Rainy Day Fund. The Senate passed SB568, sponsored by Sen. Mae Beavers, with a 29-2 vote.

Sen. Beavers filed legislation in the beginning of session, SB305, to gradually reduce the sales tax on food one half-cent each year until it is phased out completely. The bill was put on hold this year in order to pass the half-cent permanent reduction, which Sen. Beavers describes as a “good first move.”

“With the surplus revenue,” continued Beavers “there should be no question that the state needs to refund the taxpayers of their overpayment of taxes. I will bring up legislation that continues to offer tax relief to hard working Tennesseans in 2008.”

The question many Tennesseans ask is why in years of overcollection there is not more support for a greater reduction in the sales tax. The Governor’s budget has increased by over $6 billion since 2003. However, the Governor, who has not supported any reduction in the sales tax, has commented that he does not feel that “it is a particularly effective way to get money into the hands of less fortunate people.”

Sen. Beavers disagrees with the Governor’s stance on the issue. She commented, “I’m happy that we were able to take a small step towards eliminating the sales tax on food, which is something that will especially assist the elderly and those families who need help the most.”

The original sales tax relief compromise included a month long sales tax holiday on food for either the month of November or December with a one-time cost of $76 million, an amount that could very well have been accommodated by the budget surplus. Instead, the proposal was dwindled down through compromises between the Governor and Senate leadership to a sales tax holiday on Easter weekend next year.

The reduction in sales tax on grocery food and food ingredients, not including prepared food, alcoholic beverages, candy, dietary supplements, or tobacco, will take effect January 1, 2008.


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