The Tennessee legislation that is advancing through the General Assembly to allow cities and counties to reduce or eliminate, but not increase, the state sales tax comes amid a push by states across the country to do away with taxes on food to cope with the cumulative effects of inflation.
The bill would allow all “counties and municipalities, by resolution or ordinance,” to set the “tax on the retail sale of food and food ingredients” at any “rate less than” the state’s sales tax rate. The bill’s language specifically precludes local governments from increasing the sales tax rate beyond the set by Tennessee, which is currently 4 percent.
It comes as a number of the 13 states that continue to tax groceries have sought to reduce or eliminate their tax in a bid to provide relief to consumers struggling with the effects of inflation, according to a report from a progressive think tank that highlighted at least 10 states taking steps to reduce or eliminate such taxes in 2023.
Efforts last year to reduce or eliminate taxes on food in these states were “really noticed” by residents due to the effects of inflation, according to remarks by the Food Industry Association (FMI) to Newsweek last July.
“They can get an extra peanut butter sandwich, get an extra loaf of bread to feed their family – that could be significant,” the spokesman told the outlet. He added that lowering taxes on food is generally “not a life-changing impact for consumers and it’s a relatively modest hit to state budgets.”
Grocery costs have hit Americans hard since 2022, when polling revealed 82 percent of American shoppers reported cutting back on food purchases due to higher prices caused by inflation.
The effort by Tennessee lawmakers to allow local governments to cut the sales tax on food also comes after Governor Bill Lee previously signed legislation passed by the General Assembly in 2023 that allowed for a temporary tax-free grocery period that was scheduled to last from August until October.
Billed by Lee as “three months of savings for Tennessee taxpayers,” the governor argued upon signing the law that the state’s “legacy of responsible fiscal stewardship has allowed our state to weather national economic storms while maintaining a balanced budget and cutting taxes for Tennesseans.” The decrease in sales tax receipts resulted in the state receiving millions of dollars less in tax revenue than it expected.
It was also calculated last November that the average American household must spend $11,434 more per year to enjoy the same standard of living as they did before President Joe Biden took office.
Introduced by State Senator Ferrell Haile (R-Gallatin) as SB 2520 in the Tennessee Senate, the legislation made it to the Senate Finance, Ways, and Means Subcommittee, which is next scheduled to act on the bill on March 5 after action was deferred on Tuesday.
HB 2641, the version of the bill introduced in the Tennessee House by State Representative William Lamberth (R-Portland), passed unanimously in the House Finance Ways and Means Subcommittee on Wednesday and will advance to the full finance committee on February 27.
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Tom Pappert is the lead reporter for The Tennessee Star, and also reports for The Georgia Star News, The Virginia Star, and the Arizona Sun Times. Follow Tom on X/Twitter. Email tips to [email protected].
