Tennessee lawmakers renew push for grocery tax break

Tennessee Republican and Democratic lawmakers are backing elimination of the state’s grocery sales tax this year despite worries about flagging revenues.

Democratic Rep. Aftyn Behn of East Nashville said Tuesday she will refile House Bill 2, which would end the state’s roughly 4% sales tax on grocery items and close corporate tax loopholes to offset the loss in revenue. The measure failed to advance in a finance subcommittee last year.

Likewise, Republican Rep. Todd Warner of Chapel Hill filed HB1530, which would exempt food and food ingredients from the state’s sales tax, a measure with an $800 million price tag.

Warner said Tuesday the state’s budget, roughly $59.8 billion, has grown nearly 59% since Gov. Bill Lee took office seven years ago. 

“I think it’s time we give back to the taxpayers of Tennessee by taking the state’s portion of the sales tax off groceries, which would result in about an $800 million return to the taxpayers,” Warner said.

Warner’s bill does not include a method for recouping the lost revenue while Behn’s bill would offset the revenue loss by requiring companies that shelter money in offshore accounts to pay their share of taxes. He said the state could cut private-school vouchers to make a grocery tax cut possible.

Behn said Tuesday the corporate tax base under Republican control has eroded significantly, causing the state to move toward a “fiscal cliff,” despite a promise by GOP lawmakers that they’re going to deal with an “affordability crisis.”

“Tennessee is 13 FedEx subsidiaries in a trench coat,” Behn said, referring to decisions to give tax breaks to multinational corporations while shortchanging people.

Lawmakers approved business tax breaks and rebates in 2023 and 2024 that cost the state billions of dollars in revenue and caused corporate tax collections for last year to fall off by 15.8%, a decrease of $721.5 million from the previous year.

In contrast, sales tax collections went up 4.2%, $596 million in that time frame, according to state figures.

Memphis-based FedEx and its subsidiaries, as well as Lee Company, a mechanical engineering and HVAC, plumbing and electrical services company owned by Lee’s family, joined Amazon, Nissan, AT&T and utilities such as Atmos Energy and Alabama Power in netting franchise and excise tax rebates of more than $10,000 each created by a 2024 state law. In all, 60,000 companies received three-year refunds estimated at $1.5 billion.

Behn’s bill, carried in the Senate by Democratic Sen. Charlane Oliver of Nashville, also would enact a corporate minimum tax generating $900 million. They say their argument is backed by a state report showing Tennessee’s most profitable companies are avoiding taxes, and Behn pointed out that several Republican-controlled states such as Texas passed similar laws.

Grocery tax cuts compete for support in Tennessee legislature

“This supermajority’s not delivering for Tennesseans, and the Republicans up here are getting jittery,” Behn said. “There’s no new money coming in. They don’t have money for their pet projects, and they don’t have money to tell their constituents they delivered for them, which is why they’re going after immigrants.”

Republican leaders introduced a slate of bills last week designed to eliminate undocumented immigration in the state, a move likely to overshadow other legislation this year.

Republican Sen. Bo Watson of Hixson and Republican Rep. Elaine Davis of Knoxville are sponsoring a grocery sales tax reduction too, but it’s unclear whether they will push the bill.

Watson, chairman of the Senate finance committee, said it is one of several tax-related bills that will be considered to see if they’re possible.

“All those are math problems,” Watson said. “I don’t know what we’ll be able to do until we see what the governor gives us on Feb. 2,” Watson said.

Lee is to give his final State of the State address on Groundhog Day.

Watson said he has no idea which spending items would be cut so the grocery tax could be eliminated without affecting state revenue.