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VOL. 41 | NO. 5 | Friday, February 3, 2017

Tennessee Democrats push for elimination of grocery tax

By Sam Stockard

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Calling the governor’s fuel-tax plan a “slap in the face” of working Tennesseans, legislative Democrats are making a move to offset increased costs at the pump by phasing out the grocery tax.

House Minority Leader Craig Fitzhugh and Senate Minority Caucus Chairman Jeff Yarbro are filing legislation today to eliminate the 5 percent sales tax on groceries, in addition to diapers and feminine hygiene products, over 10 years.

The bill would reduce the grocery sales tax by half a percent annually in January 2018 and end it by January 2027, possibly eliminating $550 million in annual revenue based on the governor’s estimate that a half-percent cut would cost $55 million, according to Fitzhugh.

Asked if his bill is a realistic one considering the amount of revenue it could cut from the budget, Fitzhugh says, “Absolutely.”

“The percentages we’re talking about are certainly flexible. But it’s got to be more than a half a point off groceries. That’s a slap in the face to people when you want to raise the gas tax,” Fitzhugh says.

Fitzhugh, a Ripley Democrat from West Tennessee, says he likes Haslam’s idea of trying to make fuel-tax increases revenue neutral as he tries to chip away at a $10.5 billion backlog in road and bridge projects. The governor’s plan adds seven cents to the gas tax, 12 cents to the diesel tax and several fees to bring in nearly $400 million for state and local transportation projects.

Haslam offsets those increases, in part, with about $270 million worth of franchise and excise tax breaks, another reduction in the Hall tax on investments and a half-cent cut in the grocery tax.

“We’re just trying to say, look, if you want to put the burden on the back of the driving public, you ought to take the burden off at the grocery store for certain things like milk and diapers and staples that they pay the full sales tax on. We’re just trying to throw some things out there that make a little sense,” Fitzhugh says.

Legislative Democrats and Republicans agree with Haslam the state needs to do something to improve the safety of roads and bridges and relieve congestion. Some 962 projects in all 95 counties are to be finished or started by 2030 under Haslam’s plan.

How they reach that point is the sticking point.

House Republicans are balking at the governor’s proposal, saying the state should use a $1.1 billion one-time surplus and another $957 million in recurring extra money to build up the transportation fund. Rep. David Hawk is sponsoring legislation to take a quarter of one percent of the sales tax and divert it to transportation projects, a move that would set a new course for funding road and bridge work in Tennessee.

House Majority Leader Glen Casada, who is sponsoring the IMPROVE Act for the governor but thinks Hawk’s plan is better, says he likes the idea of cutting grocery taxes but wants to know how Democrats would offset revenue losses.

“All proposals are welcome, I look forward to the debate, but don’t just say I’m going to cut here. Where else are you going to cut to make our books balance? Let’s don’t be like Washington, let’s balance our books,” Casada says.

The Thompson Station Republican from Williamson County backs the governor’s business-tax cuts, saying Tennessee has $957 million in recurring revenue for the coming year because it is a “business-friendly, low-tax, low-regulation” state that encourages companies to locate here.

Haslam says he wants to reduce franchise and excise taxes because the state has lost several potential business relocations because it has some of the highest business taxes in the nation.

The governor’s office did not have an immediate response to the Fitzhugh-Yarbro legislation.

Sam Stockard is a Nashville-based reporter covering the Legislature for the Memphis Daily News. He can be reached at sstockard44@gmail.com.

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