Tax Cuts on Food, Inheritances Pushed by Haslam

Gov. Bill Haslam Tuesday afternoon introduced his 2012 legislative agenda, announcing that he will push for two tax cuts during this year’s Tennessee General Assembly session, which also began Tuesday.

The tax cuts come by way of the governor’s proposals to raise the state inheritance tax exemption from $1 million to $1.25 million and to lower the state’s portion of the sales tax on food from 5.5 percent to 5.3 percent.

A family of four spending $884 a month on groceries would save about $21 a year under the Haslam tax cut.

The proposals were something of a surprise move from the governor, who has said as recently as last month that such cuts would be unlikely this year due to the state’s tight financial situation.

The proposed tax cuts are just the beginning for the governor, who said the cuts were the first step toward his goals of lowering the food tax to 5 percent and raising the inheritance tax exemption to $5 million, to match the federal exemption mark, by the end of his first term.

Estimates are that the two-tenths of a percent decrease in the food tax will lower the state’s revenues by $18 million. For the change in the estate tax, that number is $14 million.

“I just think it’s important, if we’re to lower taxes for Tennesseans, that’s the only way to really touch every Tennessean in a significant way,” Haslam said of his decision to push for a food tax cut.

Lt. Gov. Ron Ramsey last month told reporters that he “wasn’t a big proponent” of cutting the food tax and that it probably wasn’t wise, anyway, given that sales taxes are the main revenue source for state and local governments. While Speaker Beth Harwell stood by the governor’s side at his press conference Tuesday and voiced her support for Haslam’s agenda, Ramsey did not attend but released a brief statement.

“I am excited to work with Gov. Haslam to move Tennessee forward toward more jobs, less spending and smaller government,” he said. “The governor has chosen his priorities well. This is a solid agenda that our unified Republican majority can proudly stand behind.”

Ramsey conceded that his priorities differ from the governor’s in some areas, but said he’d support Haslam’s agenda.

“I’ve always been in favor of reducing the estate tax, and so that’s one of his priorities too,” the Blountville Republican told TNReport. “So, I think if you look at the package from top to bottom, it’s something I agree with and can’t wait to help him pass it.

“[The food tax cut] has not been a priority of mine, I will agree with that, because that’s something I feel like is a stable base of revenue that we have. But reducing it from 5.5 to 5 over three years – that’s fine. It’s not like we’re trying to do away with the sales tax on food,” he said.

Haslam’s agenda did not include a push for a cut in the Hall income tax on investments, which has been a goal for some Republicans, including Ramsey.

“That fight’s not over yet either, OK,” Ramsey said. “That’s just not one of [Haslam’s] priorities.”

As for raising the state inheritance tax exemption, Haslam said he believes the move will create more revenue for the state in the long term by keeping people in the state.

“There are a whole lot of people who used to live in Tennessee who don’t anymore because it’s cheaper to die in Florida,” he said. “And I can tell you a whole lot of people who spend less than half of their year in Tennessee to avoid that estate tax specifically.”

Speaking to reporters after Haslam’s remarks, Harwell expressed her full support for the governor’s agenda and was particularly pleased with the proposed change to the estate tax. She said she was glad to see the state raising the exemption to a reasonable level and called Tennessee’s current exemption “way out of line.”

Among the other items in the legislative package were proposals to give individual school districts more autonomy with regards to salary schedules and average class size and changes to the state’s hiring and employment practices. The governor also proposed legislation that would restructure 22 state boards and commissions, which he called the “first step in an ongoing comprehensive review process.”

Andrea Zelinski contributed to this report.