State lawmakers have yet to pick through Gov. Bill Haslam’s list of priorities going into the legislative session, but so far many favor his plan to ever-so-slightly cut the food tax.
That group of fans includes Republicans who not so long ago scoffed at the idea of taxing groceries at a lower rate.
“I think it’s great. It’s a way for all Tennesseans to be able to participate in a tax cut,” said Rep. Gerald McCormick, the House Republican Leader. Back in August, when Democrats proposed using higher-than-expected sales tax revenues to offset a grocery-tax cut, McCormick labeled the idea “irresponsible.”
But McCormick stood by his earlier assessment Wednesday, telling TNReport he still believes the Democrats’ tax-cut proposal over the summer was a “political ploy.”
“I thought it was irresponsible, considering that we were mired in a recession, in a deep recession. The economy is recovering now, and I think that’s reflected in our sales tax numbers. So it’s become a possibility, whereas six months ago I think it was simply political posturing on the part of the Democrats,” said McCormick.
Lt. Gov. Ron Ramsey belittled talk about reducing the food tax as recently as last month, telling reporters cutting the food tax is “more psychological than it is anything else.”
“We’re never going to do away with (the food tax) completely. So I don’t think that lowering it really does help that much, and I think we can concentrate more on the tax that we can actually eliminate,” Ramsey, R-Blountville, continued. He has since said he’ll back the governor’s tax plan.
House Speaker Beth Harwell, too, showed little interest in touching the food tax three weeks ago, saying, “we don’t have the revenues available to do it.”
The governor’s plan would mean about $18 million less that the government sponges up in revenue from the private sector. Haslam’s plan would reduce the grocery tax by 20 cents for every $100 spent on food. That would save a family of four on a modest grocery budget $21.24 a year.
Despite the scant savings taxpayers would see, Democrats said they’re pleased the governor has made cutting the grocery tax an acceptable topic of conversation among the Tennessee General Assembly’s Republican majority.
“Well, it’s obviously probably not enough,” said House Democratic Caucus Chairman Mike Turner about the tax cut. “Anytime we get the opportunity to lower the sales tax I’m for it, even with the incremental steps it’s not going to be a real noticeable impact. … Hopefully one day we’ll get a full percentage point knocked off.”
Lawmakers reduced the tax back in 2007 by a half cent to 5.5 cents on the dollar. Sales tax on non-food items is 7 percent.
Democrats pushed last summer for legislative leaders to consider cutting the food tax even further, although GOP leaders at the time dismissed the idea, saying the state revenues had to recover first. But Haslam said Tuesday he’s making it a goal to reduce the food tax from 5.5 percent to 5.3 percent this year with plans to reduce it to 5 percent in three years.
Senate Majority Leader Mark Norris, Ramsey’s right-hand man in the upper chamber, says he, too, is content with the governor’s proposed plan to cut the food tax.
“It’s a great start. I mean I think some of us wish we could do more more quickly. And maybe through the budget hearings we’ll find that there is a little bit of flexibility. Perhaps we can do more. But it’s a great place to start.”
The governor’s plan is do-able, says the Republican chairman of the powerful House Finance Committee.
“This year, I think the funds will be available, so I don’t see a problem in this year’s budget. I’m not saying we don’t have to make some other cuts, but funding will be available with the increase in revenue that we have,” said Chairman Charles Sargent, R-Franklin.
The governor’s legislative priorities also include broadening the exemption from the inheritance tax from $1 million to $1.25 million, which would benefit an average of 200 people a year, a plan House Democratic Leader Craig Fitzhugh said he can support if the state can spare the funds.
“It doesn’t have the broad effect that the sales tax on food does, but it would be something that if we can afford it, it would be an appropriate thing to look at,” said Fitzhugh, D-Ripley.