GOP Showing Little Taste for Lower Food Tax

Now that Tennessee Republicans are “large and in charge” of state government, as minority Democrats like to snidely put it, they seem to have lost their appetite for cutting the state’s sales tax on food.

Even though Tennessee is looking at $62.3 million in excess revenues over the last 11 months, lowering the tax isn’t likely to happen any time soon, say powerful majority-party politicians.

Nevertheless, Tennessee Democrats are floating a plan to give part of the overage back to taxpayers — by reducing the 5.5 percent tax on food and making additional funds available for “needs-based” college scholarships.

The Volunteer State now charges a 7 percent sales tax on items other than food and is one of seven that offers a reduced rate on groceries, although 31 states exempt most non-restaurant food purchases from sales taxes.

Republicans, who consolidated their political power in the 2010 election promising a more fiscally disciplined, taxpayer-friendly state government, last month scoffed at Democrats for offering up a plan to reduce the tax on food.

“It’s just irresponsible,” House Republican Leader Gerald McCormick told TNReport. His preference is the state keep any extra tax collections safely locked up in the government’s savings account for spending later in leaner times, like when Washington starts ladling out smaller helpings of federal largess.

Lt. Governor Ron Ramsey claims he’d “love to eliminate the food tax.”

Not now, though.

“I hope and pray that Tennessee will soon be in a position to do just that,” the Blountville Republican said in an e-mailed statement shortly after the Democrats served up their tax-cut idea. “But a revenue blip does not a surplus make.

“While the new revenue numbers are encouraging, the last few years have taught us that we cannot afford to be cavalier with the contents of our treasury,” he said.

Ramsey, who recently proclaimed that “a basic philosophical difference between Democrats and Republicans” is that the latter favor taxpayers keeping their own money in times of revenue surplus, accused Democrats of “craven political posturing” for proposing a tax cut on groceries in the current fiscal climate.

Requests through Ramsey’s spokesman for further comment and explanation from the lieutenant governor went unanswered.

Republicans didn’t used to be so hostile to the idea of a tax cut for Tennesseans who purchase food. Indeed, some, like Kingsport Rep. Tony Shipley, once upon a time got elected promising to push for food-tax relief.

In 2007, Sen. Mae Beavers was at the forefront of the legislative effort to reduce the food tax, ultimately by half a cent. At the time, she complained that wasn’t enough. But now she’s just irritated the matter has popped up again.

“I really take offense to (Democrats) making a political issue out of it this time when they had a chance to take it all off a few years ago,” said Beavers.

Gov. Bill Haslam was more conciliatory towards the proposal, saying he “100 percent” agrees with Democrats’ desire to reduce taxes on groceries when the state collects excess money from taxpayers.

In principle, anyway. He questions though whether tens of millions of dollars in over-collections truly represents a “surplus” at this time.

“If we had a surplus, we should not be keeping the money. I couldn’t agree more,” the governor told TNReport. “It’s just way too early to say that because I have a feeling we’re going to have to make some hard calls.”

The catch, Haslam says, is state government would need to consider cutting millions of dollars in services now covered with $160 million in one-time money, address rising education costs and weather instability from the economy and federal government in order to reduce the tax.

“There’s a whole lot of stuff in there I can guarantee the Democrats and most of the Republicans don’t want to cut,” Haslam said. “My first word would be to the Democrats, how do you feel about that $160 million in services? Are you ready for all of those to go away, because our overage is not enough to do both.”

Rep. Craig Fitzhugh, the leading Democrat in the House, says he sees nothing particularly ludicrous about proposing to cut “one of the highest sales taxes on food in the entire country.”

“If that’s absurd, well, we need more absurdity in government, because I think that’s an excellent option that we may have,” said the Ripley Democrat.

Lawmakers this year considered a plan to raise the tax on soda in exchange for lower food taxes, but that issue went nowhere. Lawmakers did manage to lower taxes on investments for some senior citizens by raising the income benchmark by $10,000 to exempt more individuals and couples from paying the Hall income tax.

While legislators play political ping-pong over the excess taxpayer dollars, state government observers of various ideological stripes agree the partisan bickering ought to be set aside in favor of a serious policy-driven conversation.

“It’s not enough to rely on the whims of either political party to return excess revenue to taxpayers,” said Justin Owen, executive director of the Tennessee Center for Policy Research, a free-market think tank which has advocated a reduction in the grocery tax.

What the state should do is automatically kick any excess revenues back to the public at the end of each fiscal year, he said.

Ben Cunningham of Tennessee Tax Revolt said it seems obvious to him “any surplus ought to be returned to the taxpayer.”

“The time to give tax revenue back to the families to put back in the family budget is in the good years, this way you even out the ups and downs of tax revenues and you better control the size of government,” said Cunningham, a prominent voice in Tennessee’s tea-party movement.

Tennesseans for Fair Taxation, a coalition of liberal activists, unionized workers and progressive advocacy groups, has long pushed for reducing Tennessee’s reliance on a sales tax. TFT argues Tennessee’s tax on food is perniciously high — that it, in essence, constitutes a “tax on life.”

“Groceries represent a much bigger portion of low-income families’ budgets while it only represents a small fraction of most high-income families’ budgets,” argues TFT. “By eliminating the tax on food, the average family would save enough annually to buy a whole month’s worth of groceries.”

TFT’s preference for instituting a state income-tax to offset reduced revenues from a lower or eliminated grocery-tax doesn’t seem likely to gain much traction in the GOP-dominated Legislature, where the wheels are in motion to constitutionally ban an income tax.

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