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Tax Cuts Passed By State House

Reductions to the taxes on groceries and inheritances were approved by the state House Thursday. Leadership at the Legislature expressed confidence the tax cuts would ultimately pass and be signed into law.

Tennesseans are only a few votes away from paying slightly less on their groceries and, for some, the tax they pay to inherit wealthy estates.

The House of Representatives on Thursday gave an overwhelming thumbs-up on two proposals that would reduce taxes in the next year. One would drop the tax on non-restaurant food, and the other would repeal the tax people pay when they are bequeathed an estate worth more than $1 million.

“We looked at the numbers, rolled our sleeves up, and worked with Governor Haslam to come up with two bills that will really benefit all Tennesseans,” said Finance Chairman Charles Sargent, R-Franklin, in a statement.

The two measures now head to the Senate for final approval. Gov. Bill Haslam, who pitched both tax cuts back in January, is expected to sign the bills into law if they make it to his desk.

Which is very likely, according to legislative leaders on both sides of the aisle, who said they like the idea of giving taxpayers money back then the state collects more than it needs.

The only catch, according to House Democratic Caucus Leader Mike Turner, is the state needs to spread those tax cuts out among more people.

Turner, D-Old Hickory, voted against the bill that would repeal the tax on inheritances by 2016, saying he wanted to see that plan scaled back in favor of a meatier cut of the food tax.

“I’m not opposed to cutting the inheritance tax. But I think our priorities should have been, let’s give the relief to people on the lower end first, because we’re putting a huge burden on them,” he told reporters.

The first step in repealing the inheritance tax begins with raising the exemption for estates to owe taxes on. Under the bill, HB3760, the state would raise the exemption to $1.25 million from $1 million. By 2016, the phasing out of the tax will have saved money for heirs to more than 800 estates, according to legislative number crunchers.

The plan to reduce the food tax, HB3761, would equate to a savings of 25 cents for every $100 spent on groceries. For a family of four on a modest food budget of $884 a year, that means $26.52 in savings a year.

“The bottom line is we rely on the sales tax for a steady source of revenue for this state,” House Speaker Beth Harwell said to reporters Thursday. “On the other hand, when you remove the food tax, you don’t encourage investment in this state whereas the elimination of the death tax, I believe, will end up bringing additional revenue into the state.”

Justin Owen, CEO of a free-market think-tank called The Beacon Center of Tennessee, says phasing out the inheritance tax is “possibly the most important legislation proposed in the General Assembly this year.”

“The repeal will alleviate the farmers and small business owners who are harmed by this tax, bring additional job opportunities to our citizens, and actually lead to an increase in tax revenue over time,” he said in a statement.

The two tax cuts are up in the Senate Finance Committee Tuesday, April 17.

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