We did it! First-ever cut in state food tax passes!!!
That's right... We did it! The first-ever reduction of the
state's high food tax has now passed both houses and it headed
to the Governor's desk for his signature. As part of the budget
bill that passed both chambers, the sales tax on food will
be cut from 6 to 5.5%. While this is far less than TFT had
asked for, it is a very positive first step that we can build
as we move forward.
The local government add-on of up to 2.75% is not affected.
On average, locals add 2.35% to the state rate, bringing the
average state and local food tax to 8.35% under current law.
This is the highest average state and local rate in the nation.
Beginning January 1, 2008, this average rate will drop to
7.85% as the new state rate takes effect, moving Tennessee
to the third highest food tax, below Oklahoma and Alabama.
Our food tax will still be among the highest in the nation,
but this is nonetheless a very positive step in the right
direction and we applaud the legislators who helped make this
possible. Clearly, much work remains to be done in the coming
years to build on this victory.
Until 2002, grocery food was taxed at the same rate as non-food
items. Legislators excluded groceries from the 2002 sales
tax increase. This meant that for the first time, groceries
were taxed at a lower rate than non-food items (6% for groceries
vs. 7% for non-food items). The scheduled reduction in the
food tax to 5.5% will be the first time the food tax has ever
actually been reduced, a welcome change.
While the 42-cent cigarette tax increase was technically
dedicated to education, no matter how they shuffle the money
on paper, the end result is $40 million of the $220 million
cigarette tax increase was used to cut the state's high food
tax. That's what we wanted... a fiscally-sound cut in the
state food tax paid for with an increase in the cigarette
tax so important public structures like education, health
care, and environmental protection would not be hurt.
TFT's statewide Board of Directors will be meeting in late
July to celebrate this year's victory and start making plans
for 2008 and future reductions in the state food tax. Additionally,
we are planning an Annual Membership Meeting for September
15 and we invite all our supporters to join us as we make
plans to build on this year's victory.
The public investments that
our tax dollars make possible are the foundation of a healthy and vibrant
economy. Even the wealth of our most affluent citizens is made possible
through these investments.
Our publicly funded schools and universities fill
workplaces across the state. Our court system enables businesses to resolve
disputes and enforce contracts. Our roads and highways allow the goods
that come off our assembly lines to be shipped to customers everywhere.
In the end, there is no way to separate these public
investments from the health, vitality, and strength of our economy. They
are deeply intertwined.
Progressive Taxation
The principle of progressive
taxation is that those who reap the greatest benefits from the economy
our tax dollars make possible should contribute the greatest share towards
its maintenance.
Tennessee stands this principle on its head by asking
those who benefit least from our economic system to actually pay the greatest
share in taxes.
While a truly progressive system would be ideal, Tennessee
would be doing good if we simply asked those who benefit most from our
economy to contribute the same as everyone else.
Schedule a tax reform workshop for your church or community group.
