Tennessee Tax Policy Choices
Billionaires vs. Bananas
Tennesseans pay a premium when they buy bananas thanks to state tax policy that includes groceries in the state’s sales tax.
State taxes on groceries are 4% and local taxes can add another 2.75%. That means Tennesseans can pay nearly 7% more for the same bananas Kentuckians buy with no extra tax charges.
Tennessee is one of only 13 states that tax groceries.
And, while bananas bear the burden of the grocery tax, out-of-state corporations received a $1.6 billion tax break this year.
Some lawmakers are seeking to change that - putting bananas over billionaires and eliminating the state tax on groceries. That plan is estimated to cost just over $1 billion a year - less than the cost of recently passed corporate tax breaks.
Nashville Rep. Aftyn Behn and Sen. Charlane Oliver have proposed eliminating the grocery tax.
The grocery tax disproportionately affects low- and middle-income families because these families must spend a higher percentage of their income on necessities, like food. Ending the state’s 4% food tax would put real money back into the pockets of hardworking Tennesseans year-round and reduce some inequity in Tennessee’s tax code.
While Behn and Oliver pursue tax policy focused on improving the quality of life for Tennessee families, it’s clear that Gov. Bill Lee’s policy of tax giveaways to big corporations (like his own Lee Company) is blowing a hole in the state budget.
Finance and Administration Commissioner Jim Bryson said, "Year-to-date, we are significantly below our original general fund budget estimate with two months remaining in the current fiscal year."
In addition to the sluggish May revenue, the state reports that year-to-date, incoming revenue is $523 million below budgeted estimates.
The theory of trickle-down economics espoused by Lee and his allies suggests that everyone benefits from tax cuts for billionaires and corporations because the money saved “trickles down” and fuels economic growth.
The reality of the state’s revenue picture tells a different story: Lee’s policies have blown a hole in the state budget that will strain resources needed to fund schools, healthcare, and infrastructure.
Meanwhile, Tennesseans pay a premium for pantry staples like bananas.