Governor Bill Lee signed the largest tax cut in Tennessee history on Thursday, his office announced. The Tennessee Works Tax Act (TWTA) aims to provide $400 million in savings for families and small businesses.
The sweeping new legislation includes a three-month grocery tax holiday, a tax credit for companies who offer paid family leave to employees, and $150 million in small business tax relief.
“Tennessee’s legacy of responsible fiscal stewardship has allowed our state to weather national economic storms while maintaining a balanced budget and cutting taxes for Tennesseans,” Governor Lee said of the bill. “We thank the General Assembly for partnering with us to make the right investments for Tennessee families and businesses while supporting our state’s future economic growth and success.”
“In Tennessee we are committed to low taxes. We believe that Tennessee businesses and citizens are in the best position to decide how to spend their own money, and these tax-cuts demonstrate that we practice what we preach,” Senate Majority Leader Jack Johnson (R-Franklin) said.
“I applaud Governor Lee for this bold measure to provide more growth opportunities for businesses and financial relief for families on everyday expenses. We are proud to be one of the lowest taxed states in the nation, and this move to further cut taxes strengthens our dedication to being a pro-business and pro-family state with low taxes,” said Johnson.
House Majority Leader William Lamberth (R-Portland) said that “Tennesseans know best how to spend their own money.”
Lambert further touted the bill’s benefits, saying that “[t]hese historic tax cuts mean more money for our citizens to invest, spend and save. It provides meaningful reforms that further solidify Tennessee’s standing as the most well-managed, fiscally stable state in the nation where families and businesses thrive.”
The bill originated in January of this year. It passed the State House of Representatives in a vote of 89 to 6. The State Senate then substituted their own version of the bill and passed it 31 to 2, which the State House then confirmed in a unanimous vote of 90-0.
As part of the newly signed law, Tennesseans can look forward to a grocery tax holiday from August 1st to October 31st. The state defines the food and ingredients included in the exemption as “liquid, concentrated, solid, frozen, dried, or dehydrated substances that are sold to be ingested or chewed by humans and are consumed for their taste or nutritional value.”
The sales tax exemption will not cover “alcoholic beverages, tobacco, candy, or dietary supplements.” The State will reimburse local governments for any sales tax revenue lost during the period.
Over the next two years, companies who offer their employees paid family leave “may be eligible for a tax credit against their franchise and excise tax liability.” The Department of Revenue says that “[e]ligible companies can receive a credit based on the amount of wages reimbursed to employees.”
Small business owners will see a combined $150 million in tax cuts. One highlight in the set of tax cuts is that companies may now deduct the first $50,000 in net earnings from the excise tax. The law also “[e]xempts $500,000 of business property from the franchise tax minimum measure.” More on the small business tax cuts is located on the Department of Revenue website.
Tennessee State Director for the National Federation of Independent Business (NFIB) Jim Brown said, “The timing of this comprehensive tax relief package could not be better for many small businesses in Tennessee that are dealing with multiple challenges, including a labor shortage, persistent inflation, and supply chain disruptions.”
“NFIB thanks Governor Lee and his administration and the General Assembly for getting these much-needed reforms done to help our state’s risk-takers and their employees,” said Brown.
The tax cuts cone after years of budget surpluses. For the first nine months of this fiscal year, Tennessee collected $1.5 billion more than it budgeted in taxes and fees. Last year, the State collected $4.6 billion more in taxes and fees than were budgeted.
In December of 2021 alone, the state collected $437.2 million more in tax and fee revenue than it had budgeted for the month.
In neighboring Georgia, similar tax revenue surpluses sparked a bill in the state legislature to give $1 billion in tax rebates to state residents. Single filers in the state will get $250, while married filers will get $500 from the State of Georgia. Governor Brian Kemp said “Georgia is once again in a position to issue surplus tax refunds thanks to years of responsible, conservative budgeting.”
He said the State of Georgia is “doing what we can to return money back where it belongs — in taxpayers’ hands.”
Brandon Puttbrese, Tennessee Senate Democratic Caucus spokesman, responded to the Tax Act, calling it trickle-down economics. Senate Minority Leader Raumesh Akbari (D-Memphis) voted in favor of the bill, as did State Senators Heidi Campbell (D-Nashville), Sarah Kyle (D-Memphis), and Jeff Yarbro (D-Nashville).
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Mac Roberts is a reporter at The Tennessee Star. Email tips to [email protected].
Photos “Bill Lee Signs Tax Cuts Bill” by Bill Lee.
What a crock. How about repealing the 12 cent a gallon IMPROVE tax permanently? How about lowering the tax on groceries permanently?
And why are companies getting money for getting paid to cover the cost of paid family leave? Family leave has gotten way out of hand.
I could go on but the fact is that Tennesseans ae overtaxed but there is no relief in sight. Lee has never seen an expense that he does not like. Just like any other RINO.
Governor Lee is applauded for throwing crumbs to the people. “The tax cuts come after years of budget surpluses.” We get three months of tax-free food, after having been over-taxed for years, instead of getting a meaningful tax rate reduction. Businesses get tax breaks, which probably won’t be reflected in lower prices. Governor Lee:” Let them eat cake”.