GOP leaders want to lower Tennessee sales tax rate

On November 9, 2014, in News 2014, by Mark Norris

State Republican legislative leaders want to cut the Tennessee sales tax rate from 7 percent to 6.75 percent.

Senate Majority Leader Mark Norris, R-Collierville, and House Majority Leader Gerald McCormick, R-Chattanooga, pre-filed identical bills this week calling for the cut to the state’s largest source of tax revenue.

“It’s time to have a serious discussion about state revenue,” Norris said Friday afternoon. “Putting the sales tax on the table helps us frame the issue, I think. It will be more helpful in framing the issue, and having a healthy discussion.”

In the last budget year, Tennessee earned about $7.2 billion from sales tax revenue, according to statistics from the Department of Revenue. A 0.25 percent reduction could represent hundreds of millions of dollars in lost state tax revenue, although state officials could not give an exact figure yet. The state uses a complex formula that applies the sales tax rate to the overall state tax base to estimate potential revenue for the state’s coffers.

The sales tax rate is different throughout the state, depending on city taxes. In Nashville for example, the state and city tax combine to result in a 9.25 percent tax. Looking at just the state sales tax, the change would mean someone buying a $25,000 car would pay about $62.50 less in state sales tax on that purchase.

Tennessee doesn’t have an income tax, and voters just approved a change to the constitution to forbid such a tax. Norris said the adoption of the constitutional amendment and the start of a new legislative session made for the perfect time to discuss tax cuts without the “boogeyman” of the income tax.

Any tax cut would likely mean an offsetting cut in some sort of spending.

“It’s all part of the discussion. Everything’s fair game. It needs to be. It really needs to be,” Norris said.

Norris and Laura Herzog, a spokeswoman for Gov. Bill Haslam, confirmed the bills were not introduced on behalf of the governor.

“We’re in the process of working on our legislative agenda and just beginning the budget process,” Herzog said. “As part of our legislative preparation process, we’ll review bills that have been filed and position those bills in the coming months.”

The proposed reduction comes after Haslam has repeatedly warned against repealing the state’s investment tax, known as the Hall tax. State Sen. Brian Kelsey, R-Germantown, pre-filed a bill this week that would repeal the Hall tax gradually over three years.

Norris, who noted the measure looks very similar to one introduced last session by Sen. Mark Green, R-Clarksville, said he and McCormick believe its important to look at all state revenue and expenditures, starting with the sales tax.

“We can’t just have people going out piecemeal and filing little tax tweaks or trying to repeal a tax,” Norris said.

He said he notified the governor about the proposed sales tax cut. While he said he understands the governor’s reasoning for being wary of a Hall tax repeal, he said Haslam “appreciated the spirit” of the bill from the majority leaders.

Reach Dave Boucher at 615-259-8892 and on Twitter @Dave_Boucher1.

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