Tennesseans will see a slight reduction in their food costs when checking out of grocery stores like Kroger and Harris Teeter starting Jan. 1, but critics say the half-cent cut in the state’s sales tax on food won’t significantly help family budgets.
The sales tax on items from everything to milk and bread to filet mignon and lobster will now be 5.5 percent as opposed to 6 percent. The local sales tax percentage — 2.25 percent in Davidson County — will not be affected.
But will the reduction make much of a difference for Tennessee families or could lawmakers have done more?
Phil Schoggen, a member of Tennesseans for Fair Taxation, a group that lobbied in favor of the food tax cut, said the half-cent reduction would make the most difference for low-income families who spend a higher proportion of their income on food.
“That’s the most regressive and harshest penalty the state imposes on persons with limited incomes,” Schoggen said of the food tax.
Schoggen and others, however, think the state could have done more to lower the food tax in a year when the state’s coffers overflowed with unexpected revenues numbering in the hundreds of millions.
“I really believe we could have done more for Tennesseans and reduced that further,” said Rep. Beth Harwell (R-Nashville).
The Department of Revenue estimates the state will lose about $40 million in tax revenue per fiscal year as a result of the tax cut.
Meanwhile, low-income Tennessee families will put about $40 into their wallets or pocketbooks for the year as a result of the cut.
The change in the sales tax on food resulted from this past legislative session, when both Democratic and Republican state lawmakers voted overwhelmingly for the politically popular choice to cut one of the highest sales taxes on food in the country.
All, however, did not favor the tax cut.
Veteran Davidson County Democratic Sens. Joe Haynes and Douglas Henry were the only two senators who voted against cutting the sales tax on food.
Their reasoning rests on the sales tax on food being one of if not the most stable source of taxpayer revenue.
If you decrease that stable source of revenue, Henry said, you get closer to bringing back talks of a state income tax.
“I wouldn’t think it would amount to a great deal in the average budget,” Henry said of the sales tax cut.
Lawmakers like House Majority Leader Gary Odom (D-Nashville) want to continue cutting the sales tax on food.
Odom says the goal should be to eliminate it entirely.
“I think we made a significant statement,” Odom said of the food tax cut.
An expected budget shortfall this year — estimated to be as high as $240 million — could derail efforts to further cut the food tax, however.
The sales tax on food does not apply to prepared foods found in delis and restaurants.