June 11, 2007 @ 6:00 PM
Senate Passes Sales Tax Relief
Henry Warns Cuts Can Lead to Income Tax
Senate Bill 568, sponsored by Senator Mae Beavers (R-Mt. Juliet), passed the Senate Monday (June 11, 2007) to reduce sales tax on food by one-half percent. The bill also creates a three-day Sales Tax Holiday to be held Friday, March 21, 2008, through Sunday, March 23, 2008.
The cost of the 0.5% cut from the current 6% sales tax on food is estimated at about $41 million per year. Just last year a proposed cut by the same 1/2-cent amount (104th General Assembly Senate Bill 2785) was estimated at about $35 million, giving an indication of how the tax grows with food price inflation and population growth.
Senator Doug Henry (D-Nashville) strongly stated his reasons as to why the state should not take the sales tax off food.
“It is the most stable tax in the books,” Henry stated. “When you start nibbling away at the sales tax, you start walking down the road to an income tax.”
Henry has stated similar arguments over the years that anytime the state reduces a tax or adds exemptions it moves one step closer to a state income tax.
Henry then cited a news article that had been handed out which he said showed that all over the country tax revenue was starting to dip.
He also cited a June 11, 2007 release from the Tennessee Department of Revenue which he said shows that
“It’s a foolish thing to do,” Henry said of cutting the sales tax on food.
Senator John Wilder (R-Mason) countered that the sales tax is an income tax, that all taxes are a tax on income.
“The sales tax is not fair,” said Wilder. “Food is a good source. Part of it shouldn’t be taxed, some should be.”
Wilder also noted that an income tax is unconstitutional in
Senator Beavers continued her plea for the cut: “The people are due a refund.”
The vote was 29 in favor with two against it, Senator Joe Haynes (D-Nashville) and Henry voting no. Senators Cooper and Ford were not there.
UPDATE June 12, 2007 @ 7:00 PM:
The article cited by Senator Henry was distributed at the request of Senator Haynes. It was a June 6, 2007, Tax Report article from page D3 of The Wall Street Journal, titled State Tax Collections Start to Taper Off: Revenue Slowdown Since Peak Dims Hopes for Tax Cuts, by Tom Herman.
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