Starting Monday, Tennessee residents will pay 4% less for groceries thanks to a month-long grocery tax holiday approved by the state’s legislature in April.
Through Aug. 31, Tennessee is suspending its sales tax on food and food items in an effort to help taxpayers deal with the costs of inflation.
The plan was promoted heavily by Governor Bill Lee (R), who proposed the measure last March and led it through the legislature.
“As Americans see their cost-of-living skyrocket amid historic inflation, suspending the grocery tax is the most effective way to provide direct relief to every Tennessean,” Governor Lee said. “Our state has the ability to put dollars back in the pockets of hardworking Tennesseans, and I thank members of the General Assembly for their continued partnership in maintaining our fiscally conservative approach.”
The state estimates the grocery tax holiday will save residents $80 million over the month.
The measure was not approved without debate. The debate was not, however, over whether the state should offer a grocery tax holiday. It was over whether a month was long enough.
During the debate, State Senator Joey Hensley (R) asked whether there was any consideration of a more “permanent” tax cut. State Rep. Joey Clemmons (D) likewise argued that thirty days “wasn’t enough.”
According to the state, groceries, which are exempt from the state’s sales tax, are defined 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.” Alcohol, tobacco, candy, supplements, and prepared food are not eligible for the grocery tax exemption.
Tennessee’s grocery tax is already less than it was just a few years ago. In 2017, the state reduced its sales tax on groceries from 5% to 4%.
The state also boasts no income tax, with the last vestige of that tax–which was limited to interest and dividends–being eliminated in 2020.
Alabama legislators rejected a proposal to eliminate the state sales tax on groceries in the spring. Unlike in Tennessee, however, there was no counter-proposal from opponents. A simple no, based mostly on fear of having to “replace the lost revenue,” was the refrain of the bill’s opponents.
Tennessee legislators, according to Taylor Dawson of the Beacon Center of Tennessee, don’t seem too concerned with replacing the “lost” revenue from their grocery tax holiday. That’s because, Dawson says, Tennessee has maintained consecutive years of a budget surplus.
This year, Alabama also had a budget surplus. And, at $1.5 billion, it was not a small one. Since recent estimates suggest grocery tax revenues are around $600 million per year in Alabama, or $50 million per month, that’s more than enough to cover a years-long holiday from the grocery tax–much less a month-long one.
Most of that money is gone now and has been spent on state government instead of giving Alabama taxpayers a break at the grocery store.