Nashville Democrat proposes sales tax cut as state revenues surpass projections

Rep. John Ray Clemmons, D-Nashville, speaks during a House floor debate in 2016. Clemmons filed legislation last week that would cut the state sales and use tax rate.Erik Schelzig / File / Associated Press

As U.S. inflation sits at its highest rate since the 1980s and climbing grocery prices begin to impact local families, a state representative from Nashville is proposing a sales tax cut.

Rep. John Ray Clemmons, D-Nashville, filed legislation last week that would reduce the state sales and use tax rate from 7% to 6% — a tax break that could save families nearly one penny for every dollar spent.

“We should let hardworking Tennesseans keep more of their own money if the state is going to collect it and just sit on it,” Clemmons told Main Street Nashville.

Financially, Tennessee is flush. In the first six months of this fiscal year, the state has collected $1.6 billion more than budgeted. That’s on track to surpass the $3.1 billion revenue surplus collected last fiscal year, according to recent testimony from the legislative Fiscal Review Committee.

 

In addition, the state’s rainy day fund — which remained untouched during the pandemic shutdowns of 2020 — is projected to reach $1.5 billion by the end of this fiscal year. Tennessee has also received a windfall of funding from the three federal pandemic relief packages passed by Congress and is set to receive $8 billion in funding for roads, bridges, water and broadband improvements from the federal infrastructure bill.

“We have the money. That is not a question,” Clemmons said. “Why continue to over-collect and sit on that money and continue taking out of Tennesseans’ pocketbooks if we’re not gonna do anything with it?”

Clemmons’ bill is also a challenge to Republican colleagues and Gov. Bill Lee to increase funding for key state functions like education and public health.

“This governor has evidenced his unwillingness to really spend money to address issues,” Clemmons said. “If the state is not going to spend it on things — like fully funding our public education system that we underfund $1.7 billion per year — then there’s no reason for the state to sit on that money.”

Republican leadership has signaled openness to considering a tax cut, but emphasized the need to maintain the state’s strong fiscal stability.

“I think we’re gonna be cautious in this budget cycle,” House Speaker Cameron Sexton told Main Street Nashville. “The Biden economy has surpassed the Carter economy with inflation. You’re looking at high inflation, the highest that we’ve ever had. … We’re going to have to be very cautious as we move forward because of where the Biden administration has put our economy — potentially in dire straits.”

House Majority Leader William Lamberth, R-Portland, noted the state always plans to spend less than it anticipates will actually come in.

“What that does is it allows us to leverage one-time funds for roads and bridges, and buildings, and hard infrastructure that we can put back into Tennessee and invest,” Lamberth said. “So I anticipate this year you’ll see a lot more projects like that.”

In recent years, the Republican-majority legislature has passed cuts to the Hall income tax on interest and dividends and the state’s professional privilege tax.

“We’re always wanting to look at tax cuts,” Sexton said. “We’ve always voted to reduce taxes. Unfortunately, the other side, sometimes they don’t.”

Sales and use tax makes up about 60% of the state’s tax collections. Clemmons says he’s proposing a 1% rate cut because that’s roughly what the state is “over-collecting” in revenue. A fiscal analysis of the proposal is not yet available.

“A lot of my colleagues across the aisle love to talk about tax cuts, but they don’t like to pass them,” Clemmons said. “So, you know, we’re gonna see real quick if they support tax cuts or not.”

Separately, Clemmons has filed a bill to make fresh fruit and vegetable sales tax exempt.

“Childhood obesity and obesity are rampant in the state of Tennessee,” Clemmons said. “It is absolutely imperative that we do whatever possible to facilitate Tennesseans eating fresh fruits and vegetables. I think one way to do that is to sell them sales tax free.”

A tax break could be a boost to local agriculture. And in the long term, he says, healthier citizens will save the state money in health care costs.

“This obesity issue is actually costing our state a lot of money when it comes to health care,” Clemmons said. “Every dollar that we would forgo in sales tax would result in the savings of multiple dollars and expenditures on the health care side.”