Tennessee eyes 2-week tax holiday for restaurants, groceries

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NOTE: This article has been modified from the original Associated Press post to include the full statement from the Tennessee Education Association on the budget amendment. TEA’s release can be found at the bottom of the article. Click here to jump directly to the statement.

NASHVILLE, Tenn. (AP/WKRN) — Tennessee Gov. Bill Lee is proposing a $100 million, two-week sales tax holiday on restaurants, bars and groceries, as his administration looks to divvy up hundreds of millions of dollars in extra spending due to better-than-expected revenues during the COVID-19 pandemic.

On Tuesday, the Republican’s finance team presented a budget amendment to his $42 billion spending plan in front of lawmakers.

The proposal includes several other big-ticket spending additions: $55 million for three yet-to-be-named economic development projects; $79.4 million to add faculty, equipment and building renovations at community and technical colleges; and $35 million for new radios for state troopers and a statewide disaster communications system upgrade. The state’s positive revenue picture also coincides with a continued infusion of federal money in COVID-19 relief.

“I’m especially proud to provide tax cuts to get money back to Tennesseans to encourage them to frequent industries that have been disproportionately and negatively impacted this year,” Lee said in a statement.

According to the new spending proposal, Lee is requesting two weeks of sales tax holidays on groceries, at a cost of $25 million, as well as at bars and restaurants, to the tune of $75 million. When those sales tax holidays would occur has not yet been determined. The measure must still clear the Republican-controlled General Assembly.

Lee successfully advanced a similar sales tax holiday last year, which included an extra weekend of tax-free back-to-school shopping and a week of tax-free dining at restaurants.

“I would say that maybe it’s an imperfect logic but the basic philosophy was how can we put the most funds back into the hands of Tennesseans as possible,” said Commissioner of Finance and Administration Butch Eley.

Additionally, Lee is proposing cutting the state’s annual $400 professional privilege tax to $300. The fee applies to to agents, broker-dealers, investment advisers, osteopathic physicians and physicians.

The governor had proposed early in 2020 to cut the tax in half, which would have cost the state $40 million. However, he ultimately scrapped that idea amid the COVID-19 outbreak. This one is a 25% reduction and would cost the state nearly $17 million.

Earlier this year, Lee announced that he would revive a budget proposal to put $250 million into a trust fund that would help expand mental health services for school-aged children. The idea had also been spiked due to the virus outbreak.

If approved, the state plans to seek private donations for the new reserve and would use investment earnings from the fund to funnel into more mental health offerings.

The plan sprinkles millions of dollars in additional one-time money to various projects throughout the state.

One would fulfill a $13.5 million request for a proposed $65 million, 7,000-capacity sports stadium in Knoxville, which would host minor league baseball and other sports and events. University of Tennessee President Randy Boyd, a Knoxville businessman and the owner of the Tennessee Smokies baseball team, is leading the push.

Another would provide $2 million for renovations at the Hermitage in Nashville, the home of President Andrew Jackson. State officials say the historic home has deferred maintenance needs amid a hit to revenues from tourism suffered during the pandemic.

TN Educators Reaction

Tennessee Education Association President Beth Brown released the following statement this week on the budget amendment:

“With the state bringing in record surplus month after month, there is no excuse to not make significant increases to public education funding. The governor’s budget amendment is woefully short on meaningful K-12 investment.

Without sufficient state investment, school districts cannot afford the nurses, counselors, RTI specialists and social workers our students need. Without sufficient state investment, underpaid teachers will continue to spend hundreds of their own dollars on classroom resources.

The Tennessee Advisory Commission on Intergovernmental Relations (TACIR) outlined the chronic problems with the BEP, indicating that “fully funding” the state formula would require an additional $1.7 billion in state funding. The current administration proposal is a little more than $200 million.

It is time for the state to do better. The money is there to get Tennessee out of the bottom 5 in state funding. There is no need to raise taxes, only a need to prioritize Tennessee students and public education.”

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