Lee signs $412 million tax cut
Published 4:17 pm Monday, May 15, 2023
THE CENTER SQUARE
Tennessee Gov. Bill Lee signed a tax cut Thursday that is estimated at $412 million, with $272.8 million of that attributed to a three-month grocery tax holiday.
Lee’s office called it the single-largest tax cut in state history.
The grocery tax holiday will start Aug. 1 and run through Oct. 31.
“Tennessee’s legacy of responsible fiscal stewardship has allowed our state to weather national economic storms while maintaining a balanced budget and cutting taxes for Tennesseans,” Lee said in a statement. “We thank the General Assembly for partnering with us to make the right investments for Tennessee families and businesses while supporting our state’s future economic growth and success.”
The bill includes changing the state franchise and excise taxes to single sales factor taxes like 32 other states. Those taxes are based only on a business’s sales within the state of Tennessee. It will be phased in over three years.
It also creates a $50,000 net earnings reduction ($37.8 million cost) from excise taxes while exempting $500,000 of property from franchise taxes ($20.3 million cost) and increases the filing threshold for business tax from $10,000 to $100,000 ($7.9 million cost).
“In Tennessee we are committed to low taxes. We believe that Tennessee businesses and citizens are in the best position to decide how to spend their own money, and these tax-cuts demonstrate that we practice what we preach,” Senate Majority Leader Jack Johnson said. “…. We are proud to be one of the lowest taxed states in the nation, and this move to further cut taxes strengthens our dedication to being a pro-business and pro-family state with low taxes.”
A two-year pilot family leave tax credit will be created for businesses that gives employees from two to 12 weeks of paid leave, providing at least 50% of normal wages over that period. If a business provides 50% of wages, it receives a 12.5% credit for those wages and it maxes out at a 25% credit if full wages are paid. The program is not mandatory for businesses.