NASHVILLE - A bill phasing out the state's inheritance tax by 2016 is on its way to Republican Gov. Bill Haslam after GOP lawmakers tabled a Democratic critic's effort to limit the levy to estates valued at $5 million and above.
Senators also voted 32-0 to reduce the state's sales tax on food a quarter cent, sending that measure to the governor as well. Haslam included provided for both proposals in his budget amendment.
Senate Majority Leader Mark Norris, R-Collierville, referred to the inheritance measure as the "Family Farm Preservation Act," saying it would help farmers hold on to their property and encourage wealthy Tennesseans to remain or relocate to the state.
"By this measure, by 2016, the death tax in Tennessee will be dead," Norris said of the bill, which beginning July 1 boosts the existing exemption of the first $1 million of an estate to $1.25 million at a cost of $14.2 million annually.
The exemption rises to $2 million in 2014, $5 million in 2015 and the tax goes away entirely in 2016 at a total cost of $94.6 million annually.
But Sen. Roy Herron, D-Dresden, said the tax should permanently remain in effect for estates valued over $5 million. The money could be used to provide needs-based college scholarships for 22,000 aspiring students a year, Herron said.
"This amendment would still give $52 million tax holiday for those whose estate is $5 million or less," Herron said, adding the first $5 million would be exempt. "You cannot serve both God and Mammon. Similarly, we cannot give both tax holidays to the richest of the mega rich and college educations for the poorest kids."
The amendment was tabled on a 20-12 vote. The bill then passed on a 32-1 vote.
Herron later unsuccessfully sought to increase the reduction of the sales tax on food to 5 percent.