Tennessee Democrats propose food tax cut, more scholarships

Tennessee Democrats propose food tax cut, more scholarships

July 22nd, 2011 by Andy Sher in News

An exterior view of the Tennessee State Capitol building.

Photo by The Tennessean /Times Free Press.

NASHVILLE - House Democrats say future state revenue surpluses should be used to cut sales taxes on food and increase the number of college scholarships for needier students.

Minority Leader Craig Fitzhugh, D-Ripley, said during a news conference Thursday that after two years of recession-related revenue declines, the state over the past year has had better-than-anticipated revenues.

"When the state is taking in more money than needed, as we've seen the last few months, then this money needs to go back to Tennesseans, not into the state's pocketbook," Fitzhugh said.

Democrats have filed a bill for next year's legislative session that seeks to do just that. It would have to pass the GOP-controlled General Assembly. It would take any budget surpluses from the current year and put them toward cutting the state's 5.5 percent sales tax on food and toward the Tennessee Student Assistance Corp.

Earlier this week, Republican Gov. Bill Haslam's attention was focused more on the stalemate in Washington over increasing the nation's debt limit, the possible downgrading of Tennessee's credit and likely federal budget cuts.

Medicaid, highway transportation and other areas could be hit, he said.

Federal cuts could be "2 percent, 10 percent or 20 percent, but I know they're going to be cut," he said.

If there is a default, Moody's has warned that it probably will lower the triple-A credit ratings of five states, including Tennessee.

A triple-A rating is the highest for debt and tells investors an institutional borrower presents a minimal credit risk.

Rep. Tommie Brown, D-Chattanooga, said she backs the Democratic plan for sales tax and scholarship relief.

"Obviously when you have the poorest census tract in the county over in your district pretty much, you look for many ways to bring some relief to the people," she said.

Tennessee Republican Party Chairman Chris Devaney later issued a statement, saying "Just two months ago the Democrats in the state House proposed a state income tax for Tennesseans, and now they want to drain the state's rainy day fund and put the economic stability of Tennessee at risk."

According to the General Assembly's website, Sen. Reggie Tate, D-Memphis, and Rep. Barbara Cooper, D-Memphis, on Feb. 15 introduced a bill that contained a graduated state income tax coupled with removal of the sales tax on food, lowering of the Hall Income Tax on certain investments and other reductions.

The lawmakers abruptly withdrew the bills two days later, records show.