Tennessee lawmakers are considering legislation aimed at phasing out the sales tax on certain products, including food, in a move advocacy groups say would remedy a tax policy that hurts the poor.
As written, the bill would reduce the state sales tax on diapers, feminine hygiene products, food and some over-the-counter drugs by half a percent annually, fully phasing it out on those items in 2027.
Sen. Jeff Yarbro, D-Nashville, one of the bill's architects, said the legislation could help lift what historically has been an undue burden on the people who make up Tennessee's lowest income brackets.
Yarbro is the sole sponsor of the Senate legislation. A sister bill in the house was introduced simultaneously by a fellow Democrat, Rep. Craig Fitzhugh, but both bills would require Republican support to pass. Both have been referred to subcommittees of the Finance, Ways and Means Committee.
"The U.S. Federal Reserve issued a study of last year showing that Tennessee had the most regressive system of taxation in the country, meaning that we put more obligations on our poorer residents than every other state," he said. "If we're going to address the tax code this year, we think that should be made fairer."
Tennessee is one of several states that do not have a general income tax, instead relying heavily on sales taxes to pay for government services. With a 9.25 percent combined state and local sales tax rate, Hamilton County residents pay a higher sales tax rate than most of the nation.
Yarbro said Republican Gov. Bill Haslam is proposing almost $280 million in tax cuts this year. But all but $55 million will reduce the tax burden on professionals such as lawyers and CPAs, and people who earn dividends on investment income.
Haslam's proposed reduction would amount to a 50-cent break on $100 worth of groceries, while the proposed gas tax increase is expected to cost the average motorist about $4 a month.
Yarbro and other legislators would like to see the benefits of any tax relief shared among all taxpayers, and they say it could offset the cost of Haslam's proposed gas tax.
"I think if we do end up increasing the gas tax, it's completely reasonable to think that we'd want to provide tax relief to offset that to the people who are actually paying the increased price at the pump and not just to a handful of high-income individuals and businesses," Yarbro said.
Chattanooga lawmaker Gerald McCormick is among Republicans coming around to the idea that low- and middle-income Tennesseans should get as much benefit from tax cuts as professionals and higher- income people.
"I don't see how you justify doing a gas tax increase unless there's at least a net even decrease for people that pay the increase — working and poor people," McCormick told the Times Free Press.
The change couldn't come soon enough for advocacy group leaders, who are adamant the sales tax disproportionately affects the most vulnerable, such as the homeless, working poor and single mothers, who have been stretched too thin.
Mary Ellen Galloway, executive director of Family Promise of Greater Chattanooga, said state tax policy often cripples the most vulnerable people in local communities.
"People who are poor are paying an enormous amount of taxes for basic human needs," she said. "We're balancing the budget on the backs of the poor."
She said every dollar that gets eaten up by taxes on everyday items cuts into a person's budget, and while everyone pays the same sales tax regardless of income, that money is a dramatically higher portion of a poor person's income than it is a wealthy person's.
"We've had people call us and say they have two to three kids and they're living in their car. The kids are doing their homework on the Wal-Mart parking lot under the street lamp and they're in need of shelter and assistance," she said. "If your money's going out with these high taxes then there's less for living and, in our case, affording housing."
Elizabeth Cotellese, director of a nonprofit called Baby University that works with expectant and new mothers in Chattanooga, agreed, saying the change in tax policy would have real and dramatic effects on a local level with regard to caring for babies in impoverished families.
"This could lead to parents with lower incomes being able to afford diapers throughout the entire month, and not just a portion of each month," she wrote in an email.
"I've read that sometimes parents left with no options may resort to improper and unhealthy practices such as emptying out and reusing diapers or having to leave babies in diapers for longer than appropriate."
She said the measure could be a much-needed step in the right direction — an answer to a problem that shouldn't have existed in the first place.
"Diapers are a basic necessity and not a luxury item," she wrote.
Contact staff writer Emmett Gienapp at firstname.lastname@example.org or 423-757-6731. Follow him on Twitter @emmettgienapp.
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