Tennessee General Assembly reduces budget; citizens will receive a tax cut on food items

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 Taxpayers will begin to enjoy a .25 percent tax cut on food items in the coming weeks.

The current food tax is 5.5 percent. It will decrease to 5.25 percent on July 1. 

The food tax cut was approved along with the 2012-13 budget on May 1. Next year it will decrease to 5 percent, Representative Dennis Powers said.

“We wanted to lower it to 5 percent this year, but there just wasn’t enough money in the budget,” Powers said. “We would love to eliminate it at some point, but since most of our revenue at the start is dependent on the state sales tax, we’re trying to gradually lower it.”

It costs the state $22 million in revenue to decrease the food tax by .25 percent, but it saves the Tennessee household around $100 a year, Powers said.

“It’s not a lot, but it’s hopefully something they can use to buy more food,” Powers said.

In addition to the lower food tax, the General Assembly has eliminated the gift tax. 

Previously, if a Tennessee resident wanted to give a family member land or money from savings, it was taxable if it was worth at least $13,000, Powers said. This tax has been eliminated, Powers said.

The state legislature is also looking to change the inheritance tax, Powers said. 

Previously, any property worth $1 million was subject to the inheritance tax. 

The state legislature is in the process of increasing that requirement to $5 million, which is the federal requirement. 

This will occur over a three-year period. 

It was increased to $1.5 million this year, Powers said.

Along with these tax cuts have come several budget cuts. 

Many of these cuts involved “downsizing the whole government,” Powers said. Fourteen subcommittees were eliminated from the House of Representatives. Commissions, regulatory agencies and 1,100 state positions were cut. 

Most of the state positions that were eliminated were done so through attrition, meaning when people were retired, they weren’t replaced. 

Some departments were also combined where there was duplication of services. 

The Lake Shore Mental Health Facility was also closed down, and the patients were transferred to other places. 

Over the past two years, the Tennessee General Assembly has cut its budget by $2 billion, Powers said.