Grocery Tax Holiday Not Likely to be Permanent

CHATTANOOGA, Tenn. (WDEF) – Tennessee’s Grocery Tax Holiday launched today.

Could it become permanent?

It’s a tax burden not felt in most states, with Tennessee only being one of 13 that have a grocery tax.

Tennessee Senator Bo Watson for District 11 said, “Tennessee does not have an income tax so we have limited ways of giving money back to our citizens. This is one way of giving their tax dollars back to them.”

The Volunteer State is only one of 8 across the country that does not have an income tax, enshrined into the state’s constitution.

Therefore, sales taxes such as the grocery tax have become a key revenue source for the state government.

Senator Watson says that the state is forgoing around $275 million dollars during the three-month tax holiday.

Dr. Bento Lobo, a professor and the head of the finance department at the University of Tennessee-Chattanooga (UTC) said, “The loss of revenue here should be something that the state should be able to solve pretty easily.:

Dr. Lobo says the state has about three to four times the amount of revenue needed to cover short term obligations.

This has enabled the state government to pass the 20-22 Tax Reform Act, which granted this grocery tax holiday.

Tennessee families can expect to save anywhere from 100-150 dollars during the grocery tax holiday.

On the question of if the grocery tax could go away, Senator Watson said, “The grocery tax is actually the most stable and most reliable tax that the state of Tennessee has. This is an opportunity to give back some of folk’s resources back to them, but it’s not a long-term strategy.”

A lack of grocery tax would likely mean higher taxes on other items as well.

Dr. Lobo said, “If they were to get rid of the sales tax all together, they would have to raise property taxes… then they would have to think about raising the rate on non-food items to finance that budget gap.”

As long as Tennessee does not have an income tax, expect the grocery tax to stick around.

Senator Watson said, “People are flocking to Tennessee because we don’t have an income tax.”

As a reminder, the grocery tax holiday applies to most grocery items but not everything.

Items such as candy, alcohol, and prepared food are exempt from the holiday.

The holiday will last through Halloween night on October 31st at midnight.