Tennessee governor proposes 30-day state grocery tax moratorium

A 30-day grocery tax suspension proposed by Tennessee Gov. Bill Lee collectively could save consumers $50 million.

Lee announced Thursday he will include the 30-day holiday in his 2022-23 budget amendment, which is set to be delivered Tuesday. Last year's state budget included a one-week grocery and restaurant tax holiday, which was estimated to have a $38.5 million tax impact.

Lee did not say when the proposed moratorium would happen, but it would need to be after the new budget year begins July 1.

“As Americans see their cost-of-living skyrocket amid historic inflation, suspending the grocery tax is the most effective way to provide direct relief to every Tennessean,” Lee said. “Our state has the ability to put dollars back in the pockets of hardworking Tennesseans, and I thank members of the General Assembly for their continued partnership in maintaining our fiscally conservative approach.”

This year’s tax holiday proposal from Lee includes food and groceries but not prepared food at restaurants.

The state collected nearly $50 million last September – a 30-day month – with its 4% food and grocery tax. Last year’s tax holiday proposal reimbursed local governments for lost taxes, which would cost the state $2 million on an estimated $50 million overall tax impact.

"While this temporary tax relief is a well-intentioned way to fight the inflation caused by terrible federal policy, and while it will certainly help middle-class Tennesseans, we will continue to focus on opportunities to make permanent tax cuts that will help Tennesseans long-term," Beacon Center of Tennessee Chief Executive Officer Justin Owen said.

A proposal last year from Sen. Jeff Yarbro, D-Nashville, to have a grocery and food tax holiday from May through October did not pass in the Legislature. It was estimated it could have saved consumers $46 million-$48 million a month.

“Weird,” Yarbro tweeted Thursday. “When [Rep. Vincent Dixie and] I proposed a pause on sales tax on groceries to help [Tennessee] taxpayers, they rejected it. Worth noting there are about 200 other things the legislature should be doing to help families struggling [with] housing, health, gas [and] food costs. But not happening.”

Two Democratic legislators called for Lee earlier this month to create a 90-day gas tax moratorium that Rep. Bo Mitchell, D-Nashville, said would save consumers $224 million.

That proposal has not happened.

“This. Is. Rich,” tweeted Rep. John Ray Clemmons, who had proposed the gas tax suspension with Mitchell. “[Lee] refused to suspend gas/diesel tax after [Mitchell and] I recently called for it, so he tries to save face by pivoting to a tax that Dems have been fighting to cut/repeal for [years]. He [and] his [administration] killed my bill to make fruit/[vegetables] tax-free less than [one month] ago.”