$2 billion tax rate increase in TN, new report says

$2 billion tax rate increase in TN, new report says

Tennesseans will have to adjust to an overall tax rate increase of more than $2 billion, according to a new report from the American Legislative Exchange Council.

This is despite specific tax reductions that Tennessee Republican Gov. Bill Haslam and members of the legislature enacted earlier this year, according to the report, titled State of the States 2017.

The Arlington, Va.-based ALEC is made up of state legislators from around the country who believe in limited government, free markets, and federalism, according to its website.

ALEC’s new report examines how policy proposals in each of the 50 states will affect their economic competitiveness.

Tennessee residents, the report said, will pay a higher gas tax, although that is offset by a sales tax reduction on groceries.

ALEC MAP: States in red, including Tennessee, will have tax increases this year, according to a new report (photo courtesy of ALEC).

That gas tax will increase 6 cents during the next three years, while the diesel tax will rise 10 cents. Money from that gas tax hike will reportedly pay for more than $10 billion in infrastructure projects.

The grocery tax cut of 1 percentage point, according to Haslam, will save state residents $55 million annually.

“Governor Haslam’s $37 billion budget proposal for fiscal year 2017-18 included many big-ticket items, such as $100 million in pay raises for K-12 teachers, $132 million for the state’s reserve fund and a $57.8 million expansion of Tennessee’s free community college program,” said the authors of the study, Jonathan Williams, Joel Griffith, Elliot Young, and Christine Smith.

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“The governor also highlighted his proposal fully funds the cuts to the Hall Income Tax (on dividends and interest), which is already on track to be eliminated by 2022. But despite these specific tax reductions, Tennessee is experiencing an overall tax increase totaling more than $2 billion over ten years.”

The authors said that many governors around the country focused a great deal this year on tax relief.

The governors also addressed pension reform, expanding or shrinking Medicaid, and changing their state’s minimum wage, the report said.

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“Overall, most governors conveyed an understanding that lower tax rates and limited government give citizens and businesses a greater incentive to reside and operate in their states relative to others with higher tax rates and more regulations,” the authors said.

Alabama, which borders Tennessee, is getting tax reductions, while Georgia is getting a tax increase, according to the report.

Members of ALEC believe that states with lower tax rates, fewer regulations and responsible spending habits outperform other states in terms of economic growth.

Contact Christopher Butler at chris@tennesseewatchdog.org

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