NASHVILLE, Tenn. (WSMV) – A $100 grocery bill could drop to $96 if Tennessee eliminates its grocery tax, but disagreement over how to replace the lost revenue has stalled action at the state legislature.
Both Republicans and Democrats have filed bills to eliminate the 4% tax. The divide is over how — or whether — to make up for the funding gap it would create.
The grocery tax generates approximately $800 million per year for the state. That money funds infrastructure, public safety, clean water, and education.
“Removing $800 million from the state budget without replacing it means one thing: cuts,” said Rep. Aftyn Behn.
How each party proposes to handle the gap
Republicans filed a bill to eliminate the tax but did not include a specific replacement funding mechanism.
“I can go on and on of the taxes that we’ve cut, and we’re still able to make sure that teachers are getting raises, and state employees are getting raises, and roads are getting paved,” said House Majority Leader Rep. William Lamberth.
Democrats announced they would offset the loss by closing corporate tax loopholes.
“The way we’re going to pay for it is through — it’s very nerdy, but — worldwide combined reporting and a corporate minimum tax. Both of those things have been instituted in states like Texas,” Behn said.
Why this year may be different
Behn said deteriorating infrastructure is driving renewed urgency behind the Democratic proposal.
“You look around, anytime you drive on the roads, you just see that our infrastructure is crumbling. And they don’t have a way to address any of the needs right now. So our proposal is saying, hey, you want a creative funding stream? Here it is,” she said.
If any of the bills pass, they would take effect July 1, 2026.
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