KINGSPORT — Tennessee should have no state sales tax on its own distributed farm products, 2nd House District GOP challenger Tony Shipley said in a civic club speech Tuesday.
The Colonial Heights Republican told the Cosmopolitan Kiwanis Club that his zero tax proposal should apply to all food grown, processed or packaged in Tennessee.
“Why do we always assume that government taxes? Why can’t government de-tax?” Shipley asked club members. “... Taking the taxes off something can be a very constructive mechanism in an economy that is struggling right now today. ... The opposition party (Democrats) believes in more taxes. ... I disagree with that. I think we need government off our back and out of our pockets.”
In response, Democratic incumbent state Rep. Nathan Vaughn of Kingsport said Shipley will say anything in an attempt to get elected.
“A proposal such as this without the necessary research and investigation is just plain irresponsible and has everything to do with politics and nothing to do with good government,” Vaughn said. “I am not aware of any such efforts in the past to cut taxes of this magnitude without either a plan to cut government services or to find other revenues to replace these lost revenues.”
Tennessee’s 7 percent state sales tax rate is state government’s core revenue stream. Local option sales taxes, which fuel municipal and county governments, average above 2 percent.
Shipley predicted that if he is elected, his proposal would probably be sent to a legislative summer study committee for review.
But he stressed the plan would create jobs inside the state.
“If we remove taxes, the entrepreneur will step up and fill the gap. ... The agricultural industry will get a boost,” Shipley said. “Essentially, if it is a Tennessee farm product whose growth and processing employs Tennesseans, then no state sales tax should be applied.”
He told club members that every day, Northeast Tennesseans drive across the state line into Southwest Virginia to buy groceries, gas and other items because of Virginia’s lower sales tax.
“By having one of the higher sales taxes around, what are we doing for our economy? Nothing,” Shipley said.
Tennessee’s sales tax collections have underperformed this summer, as state economists predicted in late spring, according to the state’s Department of Finance and Administration. Finance Commissioner Dave Goetz reported that July revenues totaled nearly $50 million less than the state budgeted.
“These are difficult economic times for Tennessee,” said Vaughn, a member of the House Finance Committee. “We are currently addressing declining revenues by considering possible state employee layoffs and additional cuts in government services.”
Shipley estimated his plan would cost the state about $70 million.
To offset the cost, he said the state could do a better job controlling spending, including on items such as a conference facility at the governor’s executive residence.
Shipley acknowledged that a proposal in the last legislative session to reduce the sales tax on food by 3 percent failed.
“What is irresponsible about returning money to the people of Tennessee? I submit it’s a wise thing to do,” he said.