The Senate passed and sent to Gov. Bill Haslam Friday legislation abolishing Tennessee’s inheritance tax and lowering the sales tax on groceries.
Legislative leaders, meanwhile, said they will also back passage of a third bill that would repeal the state’s gift tax. Haslam has said he supports that move as well.
The bill providing a phased-in elimination of the inheritance tax, HB3760, passed the Senate 32-1. The House had approved earlier, 88-8.
As approved, the bill calls for raising the current exemption for the inheritance tax from $1 million to $1.25 million this year and increase the exemption annually until 2016, when the tax would be eliminated entirely.
The sole no vote in the Senate came from Sen. Roy Herron, D-Dresden, who had attempted to amend the bill to block the final step, leaving the exemption at the scheduled $5 million level for estates of those dying in 2015.
Herron’s amendment was tabled, on motion of Senate Majority Leader Mark Norris, R-Collierville, in a 20-11 vote. All 11 no votes came from Democrats.
Under Herron’s proposal, the state would use the revenue from estates of over $5 million to fund college scholarships for children from low-income families. He said “20 to 30 heirs and heiresses” would annually benefit from removing the inheritance tax from estates of over $5 million while thousands of youngsters would get a college education they could not otherwise afford.
Herron said that about 160,000 eligible students apply for Tennessee Student Assistance Corp. grants each year, but the state only provides funds to cover about 30,000. He estimated that revenue from estates of over $5 million would cover 700 extra students in each of the 33 state Senate districts.
“Who is going to be the job creators, the heirs and heiresses?… I bet you its going to be those folks who get to go to college,” Herron said.
The bill lowering the state sales tax on grocery food, HB3761, was approved unanimously by the Senate, just as occurred earlier in the House. Currently, the sales tax on groceries is 5.5 percent. The bill, part of Haslam’s administration package, drops that to 5.25 percent. The governor says he plans to push legislation next year that will bring the level down to 5 percent.
Herron also filed amendments to the sale tax bill, ranging from that called calling for complete repeal of the levy and to another jumping a year ahead of Haslam’s schedule to lower the rate to 5 percent in the coming year. All were defeated on party line votes.