(The Square in the Center)- The budget proposal put forth by Tennessee Governor Bill Lee proposes an annual tax cut of $410 million, with $1.2 billion in one-time expenses.
The proposed budget is $52.6 billion in total, of which $25.4 billion comes from state and $19.8 billion comes from federal sources. The proposed budget would cut $9.9 billion from the existing amount, with $3.4 billion less coming from the federal government and $6.6 billion less from the states.
The Beacon Center’s Entrepreneurship & Innovation Council suggested the franchise tax cut last year. According to the research, Tennessee was one of the 16 states that imposed a franchise tax, and it had the fourth-highest rate in the US for this type of tax, which is imposed regardless of whether a business is profitable.
The franchise tax in Tennessee is likewise uncapped, according to Beacon, and it is calculated using the “greater of the company’s net worth or the book value of real or tangible personal property owned or used in the state.”
“This change to our franchise tax law is extremely important, and there has been a good bit of conversation about it,” Lee stated in his State of the State speech. “After the law’s nearly ninety-year existence, we realized it needed to be changed. To move forward, we came up with a solution that fixes the problem right now. And that’s the greatest way to make sure we’re treating Tennessee taxpayers fairly.
In addition to reducing one-time spending, Lee’s budget proposal increases the state’s rainy day fund by $20 million. Through the first five months of this fiscal year, the state’s tax revenues have stagnated and are currently $280 million below projected levels.
Senate Bill 2103, a proposal to alter the franchise tax, states that it will call for “a refund equal to the amount of tax paid minus the amount of tax otherwise due.” It is necessary to request a refund no later than three years from December 31 of the year the payment was made.
The $1.2 billion in one-time expenses included in the proposal are covered by that refund. The plan is still being examined, according to the National Federation for Independent Business, to determine how it will affect its members.
Jim Brown, the state director of NFIB Tennessee, stated, “Our members are responding very favorably to the governor’s franchise tax proposal.” “To ensure that the proposal’s implementation goes smoothly, we are also gathering feedback from the tax practitioner community and sharing it with state leaders.”