PROBLEM STATEMENTS:

As of April 2026, Tennessee lawmakers have passed a $58 billion state budget that does not include a permanent cut to the state’s 4% grocery sales tax, despite proposals. While lawmakers continue to debate its elimination to address high food prices, concerns about losing over $800 million in annual revenue have prevented final passage.

(a) Tennesseans are struggling to keep food on the table for their families. Cutting the grocery sales tax could help put money back into their pockets for food, housing, healthcare, utility bills, insurance, and childcare.

(b) A policy that has long drawn criticism from advocates who say it places a heavier burden on low-income families.

(c) Replace the hundreds of millions of dollars the tax generates for the state each year.

(d) Tennessee currently charges a 4% state sales tax on groceries, one of only a handful of states that still tax food purchases. The tax brings in more than $800 million annually for the state’s general fund, helping pay for services ranging from education to prisons.

(e) The tax exists largely because Tennessee relies heavily on sales taxes rather than income taxes to fund government operations. The state is heavily dependent on the general sales tax in Tennessee.

(f) Unlike most states, Tennessee does not have a personal income tax, and its constitution prohibits one. As a result, the state relies more on sales taxes and business taxes than many others.

(g) Grocery taxes are often criticized by economists because they are considered “regressive,” meaning lower-income households tend to spend a larger share of their income on groceries than wealthier households.

(h) The tax can represent a bigger financial burden for families already struggling with rising food prices.

(i) Working families pay taxes every time they buy groceries, but many billion-dollar corporations operating in our state pay little to no corporate taxes.

(j) Grocery tax remains one of the state’s most stable revenue sources. It is one of the broadest-based taxes that the State of Tennessee has relating to revenues.

(k) The state is facing slower revenue growth and the end of federal pandemic relief funds that previously boosted budgets. Those pressures could make a permanent tax cut more difficult to pass without creative financial strategies.

(l) Weighing the cost of groceries against the need for stable state revenue will be a difficult task, but the general welfare of Tennesseans must come first. Every tax decision ultimately comes down to balancing relief for Tennesseans with the cost of running government.

Atwater's Goal and Strategies:

• Budgets are Moral Documents: Perform a forensic investigation of the last 10 years of the State of Tennessee's fiscal budgets to identify, analyze, and redirect all governmental waste, duplication of services, nepotism, biased contractual agreements, and relationships with lobbyists.

• Offset the lost revenue by changing how certain large corporations are taxed.

• Create the Fair Tax Study Committee to hold a series of hearings across the state to examine ways Tennessee can transition from sales tax to income tax.

• A comprehensive Tax-Shift approach. A Tax Blueprint to Strengthen Tennessee, thus taking the financial burden off middle-class, working-class, and low-income families.

• Revenues from the sale of medicinal and recreational marijuana could offset the financial base.

• Reassessing tax incentives and PILOTs (Payment -in-lieu-of-taxes), which give billionaires a free ticket to economic growth while the working-class carries the burden of paying higher taxes.

• Reconstruct the trickle-down model of finance. Sales and excise taxes take a bigger bite from people who earn less. State and local sales taxes and excise fees take a larger share of income from low-wage workers and the middle class than from the affluent. Working families typically spend most or all their earnings on basic necessities, while wealthier taxpayers can save or invest money left over after covering the basics.

• Assess a special tax rate on all new data centers and detention centers erected in the State of Tennessee, such as 15% of their gross net, to be set aside for grocery sales tax replacement.

• Impose special taxes or repeal existing incentives on data centers as of 2027. Introduce or remove these tax incentives.

• Address targeted fees to require data centers to pay fees for utility infrastructure to support increased power and water demand.

• Modify laws to exclude new data centers from property tax exemptions.

• Introduce requirements for data centers to become carbon-neutral within two years to qualify for tax incentives if offered.

• Adjustment of government waste could assist in removing the 4% state tax on food items, as aimed in bills such as HB 1530 and SB 2511, which would reduce grocery bills, providing roughly $300–$400 in annual savings for the average household.

• Increase livable wages to confiscate for groceries, which are considered a regressive tax because lower-income residents spend a larger percentage of their income on necessities. Eliminating this tax reduces the burden on this demographic.

• Increased Household Purchasing Power: Money saved on groceries can be redirected toward other necessities like rent, utilities, or childcare.

• Offsetting High Inflation: Lowering the tax helps consumers cope with rising food costs.

• Aligning with Other States: Many states do not tax groceries, making Tennessee's 4% rate (among the highest for states that still tax food) a target for reform.

• Erect satellite food kiosks in every rural county to combat food insecurities until the grocery sales tax has been addressed. These counties are struggling because they may not have access to any grocery stores due to isolation or no transportation.