IMPROVE Act Tax Cuts
The IMPROVE Act is a comprehensive and strategic plan to cut taxes on food and manufacturing while updating how the state provides Tennesseans the safe and reliable transportation network needed to support future job growth.
The legislation cuts taxes by an estimated $270 million annually, bringing the total number of cuts made and proposed since 2011 to $540 million annually, roughly nine times more than any other administration.
- Cuts the sales tax on groceries by another half percent ($55 million).
Tennessee’s taxes are currently the lowest in the nation as a percent of personal income and this additional sales tax cut on groceries will help reduce it even further. Under the IMPROVE Act, the state sales tax on groceries will fall to 4.5 percent – for a total one percent reduction under this administration since 2011.
- Cuts business taxes for manufacturers by $113 million by allowing them to go to “single weighted sales factor.”
Tennessee is a manufacturing state, and the IMPROVE Act would allow manufacturing companies to go to a “single weighted sales factor,” reducing their Franchise and Excise (F&E) taxes by not having to use their large number of employees or property as factors to determine their amount of F&E taxes due. Manufacturing companies could also grow their property and payroll in Tennessee and not risk increasing their F&E taxes unless their Tennessee sales increased. These measures would make Tennessee more competitive in recruiting new manufacturing businesses to our state and bringing countless other jobs because of manufacturing’s multiplier effect.
For example, for each one job created in tire manufacturing in the state of Tennessee, another 2.32 indirect and induced jobs are created in the regional economy. Additionally, each dollar in new earnings paid to tire manufacturing jobs in Tennessee generates an additional $1.66 in earnings in the regional economy.
According to the U.S. Bureau of Labor Statistics, more than 339,000 Tennesseans are employed in the manufacturing industry and our manufacturing employment is the 13th largest in the nation and 4th largest in the Southeast. Last August, the Brookings Institute ranked Tennessee No. 1 among U.S. states for advanced industry job growth since 2013.
- Cuts the Hall income tax 3 percent ($102 million) over the next two years.
Under the IMPROVE Act, the Hall income tax, which is statutorily required to be eliminated by 2022, would be cut 1.5 percent this year and 1.5 percent in the next year’s budget.