Historic Tax Cuts for Tennessee Businesses and Families Approved by General Assembly
By State Senator Page Walley
The Tennessee Works Tax Reform Act of 2023 was passed by our General Assembly this year to provide targeted relief to families, lower the tax burden on businesses, boost Tennessee’s economic competitiveness, and promote entrepreneurship and small business formation. The legislation provides over $400 million in tax cuts – the largest in Tennessee’s history.
In Tennessee, we are proud to be one of the lowest taxed states in the nation and have cut more than $2 billion in taxes since 2011. We have no state income tax and this year we are continuing to cut taxes to strengthen our dedication to being a pro-business and pro-family state with low taxes.
The tax cuts will deliver for working families by creating a three-month sales tax holiday on groceries during August, September and October 2023. With rising costs of groceries due to inflation, this is one way we can help ease the burden of inflation on Tennessee families. It also seeks to incentivize businesses to provide paid family leave to employees by establishing a state paid family leave franchise and excise tax credit on wages paid for a two-year pilot period.
In Tennessee, we believe that Tennessee businesses and citizens are in the best position to decide how to spend their own money, and this tax-cut proposal demonstrates that we practice what we preach.
The tax cuts will provide significant relief to small businesses by lowering the burden of the franchise and excise tax as well as the business tax rate. Under the new law, over 23,000 small businesses in Tennessee will have their excise tax liability reduced to zero by exempting the first $50,000 in income from the state’s excise tax.
It also exempts up to $500,000 of business property from franchise tax liability to make sure that small businesses are not overly burdened by paying excessive taxes on property every year. In addition, 140,000 Tennessee businesses will be exempt from paying the business tax by raising the threshold for business tax exemptions from $10,000 to $100,000 of gross receipts. It also reduces the highest business tax rate from 0.3 percent to 0.1 percent.
The legislation also reworks some of the business tax structure to help Tennessee lead the nation in economic competitiveness, while prioritizing Tennessee businesses. It incentivizes businesses to hire Tennesseans and headquarter in Tennessee by changing the way the excise tax is calculated to favor businesses with a higher percentage of their properties and jobs located in Tennessee than in other states. It also ensures state tax deductions for research and development (R&D) expenses – which help companies grow, innovate and produce superior products and services. This move comes after the federal government ended yearly R&D tax exemptions for businesses. The measure also removes unfair taxes on certain manufacturing facilities with unsold inventory.
I am proud of Governor Lee and our legislature for passing this bold proposal to provide more growth opportunities for businesses and financial relief for families on everyday expenses. Business friendly policies such as these will help strengthen the economic outlook for our region. These tax cuts will help grow, recruit, and retain businesses which will result in quality jobs and stronger communities.
Thank you for allowing me to serve as your State Senator. In the coming weeks and months, I will continue to provide updates on what was achieved this General Assembly. In the meantime, if you have any questions please contact my office at (615) 741-2368 or sen.page.walley@capitol.tn.gov.
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