House Republicans on Monday passed the largest tax cut in state history, which represents $407 million in cuts impacting every Tennessean, including a three-month-long sales tax holiday on food from Aug. 1-Oct. 31
The Tennessee Works Tax Reform Act of 2023 makes a number of changes to the state’s tax code.
House Bill 323, sponsored in the House by Majority Leader William Lamberth, R-Portland, and Assistant Majority Leader Mark Cochran, R-Englewood, is part of Gov. Bill Lee’s top legislative initiatives for 2023.
The bill aims to lower the tax burden on businesses, boost Tennessee’s economic competitiveness, promote entrepreneurship and small business formation, as well as provide targeted relief to families.
Tennessee Republicans remain committed to keeping taxes low. Tennessee is the second-lowest taxed state in the nation and collects zero income tax.
The cuts provide significant tax relief to small businesses by lowering the burden of the franchise and excise tax as well as the business tax rate. The bill would allow more than 23,000 small businesses in Tennessee to reduce their excise tax liability to zero by exempting the first $50,000 in income. It also exempts up to $500,000 of business property from franchise tax liability.
The tax cuts would exempt 140,000 Tennessee businesses from the business tax by raising the threshold for business tax exemptions from $10,000 to $100,000 of gross receipts. In addition, it reduces the highest rate from 0.3% to 0.1%.
The proposal will strengthen Tennessee’s economic competitiveness while prioritizing businesses within our state’s borders. It incentivizes businesses to hire Tennesseans and headquarters here. It ensures state tax deductions for research and development (R&D) expenses that help companies grow, innovate and produce superior products and services.
Finally, 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. The companion version of the bill is currently advancing in the Senate.