State Investment Saves Tennessee Businesses 300% Tax Increase In 2021

The Center Square [By Vivian Jones]- 

Tennessee employers would have paid at least 300% higher unemployment tax premiums in 2021 if state officials had not allocated COVID-19 relief funds to the state’s unemployment trust fund early, according to projections released by the University of Tennessee’s Boyd Center.

Unemployment taxes would have increased by $837 million without proactive investment by the Financial Stimulus Accountability Group, according to UT’s analysis.

“The decision to immediately use federal Coronavirus Relief Fund dollars to bolster our unemployment trust fund protected workers, prevented possible tax increases and will allow employers to continue to hire as our economy recovers and grows,” Lt. Gov. Randy McNally, R-Oak Ridge, said in a statement. “Tennessee’s commitment to fiscal responsibility held firm under fire.”

While businesses were saved a tax increase, the Tennessee Legislature passed two pieces of legislation this year that allowed the state to collect sales tax on online purchases.

In March, lawmakers passed a bill requiring online marketplace facilitators with sales of more than $500,000 a year, such as Etsy or Wayfair, to collect and remit sales tax to Tennessee. The online sales tax expansion would collect an estimated $83 million in state and local tax revenue in the 2020-2021 fiscal year.

When the Legislature reconvened in June, it passed a budget provision that lowered the threshold for firms’ sales from $500,000 to $100,000, collecting an additional $43 million in state and local tax revenue.

Gov. Bill Lee said Thursday recovering sales tax on online purchases did not constitute a tax increase but a recovery of taxes already levied by statute.

“Sales tax is an ongoing and currently existing statute in the state,” Lee said. “Collecting it via the online process is a matter of collecting a tax that was already due, but not not previously being collected.”

Tennessee’s unemployment rate dropped to 8.5% in August, the Department of Labor and Workforce Development announced. It was a decrease of 7 percentage points since the height of the shutdown in April and 1.2 percentage points since July. The unemployment rate in August 2019 was 3.4%.

“Tennessee’s philosophies are just different than many other states; we want businesses to grow and to thrive,” House Speaker Cameron Sexton, R-Crossville, said. “Our goal is to maintain a healthy economic environment that not only creates jobs, but also encourages businesses to prosper. That’s why we are the second-best state in America to do business in.”

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