According to the latest figures released by the state, Tennessee’s tax revenues have fallen short of projections by $494.2 million. The decline in revenue is mainly due to a $277.5 million drop in the state’s business, franchise, and excise taxes related to business activities and corporations. These revenue numbers cover the first nine months of the state’s fiscal year from August 2023 to April 2024, with April being Tennessee’s highest revenue month, accounting for approximately 28% of the state’s business taxes.
Tennessee has struggled with missed projections among business taxes throughout the entire year, as Don Bruce, the director of the Boyd Center for Business & Economic Research, pointed out the difficulty in forecasting franchise and excise collections due to their volatility. Additionally, Tennessee faced an unusual economic environment with high interest rates slowing down the US economy and a decreasing inflation rate leading to lower revenue collections.
The impact of last year’s tax cut, which was estimated to result in a $237.5 million revenue loss, has also contributed to the decline in tax collections. When combining the revenue shortfall and the tax cut, tax collections are down by almost $515 million. This decrease in revenue estimates was one of the reasons Democratic lawmakers opposed another business tax enacted this year, which was estimated to cost $400 million annually and also calculated by the fiscal review committee and the Department of Revenue.
