City staff: proposed grocery-tax and property-tax cap bills are stalled; local revenue exposure quantified

Dr. Acuff told the working group that recent state proposals that would change local sales-tax collections are effectively dead for the year. "The spoiler is both of these bills are effectively dead for the year," he said, summarizing committee action on both the Healthy Tennessee Grocery Tax Reform and a proposal to eliminate sales tax on groceries.

Staff presented rough fiscal estimates: a narrowly targeted exemption for "healthy" groceries would reduce local taxable sales by an amount that translates to under $6 million in lost local revenue, while eliminating the grocery sales tax entirely across state and local portions would cost Chattanooga about $16.5 million based on fiscal-year-2025 baselines. Dr. Acuff cautioned that the estimates use household spending data and assumptions about the portion of grocery purchases that would qualify under a narrow definition.

He also reported that a property-tax cap that had been under consideration was sent to a subcommittee and is not likely to move in the current session. Council members discussed how a revived version of any of these bills in a future session could materially affect the city’s revenue picture and asked staff to keep monitoring developments.

Why it matters: Sales-tax and property-tax rule changes at the state level can immediately affect municipal revenue and complicate multi-year budget planning. Staff advised the council to track such bills in future sessions and integrate potential scenarios into the budget-evaluation matrix.

What’s next: Staff will continue to monitor state legislation and incorporate scenario estimates into upcoming budget materials for council review.