State tax revenues have fallen short of projections by $494.2 million, according to the latest revenue numbers released by the state on Friday. The decline in revenue is primarily due to a $277.5 million drop in the state’s business, franchise, and excise taxes on business activity and corporations. These latest 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 roughly 28% of business taxes collected.
Missed projections in state business taxes have been an ongoing issue throughout the year. Don Bruce, director of the Boyd Center for Business & Economic Research at the University of Tennessee, explained that franchise and excise collections are challenging to forecast due to their volatility. In the current economic climate, with high interest rates slowing down the U.S. economy and a decrease in inflation rates, Tennessee has seen a decline in revenue collections.
One contributing factor to the drop in revenue was last year’s tax cut, which was estimated to result in a $237.5 million revenue loss. This decrease was already factored into the budget, meaning that when combining the shortfall and tax cut, tax collections are down almost $515 million. Despite these challenges, the Tennessee General Assembly recently enacted another business tax, estimated to cost $400 million per year.
Democratic lawmakers opposed the new business tax, citing concerns over
