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| | Tuesday, November 19, 2019
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Tennessee economic growth It's been a good decade for economic growth in the Volunteer State. Last week UT Economist Bill Fox said he expects growth to continue into 2020. But tax collections have been slowing with collections increasing only 7% in the past ten years, when adjusted for inflation. Because Tennessee has no state income tax, it has less to spend when the economy slows and consumers curtail spending, resulting in a lower sales tax collection. Dr. Fox says a seven percent growth over ten years, "is not alot of growth. Revenue growth would have been stronger, but we had a number of policy decisions to reduce revenues." The Tennessee legislature recently ended taxes on gift, inheritance and estates, all aimed at promoting Tennessee's business-friendly reputation. Fox called on state leaders to be careful about cutting any more taxes. "My fear is what happens in a recession," Fox said. "We've been able to build sizable reserves and that certainly helps us. But the impact of recessions can be quite long-lived," he explained. Economists say the state's fiscal health will stem from consumers' willingness to keep spending, and that will be unlikely as the economy slows. Sales tax collections in Tennessee bring in 68% of Tennessee's gross domestic product. In recent years there has been an increase in movement from rural East Tennessee to Nashville as job seekers move to better paying positions. "The significant movement of our labor force (in East Tennessee) is something of a concern for us," says Fred Mackara, an economist at East Tennessee State University. "We have real concerns how we're going to consider our productivity." Tariffs also are causing uncertainty in the manufacturing sector, and new housing starts have slowed.
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