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    Tenn. Increases Sales Tax

    Plan raises tax rate from 6 percent to 7 percent on everything except food.

    NASHVILLE, Tenn. -- After four years of intense debate over taxes and three days into the new fiscal year, the state Legislature approved a 1-cent increase in the state sales tax and a variety of other tax increases to end a partial government shutdown.

    When the tax goes into effect July 15, Tennessee will have one of the highest sales tax rates in the country -- and the largest tax increase in its history, $933 million, the Associated Press reported.

    The House narrowly approved the bill 50-41 -- the minimum number of votes required for passage. The Senate approved the bill 22-11 earlier. It now goes to Gov. Don Sundquist, who said he would sign it.

    The stalemate over whether to enact an income tax and how to resolve an $800 million deficit resulted in lawmakers failing to pass a balanced budget by July 1, the start of the new fiscal year. The plan raises the state sales tax rate from 6 percent to 7 percent on everything except food, and increases levies on businesses, alcohol and tobacco products. Local governments will be allowed to continue to add up to 2.75 percent to the state sales tax.

    When the sales tax goes into effect July 15, Tennessee will have one of the highest rates in the country -- 9.75 percent in 30 of the state's 95 counties, the report said.

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