Wednesday, August 16, 2006

Are State and Local Taxes About to Jump?

The funding mechanisms of local and state government are headed for a collision course which will impact all residents and businesses - perhaps property owners the most - according to a new study from the TACIR (TN Advisory Commission on Intergovernmental Relations).

The full study is here and a news report on the study here.

The TACIR often influences how new policies are made in the state, and the ideas they present in their study point the way to how the current system may change.

One of the most notable elements of the study is that Residential property taxes have been increasing while tax revenues from business have been decreasing.

TACIR noted that from 1973 to 2000, the residential share of total property tax assessments rose from 35 percent to almost 50 percent, while the commercial and industrial share hovered close to 40 percent. By 2005, residential property represented 53.3 percent of total assessments, while commercial and industrial assessments had dropped to 35.9 percent."

I always see these types of "advisory reports" as the smoke of a growing fire. The state has been reluctant to increase the share of revenues from sales taxes to cities and counties -- that seems to be the most obvious way to aid communities and keep property taxes from a dangerous increase. Fear of a rejection or an exodus of business means the individual will be targeted instead.

Another suggestion from this report is far more ominous and may point the way that some in state and local government want to steer -- more taxing authority for cities and counties. The report says:

"Significant new taxing authority that allows local governments to take advantage of existing tax bases or activities that are currently untaxed. Possible changes include an increase in the local sales tax single article limitation (currently set at $1,600), the authority to levy payroll taxes, and local ad valorem vehicle taxes in lieu of existing wheel taxes."

A local payroll tax?? That would be a very bad move. Yet, higher taxes are certainly being considered and it appears thought is being given to find a way to quickly and quietly to change the way residents in the state are taxed.

After all, the report also says one of the "problems" in creating revenue is the "truth in taxation" laws are so public that it is "politically difficult" to raise taxes on property. Sounds too much like some "less public" decision-making is the goal here.

Once the TACIR begins to influence legislation, it is usually with a specific goal in mind. Government is always looking for ways to increase taxation and public review is the best way to insure spending isn't bloated and that any new legislation is necessary and fair.


  1. Its gotta happen soon, and property taxes can't take too much more tweaking.
    Man, I'm still one of those weird bastards that sees the sense in a state income tax, and a lowering of the sales tax.
    I mean, c'mon. How can that NOT be the most painless way for the state to get more money?

  2. Well, AT we do have an income tax in TN, called the Hall Income Tax and a "new" state income tax would likely mean a decrease of the Hall tax rate.

    I think the state really bungled the whole problem several years ago, since there has to be a constitutional change first to allow for a new 'income' tax. Making one at say 4 percent and rolling sales tax back to 2 might have had a chance if the Legislators had presented the referendum idea properly.

    Many fear (probably correctly) that it would not stay at 4 percent for long, unless there were some type of restrictions on how increases would be allowed.

    I do think you are right - current property taxes are at their limit now, but why not bring the level of tax on industrial and business up to even out the burden?

    We doubtless have a very precarious and lopsided system in place, which I don't think can last for many more years. That said, adding more taxing authority at the local level is not the answer.

    Serious debate and consideration in Nashville will have to take place soon to avert critical problems!

  3. Ann Lloyd11:20 AM

    I don't know how other cities in Tennessee manage their property taxes, but Jefferson City needs to increase its tax base, and now. I appeared before city council last year pleading for a tax increase so city services would not be cut. Everyone looked at me like I was insane. Taxes remained the same, services went by the wayside. Property taxes are relatively fair, if assessed at the same rate for industry, commercial and residential. But, of course, that's the rub. I don't want to know how much of a sweet tax deal WalMart got when it came in. And now Lowe's is building right next door. What's that about? There's a Lowe's in Morristown 12 miles away. As for a stae income tax. Yes.When I lived in Detroit, there was even a city income tax. Lots of places have them. If you want to live in a modern world, you must pay for it.