Despite tax cuts in recent years at the state level, there have been significant tax increases at the local level, especially property taxes. In 2019 alone, more than $208 million in proposed or adopted property tax increases occurred across the state. It doesn’t help Tennesseans if their taxes are cut at the state level only to have them increased at the local level, especially for senior citizens and others on fixed incomes who are extremely sensitive to increases in property taxes. While their home values may be rising, that equity can only be accessed upon selling their home. Meanwhile, ever higher property taxes makes it harder for want-to-be home buyers and even renters, which is especially problematic with everyone dealing with the effects of high inflation.
To protect their constituents, most states have passed some type of statewide protection from large property tax increases. Even California passed protections for property owners over 40 years ago with Proposition 13. Surprisingly, Tennessee is one of only four states that does not cap property taxes in some way, along with Hawaii, Vermont, and New Hampshire. Placing guardrails on large property tax hikes would make Tennessee the most taxpayer-friendly state for individuals and help curtail the ever-rising price of housing.
Our proposal protects homeowners and businesses by putting a reasonable limitation on the growth of revenue local governments can collect from property taxes in one year. It exempts revenue collections from new construction, so it doesn’t penalize new growth and provides a mechanism for constituents to vote on property tax increases on the ballot if the increase is significant. It also doesn’t prevent a government operated utility from raising rates to ensure self-sufficiency.
Beacon Impact’s legislative proposal limits the increase in revenue from property taxes that cities and counties can collect by inflation plus two percent annually. This allows for a reasonable rate of increase yet prevents constituents from being hit with large tax increases. The bill exempts revenue from new construction from counting against the cap to allow localities to fund the expansion of services to these new areas and promote growth. Local governments would also be allowed to rollover unused years of revenue increases up to three years. If local governments wish to raise more than the cap would allow, then the bill allows local governing bodies to put the issue to the ballot for voters to decide, similar to the process for raising wheel taxes.