Property Tax Limitation Key to Keeping Tennessee Competitive, New Polling Shows It’s Also Popular
By Patrick Gleason
Imitation is among the highest forms of flattery, so the saying goes, and states across the country continue to flatter Tennessee. That’s certainly the case when it comes to tax policy. Bills to phase out state income taxes have already been enacted in Mississippi, Oklahoma, and West Virginia, with legislation to follow suit filed in many other states.
Down in Atlanta, for example, Georgia Lt. Gov. Burt Jones recently unveiled a proposal to phase out the state’s income tax, which now stands at a single rate of 5.09 percent. Meanwhile, over in Columbia, the South Carolina Senate is advancing legislation to phase out the Palmetto State’s income tax over time based on revenue triggers.
The lack of a state income tax has long been an economic advantage for Tennessee, but that advantage will diminish as the club of no-income-tax states grows. As such, it is imperative that Tennessee lawmakers continue to pursue reforms that will make the Volunteer State’s tax and regulatory climate even more attractive.
Business tax relief would certainly make Tennessee a more attractive destination for job-creating investment, but the state also has a glaring need for a statewide law safeguarding residents against drastic property tax increases. Tennessee is currently one of only four states without a law on the books limiting growth in local property taxes. Some members of the Tennessee General Assembly, including those in key leadership and committee posts, would like to change that with legislation to limit the rise in property tax collections for local governments across Tennessee from growing faster than inflation plus two percent annually (or six percent over the preceding three years). If local officials wish to increase property tax collections at a greater clip, they could do so by getting voter approval.
A poll recently commissioned by the Beacon Center of Tennessee indicates there is broad, bipartisan, and cross-ideological support for a statewide limit on local officials’ power to raise property taxes. In a poll of 1,200 registered Tennessee voters, 90 percent of those surveyed said they support “a limit on how much property taxes can increase each year in Tennessee, with voter approval required for any increase above that limit.”
The level of support expressed for such a property tax limit was high regardless of party registration. The Beacon Poll, which was conducted from January 11 to 18, found strong bipartisan support for “a statewide limit on how much local governments can raise property taxes each year.” Among Republicans surveyed, 73 percent said they support such a limit, as did 83 percent of Democrats.
Only 11 percent of Democrats and 19 percent of Republicans surveyed in the new Beacon Poll said that local officials “should determine property tax increases independently, without a statewide cap.” It’s surprising to many that there would be greater opposition among Democrats than Republicans to granting local officials unfettered power to raise property taxes, but that’s what the new poll found.
It’s no coincidence that property tax relief is a top priority for the governors of Florida and Texas, two other no-income-tax states that Tennessee competes with for job-creating investment. Florida Gov. Ron DeSantis is championing a constitutional amendment to phase out property taxes on primary residences over time in Florida. Meanwhile, Texas Gov. Greg Abbott is now campaigning on a six-point plan to limit the rise of property tax bills in his state.
Gov. Abbott, like some Tennessee lawmakers, has proposed mandating voter approval for property tax hikes and property tax revenue growth exceeding a certain pace. Another key plank of Abbott’s property tax relief package is a cap on the growth of overall local spending, which is the driver of property tax burdens. By capping the annual rate of growth for all local government spending, Abbott intends to keep not just property tax burdens, but all local taxes, in check.
A state-imposed cap on local spending is also worth considering in Tennessee. In Tennessee, as in Texas or Florida, the size of local governments has grown much faster than the state government. For example, from 2013 to 2023, Nashville’s budget grew by an average annual rate of 8.3%. Meanwhile, the combined rate of population growth plus inflation during that same decade averaged 3.4% annually. Had local spending grown in line with the rate of population growth plus inflation for the preceding decade, Nashville’s budget would’ve been $1.3 billion lower in 2023 than it was.
Gov. Bill Lee and Tennessee legislators deserve a great deal of credit for not resting on their laurels and for continuing to pursue reforms that make Tennessee even more attractive to job-creating investment. It’s clear, however, that reining in the growth of property tax bills and the growth of local government spending in general will be key to ensuring that local officials do not mess up the hospitable tax climate that state leaders have worked so hard to establish. Fortunately for Tennessee lawmakers who want to pursue limits on local tax and spending authority, the new Beacon Poll shows there is widespread public support for this mission.