By JON STYF
THE CENTER SQUARE STAFF REPORTER
(The Center Square) — A new Beacon Center report shows while Tennessee’s truth-in-taxation law creates transparency in the process of property tax assessments, it lacks the power to prevent large property tax increases.
Tennessee was the first state with a truth in taxation requirement, but it is now one of four states without a cap on property tax increases.
Truth in taxation in Tennessee requires local governments to inform residents of any property tax rate increases and local entities to consider means that do not increase property taxes alongside rate or levy increases.
Overall taxes in Tennessee have fallen by 1% a year since 2000, but property taxes have increased by an average of more than 5% each year over that timeframe, according to the Beacon Center.
“Economists and governments often prefer property taxes because they are a stable source of revenue for localities,” the Beacon Center report said. “Additionally, while many other forms of taxes pick winners and losers, property taxes tend to be economically neutral and come closer to a ‘user fee’ than most other taxes.”
Beacon Center pointed to Nashville as a place where the current law was used in an effort to confuse voters.
Nashville residents were hit with a 34% property increase in 2020, and property values increased in early 2021.
Nashville Mayor John Cooper then touted a corresponding property tax rate decrease. Because properties were worth more, they would have to pay a similar or higher total amount even though the tax rate would be lower.
Mr. Cooper touted it as a tax rate decrease, but his opponents called that misinformation and accused the mayor of attempting to cause confusion.
Beacon Center pointed out because of the truth-in-taxation law, higher appraisal values cannot automatically lead to higher property taxes. Each local entity would have to compare the two amounts and vote on the increase.
“While Nashville’s recent 34 percent tax hike is perhaps the most notable, large property tax hikes are a statewide phenomenon,” the report said. “Using 2019 as an example as the last year before the COVID-19 pandemic, the Beacon Center identified more than $208 million in proposed or adopted property tax increases across the state.”
The three options for property tax caps are property assessment caps, rate caps and levy caps.