Today was Nashville Mayor Karl Dean’s 5th annual State of Metro address. Mayor Dean assured us the state of Metro Nashville was “strong.” He then proposed a $0.53 increase in property taxes. Tax activist Ben Cunningham of Tennessee Tax Revolt and Nashville Tea Party noted if this wasn’t the largest tax increase ever on Nashville taxpayers, it was close. Which begs the question, just how “strong” is Metro Nashville if we need draconian tax increases just to keep up with basic services?
Dean’s $100,000,000 annual increase seems to be just for basic services. He wants to pay teachers a higher starting salary and raise the salaries of teachers not making the new minimum to that new minimum; to give Metro employees a 2%-4% raise since they haven’t had a raise in 3 years; to keep paying for 50 police officers he hired with temporary federal money which we now have to pay the entire amount for; to improve or build schools to meet an increased demand; to fund and pay for pension and benefits packages for Metro employees of the same sort bankrupting cities like Chicago and states like Illinois and California.
But Mayor Dean’s approach is precisely the wrong one. So wrong, in fact, that his plan will actually work against what he wants to accomplish. When additional tax revenues are “needed” by government, there are only two options. It can tax taxpayers more or it can attract more taxpayers. Only the second option raises revenues reliably and for the long term.
The more vital or basic the service being funded, the more urgent it not be funded with shrinking revenues. Yet the Mayor’s plan is to fund necessary programs with shrinking revenues. That doesn’t sound right on first hearing. How can revenues shrink if we raise the tax? Yet the general truth of taxation is that you get less of what you tax. When taxes go up, consumption goes down. In the case of “vice” or “sin” taxes, you get fewer adult businesses or alcohol sales. In this case, it’s fewer property owners paying property taxes.
Consider that Tennessee decided, on July 1, 2007, to raise its cigarette tax from $0.20 a pack to $0.62 a pack. Overnight, we went from the lowest cigarette tax in the region to the highest. People immediately began to travel to other states to buy cigarettes at a lower price. That practice was so widespread the Tennessee Department of Revenue set up sting operations to catch Tennesseans with more out-of-state cigarettes than the government allows. 5 years later, the collection of cigarette taxes still falls millions of dollars short of the state’s projections. There is no reason to believe Nashville will avoid the results of increased taxation in this instance.
Facing a budget crisis in 2008, Chicago tried decided to fix the problem by raising their sales tax to 10.25%, then and still the highest in the nation. In just the first month following the increase, the actual collection of sales tax reported by the Illinois Department of Revenue fell by 12%. Illinois has followed that tax increase up with a 67% increase in their state income tax. Businesses and people who can are fleeing the state for better tax climates. That includes a 60 year resident of Illinois and former State Senator in Illinois who left for Texas last year and wrote a letter outlining why.
In his speech, Mayor Dean noted, “People, and businesses, choose where to locate based on a number of factors – strength of economy, availability of transit, the quality of schools.” However, if we’ve learned anything in the last decade it’s that citizens and companies also look for things like taxation and responsible government spending when deciding where to locate. Which explains why Chicago had a net loss in population from 2000 to 2010 and why Illinois used to have 25 US Congressmen based on their population and now they only have 18.
Mayor Dean’s plan assumes a steady or growing number of property owners paying higher property taxes. That’s a faulty premise. There are counties adjacent to Davidson County just waiting for us to flee higher taxes. New residents moving here, even to work at Nashville companies, don’t have to live in Nashville. We already know many don’t. Mayor Dean’s plan does nothing to change or address those realities. He ignores them at his peril and that of the rest of Nashville.
Please Mayor, for your sake and for ours, don’t raise our taxes.
If Mayor Dean’s Numbers are Off Your Taxes Will Go Up Again Soon @ Blue Collar Muse;
Mayor Dean’s Property Tax Increase Won’t Raise More Money by Rod Williams @ A Disgruntled Republican;