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.
SEE ALSO:
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;

#1 by Daniel Lewis on 05/01/2012 - 21:23
I guess this has nothing to do with a half a billion dollar convention center. We knew this was coming.
#2 by C. Edward Chambers on 05/04/2012 - 10:26
You mean 1.2 billion.
#3 by Beth on 05/02/2012 - 07:59
I have news for Mayor Dean. Nashville doesn’t hhave the best schools. People are choosing Wilson, Williamson, and even Rutherford County schools over Davidson. In fact, I myself am considering a move to Wilson County to get my daughter in a more conducive school environment. It is not a far drive to live in another county and work in Nashville. Mayor Dean indeed does need some perspective. Jesse Register is making the schools a liability, not an asset. It is not one of Nashville’s strengths. Higher property taxes will also keep homes from being affordable to many. There are lots of people who already buy outside Davidson because they can’t afford the current property tax.
#4 by rhonda b on 05/02/2012 - 08:47
MR. SOCIALIST MAYOR DEAN, WHO JUST OPENED A 9.2 MILLION PARK(CLAIMS HE HAS TO CLOSE PARKS SO THATS A FARCE),IS JUST ANOTHER ‘OBAMA LIAR’.. THE CRAZY MAN HAS SPENT BORROWED STIMULAS MONEY LIKE CRAZY TO BRAG HE IS THE NUMBER ONE AGENDA 21 ‘GREEN MAYOR’ IN THE COUNTRY (INTERVIEW WITH ‘GREENWIRE’) RADICAL LEFT RAG IN NEW YORK..POUND THOSE COUNCILMEN HARD OR NASHVILLE WILL BE SAN FRANSICO SOON, AND THAT MY FRIENDS IS NOT A PRETTY PICTURE!
#5 by Don on 05/02/2012 - 19:15
How are the %17 underemployed/unemployed going to come up with an extra $200 /yr. Personally, I am one of the fortunate ones who has a job. The company I work for is over 100 years old and trades on the NYSE. I had to take a 10% pay reduction a few years ago and there have been no raises since. I am having trouble paying my current property taxes and now they want more! Why are govt employess getting raises while everyone elses pay has gone down on average? Please explain this Mr. Mayor.
#6 by eric on 05/08/2012 - 17:38
I am a metro employee when you live in a metro area is cost more for services that other cities don’t have. It’s not the people that pay there taxes that is the problem its the ones that pay nothing and receive everything free.
#7 by Karl Richards on 05/04/2012 - 07:28
“I guess this has nothing to do with a half a billion dollar convention center. We knew this was coming.”
My thoughts exactly Daniel
#8 by Sonu on 05/06/2012 - 06:24
“I guess this has nothing to do with a half a billion dollar convention center. We knew this was coming.”
Exactly,Daniel is absolutely correct.I am also with daniel.
#9 by ezio on 05/07/2012 - 09:34
Today on Monday The House Budget Committee is meeting to discuss US$ 1.2 trillion budget cuts which are automatically scheduled to kick from 2nd January 2013.
Paul Rayan, R- Wis & committee chairman; quoted the white house regarding auto budget cuts regarding defense cuts that they will “hollow out” National Defense
Read more here: http://www.worldrealnews.com/2012/05/07/house-budget-committee-discuss-us-1-2-trillion-cuts-today/
#10 by JNN on 05/07/2012 - 12:26
The lack of basic economic understanding in government today is scary. Tax revenue comes from JOBS, PRODUCTIVITY, ETC. The higher the rate the fewer people want to work in your jurisdiction. Here is a few novel ideas.
1) Lower Taxes : Allow businesses to grow and expand.
2) Stop Trying to Buy Votes : AKA “Shared prosperity”, “Sharing the Wealth”. Sounds great in a college coffee house debate but doesn’t work in REAL life.
3) Tell the whiners to go and get real jobs : If you really want to see a whiner in action, I suggest Sean Hannity’s interview with an OWS organizer. That says it all.
#11 by JNN on 05/07/2012 - 12:27
Sorry about the grammar screw-up : Here ARE a few novel ideas.
Sorry about that everyone.
The lack of basic economic understanding in government today is scary. Tax revenue comes from JOBS, PRODUCTIVITY, ETC. The higher the rate the fewer people want to work in your jurisdiction. Here is a few novel ideas.
1) Lower Taxes : Allow businesses to grow and expand.
2) Stop Trying to Buy Votes : AKA “Shared prosperity”, “Sharing the Wealth”. Sounds great in a college coffee house debate but doesn’t work in REAL life.
3) Tell the whiners to go and get real jobs : If you really want to see a whiner in action, I suggest Sean Hannity’s interview with an OWS organizer. That says it all.
#12 by Preston Lockhart on 05/07/2012 - 14:42
Why raise property taxes now, when we are in the worst recession since the Great Deppression. It makes no sense, property values have gone down, so why would taxes go up. Expecially when you are taxing people who can barely afford to pay for their homes. Why not tax the owner of LP Field? He obviously has money to spare so why not tax him, and what about government spending, can’t we cut that? Why not cut school spending, not the educational funds, but what about the schools always leaving lights on. It’s completely wasteful.
#13 by Brian Haynes on 05/10/2012 - 09:07
Here is a publication that shows the root of the problem. Federal grants made them shift money around and cause budget problems. It is expected any time a temporary Government program comes along.
Do Intergovernmental Grants Create Ratchets in State and Local Taxes?
Testing the Friedman-Sanford Hypothesis
George R. Crowley | Sep 07, 2010
http://mercatus.org/sites/default/files/publication/Do%20Intergovernmental%20Grants%20Create%20Ratchets.WP_.Corrected.10.4.10_0.pdf
#14 by Jason@TaxCrisisInstitute on 05/18/2012 - 13:27
I have to agree with JNN, if local government wants real growth and jobs, keep Taxes at a minimum. Lower taxes really do entice business owners, hopefully politicians will figure this out one day.