Does anyone like property taxes?

Of course, we don’t. In fact, it can be argued that property taxes are the least fair of the taxes. You find the perfect home. You’re scrutinized relentlessly by your lending institution. You sign your life away for the next 30 years, pay the lawyers, the title company, the insurance, and more. Then, you are required to pay annual property taxes for the privilege of owning this generally appreciating asset. The amount you pay is largely determined by the rate set by your local legislative bodies, and your county and municipality each get a slice of your hard-earned pie. In Tennessee, those property taxes are the primary source of funding for local government entities, especially schools.

Never fear. The Tennessee General Assembly has come to the rescue. With a new constitutional amendment on the ballot this November, assuming voters approve it, you will never have to pay another dime in state of Tennessee property taxes. Sounds amazing, right?

The problem is that the state of Tennessee does not have a property tax, nor has there been any credible proposal in recent history to implement one. Never ones to avoid creating a crisis where one doesn’t exist, the legislative supermajority has met the necessary requirements to place a constitutional amendment on the ballot that bans a state property tax – just in case.

As acknowledged, everyone loathes property taxes, so there is no doubt the amendment will pass, probably with 80% of the vote. But that doesn’t mean that it should.

If you’ve been in the state for a while, you probably remember the 1999 proposal by then Governor Don Sundquist to adopt a 3.5-3.75% personal income tax and reduce the state’s onerous sales tax. Facing budget challenges, Sundquist had first floated a gross receipts tax that was promptly rejected by the state’s business interests. Then, as now, Tennessee leaders prided themselves on the fact that Tennessee was one of the few states in the nation without a personal income tax, except for the Hall Tax on dividends.

Sundquist’s proposal arguably made the political career of U.S. Senator and current gubernatorial candidate, Marsha Blackburn. At the time, Blackburn was a state senator and one of the leading opponents of the state income tax. She and radio personality Steve Gill, among others, rallied citizens to downtown Nashville and nearly stormed the Capitol long before storming the Capitol was “cool.”

Ultimately, the proposal was defeated, and to make certain it could never again rear its ugly head, the legislature proposed a constitutional amendment that voters passed in 2014. Then, in 2021, the legislature repealed the Hall Income Tax.

Tennessee remains heavily reliant on sales tax. The state’s tax is 7%, but localities can assess up to 2.75% on top of the 7%. Additional revenue is generated from a franchise and excise tax on businesses. However, in 2024, at the behest of Governor Lee, the legislature voted to refund and provide a tax break of $1.5 billion to said businesses. The administration claimed that unnamed businesses were preparing to sue, and that this measure avoided an even more costly result.

Repeal of some or all of the sales tax on groceries has been the source of bipartisan support in recent years. Momentum seems to be growing as prices on many necessities continue to rise. It is likely that some reduction in the sales tax on food will occur within the next couple of years.

The thing about governments that rely on sales taxes to fund their services and operations is that the ability to provide the services ebbs and flows with the economy. A simple downturn or recession costs millions, which can result in delays or elimination of critical infrastructure and life-sustaining benefits. If these downturns extend over multiple years, the impact can be devastating.

With the ban on an income tax, elimination of the Hall Tax, a potential cut to the grocery tax, a tax reduction and rebate to businesses, and the likely ban on a state property tax, a future state government faced with deeply declining revenues may not have any options. Poor infrastructure, struggling schools, and unfunded or underfunded safety net services won’t attract new investment and will lead to unnecessary suffering.

Opposing a constitutional amendment to ban a state property tax isn’t the equivalent of supporting a state property tax. It is a prudent decision that leaves our options open.