Wednesday, May 25, 2005
Purcell's Tax Hike
Posted by Bruce Barry on Wed, May 25, 2005 at 10:04 AM
The Tennessean has a nice package of stories and charts this morning on Mayor Bill Purcell's proposed tax increases announced Tuesday in his $85-a-head State of Metro speech, but the paper does its readers a disservice with a misleading front page headline implying (in very large type) a 21% or 25% tax increase, depending on where in the county your property is located.
Purcell is proposing a new tax rate that is (for the Urban Services District, or USD) 21% above what the rate will become in a downward adjustment following this year's countywide reassessment. That downward adjustment is required by state law because a reassessment by itself cannot have the effect of increasing tax revenue. Yes, Purcell's proposal will (in the USD) generate 21% more revenue than it does presently. But the bulk of that increase is accounted for by rising property values, not solely because of a higher tax rate, as the Tennessean headline implies.
Here's an example to illustrate. Consider someone in the USD who owns a house whose value has remained the same since the last countywide reassessment four years ago. For that person, the post-assessment adjustment of the tax rate (from $4.58 to $3.98 per $100 of assessed value) before Purcell's proposed hike means a 13% drop in property taxes. Purcell's tax hike would then raise the rate to $4.82. For this homeowner -- with no change in property value -- the net effect is a property tax bill that will rise by 5.2%.
Of course, property values have increased for most homeowners in the county, so the tax bill for most will rise more substantially. And as I said, in the aggregate 21% more revenue will be generated from USD property owners. But the point of my example is to show that most of that increase is a result of higher property values. If your property value stayed the same, then your property tax increase is only 5%.
I will concede that this is something of a semantic issue involving the meaning of tax rate adjustments and increases. But it is a distinction with some importance: An X% increase in generated revenue and an X% increase in the rate of taxation, holding property values constant, are not synonymous.
Here's an example to illustrate. Consider someone in the USD who owns a house whose value has remained the same since the last countywide reassessment four years ago. For that person, the post-assessment adjustment of the tax rate (from $4.58 to $3.98 per $100 of assessed value) before Purcell's proposed hike means a 13% drop in property taxes. Purcell's tax hike would then raise the rate to $4.82. For this homeowner -- with no change in property value -- the net effect is a property tax bill that will rise by 5.2%.
Of course, property values have increased for most homeowners in the county, so the tax bill for most will rise more substantially. And as I said, in the aggregate 21% more revenue will be generated from USD property owners. But the point of my example is to show that most of that increase is a result of higher property values. If your property value stayed the same, then your property tax increase is only 5%.
I will concede that this is something of a semantic issue involving the meaning of tax rate adjustments and increases. But it is a distinction with some importance: An X% increase in generated revenue and an X% increase in the rate of taxation, holding property values constant, are not synonymous.
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