Posted on 02/25/2002 5:09:21 AM PST by GailA
Property tax shifting to Tennessee homes
By Richard Locker locker@gomemphis.com
NASHVILLE - Changes in the structure of local property taxation in Tennessee over the last three decades have led to a gradual shift in the property tax burden toward residential property and away from utility and farm property, according to a new state report.
The residential share of property taxes assessed statewide increased from 35.2 percent in 1973 to 48.6 percent in tax year 1999. During the same period, the share for industrial and commercial property decreased from 43.1 to 39.3 percent, farm property decreased from 9.4 to 6.6 percent, and utility property fell from 12.2 percent to 5.6 percent.
The shift has resulted from a number of changes in the law, including the 1972 state constitutional amendment that authorized three property tax classifications. Other changes were the 1976 Greenbelt Law that gave preferential treatment to agricultural property, court rulings that led to the reduction of assessments of railroads and airlines, and more recent statutory changes that reduced assessments for telecommunications utilities, according to the study.
In addition, local governments have increasingly granted tax abatements and incentives for businesses to locate or expand within their jurisdictions.
The findings are included in a broad review of property taxation in Tennessee by the Tennessee Advisory Commission on Intergovernmental Relations, a state government research agency. The TACIR report, "The Local Property Tax in Tennessee," was released last week.
Some of its findings are particularly relevant because one of the tax plans under consideration to increase state revenue would impose a statewide property tax on top of local property taxes. Lawmakers are looking at a property tax of $1.35 to $2.20 per $100 of assessed value.
The report found the property tax base is "very unevenly distributed" across counties, from a low of $6,262 per capita in Lake County to a high of $26,384 in Sevier County.
Further, the report finds, there are "extensive variations" in effective tax rates across the state. "Effective" tax rates take into account the different tax rates and property values across the state by factoring in appraisal ratios that attempt to account for those differences.
For property owners inside of municipalities and special school districts, effective tax rates are the total of local property taxes paid. The lowest effective tax rate in 2000 occurred in unincorporated areas of Sevier County, where taxes on a residence with a market value of $100,000 were only $311 a year. The highest rate was in Memphis, where property taxes on the same $100,000 house totaled $1,599.
The report said its analysis supports the conclusion that the property tax hits low-income taxpayers hardest. While there is a low-income property tax relief program, it applies only to elderly and disabled homeowners.
The property tax is the largest source of local government revenue, both in Tennessee and the nation as a whole. It generates about $3 billion a year for cities, counties and special school districts in Tennessee. That is about 58 percent of all local tax collections in Tennessee.
The TACIR study concluded that because Tennessee limits the taxing authority of local governments, the property tax is likely to increase in importance in local government finance, despite "serious challenges facing property taxation in the future."
Challenges include exemptions and preferential assessment rules that already cost local governments more than $60 million a year in lost revenue; increased competition in telecommunications; and the economic shift away from manufacturing that will continue to erode the property tax base.
Contact Nashville Bureau chief Richard Locker at (615) 255-4923.
STATE BUDGET CRISIS WON'T AFFECT VOLS FOOTBALL Commentary By Bob Gilbert The solution to the state's budget crisis is coming into focus. The "do-nothings" in the Tennessee legislature will live up to their credo and do nothing. There'll be no tax reform and no tax increases. They'll adopt a deficit budget and force the governor to eliminate or cut to the bone most state operations, leaving Tennessee Vol football and basketball the only unscathed programs in higher education.
http://www.NashvilleCityPaper.com/index.cfm?section=7&screen=enews&enews_id=10691
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