Tuesday, May 1, 2012

Mayor Dean’s Property Tax Increase Won’t Raise More Money

05/01/2012 By Blue Collar Muse

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? (read more)

I  would disagree with the assertion that this tax increase will not raise additional tax revenue. Blue Collar Muse says, "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." 

While I agree that, that it is generally true that increasing the cost of something reduces the consumption of that something, it depends on the elasticity of demand and the shape of the curve. You do get less of what you tax, but how much less? There is a point at which raising taxes produces less revenue, but prior to that point, raising taxes does raise revenue. We cannot know where that point is until it is experienced. Also, the loss may be so gradual that in the short-term, a tax increase raises tax and only in the long-term does it result in a lost.

I do agree with Blue Collar Muse that "new residents moving here, even to work at Nashville companies, don’t have to live in Nashville." However, I will not move out of the county if this tax increase passes.  There are plenty of other reasons why I will stay in Davidson County. Nevertheless, I oppose this tax increase and think it is detrimental to the growth of Nashville.

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1 comment:

  1. Great points, Rod, as always.

    I don't believe it will happen overnight, but as you note, over time is a different story. I did note I was talking about long term impact on revenues.

    I also appreciate that you are not interested in leaving Nashville even if the increase passes. However, not everyone feels the same.

    Great discussion to be having, though. To tax or not to tax ...