(The Center Square) – Tennessee Mayor John Cooper has proposed a 32 percent property tax increase to offset prospective revenue losses from the response to COVID-19, but a report from the free-market Beacon Center of Tennessee recommends the city make structural changes instead.
“By focusing on the long-term problems that created this crisis, we can ensure that Metro (Nashville) never finds itself unable to weather the next crisis again,” Beacon Center Director of Policy and Research Ron Shultis told The Center Square. “Otherwise, this proposed tax increase serves as a mere Band-Aid, and it's only a matter of time until the city finds itself broke again.”
The report recommended five specific changes, three of which pertain to the metro workforce. Nashville could save money in the pension system by requiring workers to contribute to their future benefits. They currently contribute nothing. The city also could save money by setting aside funds for its health care and post-employment benefits rather than paying as the costs come in and by downsizing the city government workforce.
Beacon also encouraged Nashville to renegotiate and reign in corporate welfare deals, which is something Cooper has begun to do. The report also suggested the city enact a spending cap to prevent government spending from continuing to grow.
“Enacting our proposed reforms will help the city recover from the COVID-19 pandemic by not balancing the budget on the back of businesses and workers already struggling, but by cutting Nashville's unaffordable long-term liabilities,” Shultis said. “Raising property taxes now is like kicking someone while they're down. We can't expect businesses to recover when we increase their taxes by 32 [percent]. While raising any kind of tax is dangerous in a recession, property taxes are the worst kind to raise now as everyone's taxes are raised regardless of how their businesses or their personal finances have performed.”
The mayor’s office did not respond to a request for comment.
Facing an expected revenue loss of $470 million over a 16-month period, Cooper has proposed to increase the property tax rate from $3.155 up to $4.155 per $100 of assessed value.
The city expects the property tax increase will pay for $100 million to restore fund balances, make up for $216 million in net revenue losses and fund $16 million in operating needs, according to a news release.