Comment on this story The Anti-Taxers Few cities had a more tax-resistant population than Knoxville in the first half of the 20th century, says University of Tennessee history professor Bruce Wheeler. In his book Knoxville, Tennessee: Continuity and Change in an Appalachian City (co-authored by Michael J. McDonald), Wheeler observes that the city’s business elite “favored the status quo of limited government, few changes, and low taxes...,” a position that was “reinforced by the political ideology of Appalachian in-migrants for whom taxes symbolized urbanization and an attendant loss of independence.” Nowhere was the phenomenon more evident than in the public service career of irascible local grocery kingpin Cas Walker, arguably the most dominant figure in local politics between 1940 and 1970. Serving in both the mayor’s seat and on City Council, Walker’s oft-repeated campaign slogan told the electorate all it needed to hear: “For lower taxes, vote for and elect Cas Walker.” “Walker kept talking about the ‘silk stocking crowd’— supposedly a group of wealthy elites who were making money off taxes—and he made people believe it,” Wheeler said in a recent interview. “He fought against building Market Square Mall, the downtown library, and the Civic Coliseum, all on those grounds. If it cost money, he was against it.” Predictably, such knee-jerk resistance to any kind of revenue enhancement proved counter-productive over time. For a while, the leadership could issue bonds instead of raising taxes to pay for new city projects, Wheeler explains. The interest on the bonds eventually forced tax increases, however, and Knoxvillians found themselves paying higher taxes than any other major municipality in Tennessee for much of the last half of the 20th century. “City officials were afraid to raise taxes,” Wheeler says. “It was considered a toxic cocktail for political defeat.” Wheeler says times changed beginning with the city annexations of 1962, which made Bearden part of Knoxville, bringing in a class of more progressive suburban voters. “As the city moved west, you had more people likely to support taxes, if they were going to be spent properly,” he says. “Even so, some of that no-tax ideology still lingers.” —M.G. The relationship between city and county property tax rates shows how shifting valuations have left the city struggling to keep its revenue up to the county’s pace.

City and county residents acquiesce to big tax increases in the same fiscal year

by Mike Gibson

On the day Knox County commissioners are set to vote on the first reading of a measure to increase the wheel tax from $6 to $36, 10 people sign up to address the commission on budget-related issues. Hardly any of them, however, have much bad to say about the proposed 500 percent mark-up on a tax that wasn’t even levied here a mere two years ago.

When it’s their turn to speak, David Massey, father of grown children, and Chris Light, a parent of kids currently attending school in Farragut, both say they support not only the $30 increase, but also a proposal by commissioner Craig Leuthold to raise the wheel tax by another $5 (to a $41 total), with the caveat that the additional mark-up be devoted to schools.

A woman named Dolores, also a parent, echoes their sentiments about schools, and frets that some commissioners might vote against the tax increase for fear of not being re-elected. “I believe that if you all do what’s brave and what’s right, you’ll all have long careers,” she assures them.

When the vote is finally taken, the $30 increase passes by a 16 to 3 margin on first reading, with only commissioners Mark Cawood, Mike McMillan and Paul Pinkston dissenting.

The following evening, a similar scenario plays out at Knoxville City Council. In the same room, the large assembly hall of the City County Building, Mayor Bill Haslam proposes a 35-cent increase in the city property tax, from $2.70 per $100 of assessed value to $3.05, chiefly to cover the shortfall of the administration that preceded him.

The increase passes in a 7 to 2 vote, with the only nay votes cast by Joe Bailey and Steve Hall, arguably council’s most conservative members. A crowd of several hundred city residents watches with hardly a murmur; almost all of them have come out to hold forth on contentious zoning issues that are also included on the agenda. The tax and budget are little more than irritating formalities, hastily essayed preludes to the three-and-a-half hours of bickering that will follow.

It seems counter-intuitive, if not a little spooky, that both our local city and county governments would pass significant tax increases on consecutive days without even a ripple of protest. This is East-by-God-Tennessee, after all, an area traditionally believed to be a stronghold of thrift, fierce independence, and a general ornery skepticism. Tax increases go over here like turds at suppertime, and woe betide anybody with the invidious gall to bring one to the table.

Or so we thought in times past. Nowadays, reality says otherwise; people here may take a generally dim view of new taxes, but their outlook is still subject to fluctuation. In light of the slow national economy, a stingier state government, and some less-than-savvy money management locally, more people than ever seem to believe our local officials are on the verge of budget crises, crises that can only be averted via new revenue streams.

Have East Tennessee’s once-fierce independents been in some part tamed, cowed by the inexorable march of bureaucracy and big government? Probably not. But the prospect of two substantial new levies in the same year does illustrate that our thoughts on taxation are less homogenous and more complicated than we might have imagined.

The fact that there is little uproar over the current tax increases is not as surprising as it might seem. Former Councilwoman Carlene Malone saw three property tax increases during her 10 years of service (in 1994, ’98, and ’00), none of which was hotly contested.

“I was shocked by how little reaction there was,” Malone remembers. “Very few people showed up at the public hearings for the increases, and very few spoke against them.”

She did hear from constituents privately, however, receiving a dozen or more phone calls in the weeks preceding each of those votes, the vast majority of them from people who opposed a tax hike.

Her experience, and that of many current office-holders, too, suggests that perhaps there is a difference between voters’ public and private reactions when it comes to higher taxes. “I don’t think people necessarily know how to be activists when it comes to taxes,” says Bailey, one of two councilmen who opposed the city property tax hike. His premise also suggests that maybe stalwart individualism is not an asset when it comes to organized public resistance.

“There are certain groups organized around certain issues, but the others are very fractal,” he says. “They don’t rally around taxation. They rally around zoning, schools, and sidewalks.”

Bailey’s own experience bears that out; though surprised by the lack of public demonstration, he says he received roughly 50 private phone calls about the city tax increase, only two of which were from constituents who favored it. Fellow dissenter Steve Hall logged 92 callers, only one of whom “sort of supported it; most of them were very irate, like ‘How could you even think about it?’.”

Even Bob Becker, usually regarded as one of the more liberal members of City Council, was besieged at home by around 40 tax-resistant voters. “I divided them into three categories,” Becker says. “About 20 were against any kind of increase. Maybe 10 more had a pet peeve, a particular program they didn’t want to see funded. Another 10 were what I call ‘thoughtful dissenters.’ They were the ones who said, ‘I can handle it, but my neighbor is a 70-year-old widow, and she can’t.’ Those are the ones that touched me.”

It may be true that tax complaints are matters generally given vent in private, and thus anti-tax activism is in short supply; but surely such observations can’t explain the near-total absence of vocal opposition at recent public forums. It stands to reason that where fewer dissenting voices are heard, there must be fewer dissenters.

One line of thinking has it that at least in the city, and at least for now, Mayor Haslam has been given latitude by voters and councilmen alike in recognition of the fact that his predecessor Victor Ashe withdrew $10 million from the city’s reserve accounts over the last two years he was in office.

“I think it’s very fair to say that Bill Haslam now has to deal with Victor’s bills,” Malone says. “His last two years, Victor didn’t want to raise taxes, but there was a shortfall in what he wanted to do. So he took out of the balance of funds, and he put the city’s bond rating in jeopardy. He left behind some massive housekeeping problems.”

Even many of the tax-averse seem to agree. Despite his opposition to the higher property tax, Bailey acknowledges that Haslam’s increase constitutes “a legacy tax,” a byproduct of the Ashe administration. “It was almost like he was set up to fail,” Bailey says. “It was a tough thing he had to do.”

Which isn’t to say there aren’t critics of the mayor and his new tax rate; Haslam budget items such as a $1 million outlay for Sunsphere renovation, $400,000 for the Jobs Now! economic development program, and even long-needed paving and sidewalk projects are viewed as superfluous by some, civic creature comforts that could be sacrificed, at least temporarily, in the interest of a lower tax burden.

Hall resisted any new spending. “I think it looks bad, saying ‘we’re strapped for money,’ then spending $1 million on the Sunsphere,” he says. “Things like that are things you do when you have a little extra money.”

(When asked by a reporter about the wisdom of such allocations, one disgruntled city property owner snorts and replies simply that, “The city needs to go out of business and turn everything over to the county, if you want my opinion.”)

Still, Becker points out that Haslam may have earned public relations points by coupling his tax plan with the frugal gesture of lowering the city’s net budget in ‘04-05 (although general fund spending actually rose). And his timing for the increase was shrewd politically as well as fiscally. “It’s the perfect time to raise taxes, because it’s the longest time we’ll have before anyone has to run for reelection,” Becker says.

“I think the mayor also recognized that people are going to complain more or less equally about any tax increase, regardless of the size. So he went ahead and pushed for a large one. He saw the need to clean up the mess now.”

Maybe it’s true that a sizable portion of the electorate believed city Mayor Haslam had little choice but to raise city taxes. But what of county mayor Mike Ragsdale, who inherited a less problematic fund balance, and whose proposed $36 wheel tax looks to be more regressive than a property tax increase?

Judging from the lack of opposition at public forums, Ragsdale, too, is riding a tide of favorable public opinion. But that could change; the wheel tax faces a final vote on June 28, and would fail if four more commissioners join Pinkston, McMillan and Cawood in opposing it.

Significantly, at least two city councilmen, Hall and Becker, say they fielded more complaints about the county wheel tax than the city property tax. “Some people would tell me they support the city’s increase, then turn around and say ‘What gets me is this wheel tax,’” Becker says.

When read between the lines, many of the public statements in favor of the wheel tax increase are qualified, elliptical, punctuated by actual or implied “ifs”—“... if the money is spent on higher teacher salaries,” or “... if the money goes toward building a new West Knox County high school.”

Some observers say Ragsdale has hornswoggled those supporters through his murky explanations of how new wheel tax funds (an estimated $12 million) will be allocated. His budget and his public statements seem to differ on key points of accounting; at no point in the budget are any of the funds earmarked for schools, arguably the biggest single area of concern among voters. McMillan notes that, “There was a lot of misunderstanding about where that money was going to go; a lot of people felt it was going to education.”

“What I heard [about the wheel tax allocation], is that ‘we’re going to pinch part of it for here and part there and part somewhere else,’” says Jim, a Cawood constituent who opposes the new wheel tax. “I don’t feel like it’s been very well explained. I see tax, tax, tax, but where does it all go? It confuses me.”

“I might support the wheel tax if there was anything solid in there for teachers,” says Bill Schaad, a building trades instructor at Carter High School who pays both city and county taxes. “But there’s nothing solid about it. No one knows where that money is going to.... It’s a cop-out.”

There is a perception, too, at least among some voters, that Ragsdale’s $524 million county budget includes funding for items that are more city projects than county ones, such as the first $1 million of a $45 million new downtown library, or $1 million for expansion of the Beck Cultural Exchange Center in East Knoxville. More than one outside-the-city voter reiterated to a reporter some variation of the theme, “We don’t need a new library. We already have one downtown.”

In other words, there’s a tenuous balance between the public’s recognition of the need for more revenue, and its conflicting notions of how that revenue should be spent. While not wholly satisfied with the proposed allocation of wheel tax revenues, commissioner Craig Leuthold says he and many of his constituents supported the increase not for its short-term pay-off, but rather as a means to an end.

“Most of the people I heard from were in favor of the wheel tax, if it goes to education,” Leuthold says. “Well, my top priority is getting a new high school in West Knoxville. To get there, we’ve got to have more funding. Maybe there’s nothing designated this year, but that’s not to say maybe we can’t get there next year. Without the wheel tax, I’m not sure we can even keep the [school] capital plan we have.”

The dearth of palpable opposition to our two pending tax hikes has also been attributed variously to apathy, hopelessness and fatalism. One West Knox Countian allows that he’s “highly pissed off” about the current state of affairs, but says he hasn’t spoken publicly because he “doesn’t like to stir stuff up and make it worse.” For that same reason, he preferred that his name not be used in this story.

“I think people don’t think it makes a difference what they say anymore,” says Schaad. “I hear that from people all the time. People know they’re getting the shaft, but they don’t feel like they can change anything.”

Another theory has it that people will pay any number of smaller taxes as long as they can avoid larger, more comprehensive ones. And maybe that’s true; few issues are more politically divisive in Tennessee than the question of whether to institute a statewide income tax. “We see a correlation in Knoxville with what’s happening all over the state,” says Lizajean Holt, a Knox resident and the local organizing vice chair of Tennesseans for Fair Taxation. “People are willing to pay all these small extra increments, small chunks called lots of different things, because there’s not enough money in state government to maintain services.”

A non-profit, mostly volunteer organization, TFT lobbies for a statewide income tax with generous exemptions, but also advocates a reduction of the sales tax and the elimination of all food taxes as well as the Hall tax on investment income. If what TFT supporters say is true, then the irony is colossal—that Knoxvillians, and Tennesseans in general, actually pay more in net taxes because they fight so hard to avoid one in particular. Says Holt, “People don’t know what to think about taxes anymore because they don’t understand just how much of their income they’re paying in actual tax burden.”

But just as important as how we feel about our taxes is how other people feel about them, how they compare with those of other cities and counties statewide. By that standard, a new $36 wheel tax would certainly rank us among the more expensive places to register a car in Tennessee, but not prohibitively so. About one in three counties had no wheel tax whatsoever in fiscal 2003-04. In those that did have one, the average rate was in the neighborhood of $30; the high was in Crockett County, where the wheel tax levy was $70 per vehicle.

Our property tax rates are more daunting. The current Knox County property tax of $2.96 per $100 of assessed value ranked ninth out of 95 counties last year, while the city’s new $3.05 for ‘04-05 is greater than that of all but nine other Tennessee municipalities from ‘03-04. And since city residents must pay both property taxes, Knoxvillians would face a combined rate of $6.01, one of the three or four highest in the state (excepting a handful of districts with special rates in certain cities) by last year’s standard.

The only comparable tax rate in our immediate vicinity is in Oak Ridge, where city residents paid a combined $6.08 last year. By way of further comparison, nearby Maryvillians paid a $4.30 total, while folks in Chattanooga, a city roughly the size of Knoxville, shelled out a combined $5.58 per $100 assessed.t

Malone sees another problem on the horizon. Recent changes in Tennessee growth management law have limited cities’ power to annex. The result is that residents of high property tax municipalities like Knoxville can relocate with impunity to cheaper digs in county regions. “With a big raise in taxes, you could cause out-migration, and a diminishing tax base,” Malone says.

“The equilibrium can be tenuous. You have to look at the danger of taxing people out of their homes versus the need to maintain a level of service. How do you balance those needs? It’s a hard thing.”

June 17, 2004 • Vol. 14, No. 25 © 2004 Metro Pulse