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by Joe Sullivan

Knox County Commission showed a lot of fortitude last week in approving a property tax increase that would take effect if a previously approved wheel tax increase is repealed in a Nov. 2 referendum.

The property tax increase would assure funding for county Mayor Mike Ragsdale’s $546 million budget that Commission unanimously approved in May. The county budget had become imperiled by the “ax-the-tax” fervor in which some 16,000 registered voters petitioned for a referendum to repeal the $30 wheel tax increase on which Ragsdale based his budget. An 18-cent tax hike in the county property tax rate to $3.14 would raise the same amount ($12 million) as the imperiled wheel tax.

In standing firm against the anti-tax fervor, commissioners who supported the property tax hike on an 11-to-six vote may have imperiled their own reelection chances in 2006. And Ragsdale, who was already under fire, will incur a lot more wrath for enlisting their support.

The groundswell of opposition to the wheel tax is now compounded by resentment on the part if its opponents that the right of the electorate to decide on a tax increase has been thwarted. Resorting to a property tax increase on the part of elected officials was tantamount to a concession that the wheel tax was doomed to failure at the polls. But the oft-repeated charge that they have disenfranchised the people does not hold water the laws of Tennessee.

Unlike California and some other states where just about any proposition can be placed on the ballot, in Tennessee only a limited number of specified issues are subject to voter approval. Heading the list are amendments to the state Constitution and the charters of local governments. Beyond that, the only types of taxes on which a referendum is provided for are local option sales taxes and wheel taxes.

It’s true that the charters of localities can provide for referenda on other matters. In the city of Knoxville, for example, elected officials are subject to recall and ordinances can be initiated in that manner. But the Knox County Charter makes no provision for such actions. Setting property tax rates in the county is the prerogative of the legislative body that’s elected to do so, as is the case with all state taxes.

If all state tax increase were subject to rejection by the voters, I shudder to think what dire straits the state would be in today. Given the prevalence of anti-tax sentiment in 2002, for example, both leading candidates for governor, Democrat Phil Bredesen and Republican Van Hilleary, maintained a no-new-taxes posture during their campaigns. But faced with a billion-dollar deficit, the state Legislature, after much travail, finally approved the biggest tax increase in state history. And once he was elected, Bredesen wasn’t about to seek its revocation.

The same holds true in Knox County. I have little doubt that if either of the property tax increases that Ragsdale’s predecessor, Tommy Schumpert, managed to get through County Commission narrowly in the 1990s had been subject to repeal by referendum, such a referendum would have been forthcoming.

Even though the county has gone longer without a property tax increase (five years to be exact) than at any time in recent history, Ragsdale remained averse to one until a debacle was imminent. In seeking a $30 wheel tax instead, he claimed it would be more evenly and broadly based because the vast majority of adults own cars, whereas some smaller percentage own property. But he completely misgauged the extent of tax aversion. Its subscribers seemingly gave no heed to the harsh impacts that the $12 million in budget cuts from a repeal of the wheel tax would have forced upon him.

A persuasive case can be made that Ragsdale should have stuck with and fought for his original proposal to a probable bitter end rather than pulling what critics perceive to be a fast one. But I will give him credit for adroitly shifting course in order to achieve a better outcome.

Even on the eve of last Wednesday’s pivotal Commission vote there didn’t appear to be majority support for a property tax increase. But at least three commissioners who had been demurring swung in favor of it by the time the vote was taken. One of them, Phil Guthe, candidly admitted to “waffling” on the issue before concluding that “I remain committed to the mayor’s budget, and I continue to support the wheel tax. But we’re two months into this fiscal year, and we’ve been held hostage. If we don’t pass a property tax [increase] today, that’s two more months until Nov. 2, and I’m not willing to be held hostage for four months.”

So the only thing left for the voters to decide on election day is whether they prefer an increase in the wheel tax or the property tax. For my part, I believe a property tax is more equitable. A wheel tax hits a single parent earning $15,000 much harder than the owner of a $300,000 home, whereas a property tax is generally proportionate to affluence. Moreover, the wheel tax take would come almost exclusively from individuals, whereas the property tax burden is spread just about evenly between residential and commercial property owners. While those who rent their dwellings or places of business won’t pay the tax directly, it will be reflected in their rent.

More importantly, though, Knox County is assured of the additional revenue needed to avert a multiplicity of harmful budget cuts and to proceed with the construction of a much-needed new high school.

September 16, 2004 • Vol. 14, No. 38 © 2004 Metro Pulse