Tennessee tax burden is third lowest among states

Tennessee tax burden is third lowest among states

Property taxes vary across region, but are at least a third of the U.S. average

April 6th, 2017 by Dave Flessner in Business Around the Region

CORRECTION: An earlier version of the story included property tax data on individual counties in the region. Although ATTOM Data Solutions collects data from all counties, its analysis was based upon counties with more than 100,000 persons so the smaller county data was deleted from this report.

Lowest tax burden states

1. Delaware, 5.59 percent of income

2. Alaska, 6.27 percent of income

3. Tennessee, 6.45 percent of income

4. Oklahoma, 6.61 percent of income

5. New Hampshire, 6.7 percent of income

Source: WalletHub figures based upon the combined state tax burden from property, individual income, and sales and excise taxes as a percentage of total personal income in each state. Alabama was 7th lowest and Georgia was 18th lowest among the 50 states.

While all Americans prepare to give Uncle Sam his cut of last year's earnings by the Apr. 18 filing deadline, a new study released Wednesday shows Tennesseans, on average, will pay a lower share of their income in state and local taxes than taxpayers in all but two other states.

The financial website WalletHub said the tax burden for the typical Tennessee taxpayer is one fourth less than the median of all states. Despite having one of the 10 highest rates for sales and excise taxes among the 50 states, Tennessee ranks in the bottom 10 states for the property and individual income taxes paid as a share of income.

A separate tax study released today also suggests that home owners in the Chattanooga area, on average, pay only a fraction of the national average.

Although tax reappraisals mailed to Hamilton County property owners this year generally show an increase in property values, the typical property tax bill last year in Hamilton County of $1,234 was nearly 63 percent less than the U.S. average.

Property taxes were even lower in most surrounding counties to Hamilton County, according to a new nationwide tax analysis by ATTOM Data Solutions released today. The lower property tax bills in Southeast Tennessee, Northwest Georgia and Northeast Alabama reflect both a lower property tax rate and lower average home values in the region.

The average Hamilton County single-family home owner paid 0.63 percent of the average value per property of $197,280 in 2016, ATTOM reported. In the Chattanooga region, the average property tax bill was lowest last year in Bledsoe County at $342 and highest in Catoosa County, Ga., at $1,237.

Statewide, Tennessee had the fourth lowest property tax rates among the 50 states, behind only Hawaii, Alabama and Colorado, ATTOM reported. The property database website said Americans paid a total of $277.7 billion in property taxes in 2016, or an average of $3,296 per home.

Analysts consulted by WalletHub for its tax comparison study differ on the impact of having lower tax burdens on the growth of each state.

Robert Kleine, interim director of the Extension Center for Local Government and Finance at Michigan State University, said state taxes "have little impact on economic growth" since they are generally a relatively small share of a business revenue and "low taxes mean less spending on programs that stimulate economic growth such as education and infrastructure."

But Chris Edwards, director of tax policy studies at the conservative Cato Institute, said states still compete against one another to attract businesses and "high marginal tax rates reduce productive behavior (working, investing, starting businesses) and increase unproductive behaviors (avoidance and evasion)."

Edwards said he favors high consumption taxes, such as the higher sales tax rate in Tennessee, which doesn't have a personal income tax. Edwards said sales and consumption taxes are "less economically damaging than income taxes."

But Gary Cornia, dean of the Marriott School of Management at Brigham Young University, said he thinks the sales tax is the least fair tax since it isn't based at all on the taxpayers' ability to pay" and is therefore regressive.

"Efforts to make it more sensitive to income levels by removing some purchases like food only creates more problems," he said.

Tennessee continues to impose a sales tax on food, although the state rate will be reduced from 5 percent to 4.5 percent if the General Assembly approves Gov. Bill Haslam's tax reform plan this spring.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.


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