Tennessee Comptroller’s property reappraisal bill derailed by tax cap argument

A bill designed to expedite property reappraisals and keep counties from hemorrhaging revenue appears to have been caught in a battle over a measure to tamp down large property tax increases.

The Comptroller-requested reappraisal measure sponsored by Republican Sen. Page Walley of Savannah passed the Senate unanimously but got stuck in the House at the end of the 113th General Assembly.

The House sponsor, outgoing Republican Rep. Dale Carr of Sevierville, said on the last day of session he decided to “let that sleeping dog lie.” Carr held the bill on the clerk’s desk and never brought it up for a vote.

Reached for comment Monday, Walley indicated the reappraisal bill’s demise was connected to failure of another tax-related bill.

“I understood it may have been a victim of the House deciding that if the Comptroller and/or the Senate were not supportive of their proposal to cap local property taxes, that this should not advance either,” Walley said in a Monday text message.

State comptroller backs increased property reappraisals in ‘dynamic’ market

Tennessee Comptroller Jason Mumpower proposed the legislation to expedite the property reappraisal schedule statewide after 38 counties lost anywhere from $100 million to $113 million two years ago in property tax collections, depending on the growth rate of property values. 

Tennessee is suffering a housing shortage as tens of thousands of people move into the state, causing real estate prices to escalate. Yet real property is appraised by counties only once every four, five or six years. Mumpower wants to move that up to every two, three or four years.

But his bill fell on hard times, struggling to find traction in the session. Carr was forced to state repeatedly the measure was “revenue neutral” because counties are required to reset their property tax rate if they see an increase in appraisal values. State law prohibits counties from realizing a revenue windfall from reappraisals.

Mumpower, a former lawmaker who fell one vote short of becoming House speaker 15 years ago, would say only that, “Oftentimes, a complicated issue takes time to work through. More than anything, having served in the House, I respect the legislative prerogative to have the final say in any matter.”

He declined to speculate whether some lawmakers felt that expediting reappraisals amounted to an indirect property tax increase. Mumpower is expected to decide whether to file follow-up legislation after talking to officials statewide this summer.

Property assessors in high-growth counties say they lost money over the last two appraisal cycles because market values outstripped property appraisals by such a wide margin. An appraisal or sales ratio has to be applied in those cases.

Several fast-growing counties such as Rutherford, Davidson and Maury raised their property taxes in the last few years to deal with higher costs.

Yet lawmakers refused to pass a property tax cap bill proposed by supply-side economist Art Laffer, an advisor to multiple Republican presidents, who wanted to cap property tax increases at 2% except to pay debt and in cases when voters approved larger increases for a limited time.

Laffer contended that property tax increases cause property values to fall, mainly damaging urban areas and pushing personal income down over decades. TennCap, the economist’s new political group, started pushing the measure this year, spending heavily on a top lobbying firm to bring it passage. 

Tennessee’s county mayors fought the measure, arguing it would hamstring their ability to deal with growth.

The Legislature’s Fiscal Review Office also disagreed with Mumpower and some lawmakers over the financial impact of the bill, saying it would create more than $100 million in unrealized revenue for county governments.

House Democratic Caucus Chairman John Ray Clemmons of Nashville said he believes the proposed bill stemmed from tax cuts for corporations and the state’s wealthiest 1% over the last decade that led to decreases in state revenue, putting a heavier burden on a “regressive” sales tax and local governments forced to deal with budget gaps by raising property taxes. The sales tax is considered “regressive” because it has a greater impact on people with less income.

“For anyone paying attention, this bill was an acknowledgement by the (Gov. Bill) Lee administration of the budgetary problem they’ve created for locals and a clear attempt by Republican leaders to facilitate more frequent property tax increases on working families,” Clemmons said in a statement.

“Fortunately, there were enough of us in the House that said ‘hell no,’” Clemmons said.

In addition to a large business tax break in 2023, the Legislature passed a $1.9 billion franchise tax cut and rebate this year, using the argument that the state faced “significant legal risk” from more than 80 companies that challenged the property value provision in the franchise tax. More than half of the money will go to out-of-state companies.