LEGISLATIVE ACTION NEEDED 

In our earlier notice, we have informed you of legislation we have filed to prohibit tax assessors from sitting on jury like boards and commissions which decide property tax appeal cases. 

We have previously been successful in passing legislation to prohibit assessors and tax collectors from sitting on local county boards of equalization.  So that the taxpayers will be guaranteed fair hearings throughout the appeals process, it is important that assessors also be prohibited from sitting on the Tennessee Assessment Appeals Commission .

However, we have discovered a bill filed in the Legislature which would guarantee that a tax assessor will sit as a member of the Appeals Commission.

This bill is Senate Bill 3588 / House Bill 2833.

Please contact the bill’s sponsors tell them that you are opposed to their bill which would permit tax assessors to sit on the Tennessee Assessment Appeals Commission.

Please email or call each and tell them you are opposed to SB 3588 and HB 2833. 

Contact Information:

Representative Curry Todd  - HB 2833
rep.curry.todd@capitol.tn.gov   -  615-741-1866

Senator Bill Ketron –  SB 3588
sen.bill.ketron@capitol.tn.gov  -  615-741-6853

Thank you for your help and cooperation.

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Proposed Legislation for 2010

Tennessee Taxpayers has proposed new legislation to correct inequities to the taxpayers. 

 Assessment Appeals Commission
 
This bill is regarding who may sit on the Tennessee Assessment Appeals Commission. The Appeals Commission was created for the sole purpose to provide fair and impartial tax hearings.   Therefore, the Commission membership must be fairly constituted with no member having the appearance of bias or conflict of interest.

As you know from our earlier report, Assessors Should Not Sit on Assessment Appeals Commission, at the present time there are a number of Assessors on this Commission.  This is clearly unfair to the taxpayers. 

 The Assessors are the parties opposing the taxpayers. 

The proposed legislation would prohibit Assessors, or any government employees or officials, from sitting as members of the Commission.  (Read Bill)

This legislation is similar to that enacted earlier regarding county boards of equalization where the Legislature also prohibited Assessors and government officials from sitting on those boards.

In order to guarantee fair hearings, similar remedial legislation must be passed regarding the Appeals Commission.

Business Gross Receipts Tax Audits

Beginning this year, the State has taken over the administrative functions of the local business taxes.   Taxpayers will now file all city and county gross receipts tax returns to the State instead of to their local governments. (Read Previous Report – More Control by State – Higher Taxes for Taxpayers. 

The local governments will still be sent their share of the funds as required by present law (approximately 60%).

However, the State conducts audits and if any taxes are shown to be underpaid, then the State keeps all of these additional taxes including the local governments’ share.

This appears to us to be inappropriate. 

A share of these underpaid taxes no doubt belongs to the local governments.    

Our bill (Read Bill) provides that the State may retain the costs of audits, but must return to the local governments their proper share of the additional taxes.

Other Important Issues:

There are, of course, other important tax issues pending in the Legislature. 

For example, the issue of our governments hiring lobbyists to enact legislation to decrease our rights or increase our taxes is an issue which must be addressed.  See our report, Our Governments Hire Lobbyists to Raise Our Taxes.  

Also, our report, Is Real Assessment Equalization Dead In Tennessee, discusses the loss of the taxpayers’ rights to compare the assessments and taxes of their neighbors’ properties.   Until recent times, taxpayers could judge their assessments by comparing them to their neighbors. 

Not anymore.  The right has been taken away. This has been accomplished through some suspicious decisions in the administrative appeals process.  The right to really equalize asessments needs to be restored to the taxpayers.

Another  important issue concerns equalizing rights to amend tangible personal property returns.   Read our post, What a Difference a Word Makes!

We have numerous other bills pending regarding tax issues which are being unfairly applied to taxpayers.

Of course, we always review all pending tax legislation and will oppose any bill which would impose unfair provisions upon taxpayers or will delete any of the rights we now have.  

We can make a difference in the Legislature and achieve legislation fair to the taxpayers.  If we take no action, all that will result is more unfair procedures and tax increases.

©  copyright – Tennessee Taxpayers Association – January 28, 2010

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Are Taxes Ever Fair? Beware!

This year there have been numerous reports issued by various tax organizations regarding  the effect of the different taxes that Tennessee taxpayers are required to pay.   Some of the organizations proclaim taxes are unfair to certain groups of taxpayers and others tell us what a good deal we have in Tennessee. 

For example, it was just reported in November by the Commercial Appeal that Tennesseans who earn under $17,000 pay 11.7 per cent of their income in State and local taxes while those with incomes greater than $414,000 pay only 3 percent of their income in State and local taxes.  The Institute on Taxation and Economic Policy issued the report:

NASHVILLE  The Tennessee tax system is the fourth most regressive among the states, with lower-income families paying a higher portion of their income in state and local taxes than do more affluent households, according to a national study released Wednesday.

When all of Tennessee’s state and local taxes are considered, the study found that Tennessee families earning less than $17,000 per year pay 11.7 percent of their income in state and local taxes, compared to 3.1 percent paid by households earning $414,000 or more, the top 1percent.  Read More.

Unfair?  Probably to those making less that $17,000, but not reported in the article were  the number of taxpayers having incomes under $17,000 and the number of taxpayers having incomes greater than $414,000.  Also, omitted were the incomes and percentage of taxes for the obvious large number of taxpayers who are between those reported incomes.

In October this year, the Chattanooga Free Times interviewed The Tax Foundation which revealed that Tennessee has the highest combined State and local sales tax in the country.

Tennessee has the highest combined state and local sales tax rate in the nation, the Tax Foundation reported today.

The average combined state and county sales tax rate in Tennessee is 9.41 percent.  By comparison, the combined state and local sales tax rate averaged 7.02 percent in Georgia and 6.15 percent in Alabama.

The state of Alaska, which benefits by its tax collections from oil, gas and other natural resources, has the lowest combined sales tax rate average at 1.61 percent.  Read More.

Unfair?  Again probably.   There has never been any doubt that  Tennessee sales taxes are high.

On the other hand,  in the same month the Chattanooga Free Press interviewed The Tax Foundation on where Tennessee stood in the Nation with regard to property taxes.   The Foundation gave Tennessee taxpayers pretty good news.  Here’s part of the story:

Property taxes in Tennessee are only about half the U.S. average . . . .   Read More.

Fair?  Yes, for most property taxpayers.  Yet,  Shelby County taxpayers don’t think so.  Their property taxes are far above these levels, e.g. property taxes in Memphis are 75% more than in Nashville and 53% more than Chattanooga.

The Nashville Business Journal reported that a study by Kiplinger.com  indicated that Tennessee was among the best places in the Country for retirees. 

Tennessee is considered as one of the better states for retirees when it comes to taxes, according to a state-by-state analysis published by Kiplinger.com.

The Volunteer state ranks high because it has no broad-based income taxes — which means Social Security benefits, IRA distributions and pension income are not taxed.   Read More.

Fair?  Maybe for the retirees.  But some other taxpayers complain that they have to make up the lost tax income to subsidize the costs of government enjoyed by these retirees. 

In July, The Tax Foundation reported that Tennessee has a very favorable tax climate:

Tennessee’s State/Local Tax Burden Among Nation’s Lowest.  During the past three decades Tennessee’s state and local tax burden has consistently ranked among the nation’s lowest.  Estimated at 8.3% of income, Tennessee’s state/local tax burden percentage ranks 44th highest nationally, well below the national average of 9.7%.   Read More.

This report indicates that while there may be inequities within the system, Tennessee taxes rate low in the overall tax burden.  That good report covers three decades.  

Fair is a word you often hear in taxes, but is rarely achieved.  What is viewed by one group of taxpayers as fair is viewed as unfair by another group.  There are  many special interest groups seeking exemptions and the State and local tax codes are unbelievably rife with such exemptions which have been granted over the years. 

Other special interest groups want to directly transfer most of the tax burden to one group.  

This is where the taxpayers should beware!

The above report releases by the various tax organizations appear to be good recipe for passing the State Income tax. 

Releases such as Tennessee’s taxes are among the most regressive, we have the highest sales tax rates, our property taxes are low, and that overall our tax standing is among the nation’s lowest.   All those are good fuel for advocates of the State income tax.

There are special interest groups out there working diligently to achieve a State income tax, i.e. Tennesseans for Fair Taxation.  Their legislative bill to achieve this is still filed in the Legislature.  They seek to repeal sales tax on food and reduce the sales tax to 3%, but only after enacting a progressive State income tax.     

We don’t view the income tax as the means to solving any of Tennessee’s financial problems.   Perhaps it would be perceived as fair to those who would be forced to pay little or no income tax, but to most of the Tennessee’s taxpayers it would be perceived as unfair.  

A State income tax would also be devastating to the taxpayers, especially in view of the economy and the expected increases in the Federal Income Tax from the Obama administration.  

We have enough taxes. Yet, it seems our governments are very creative in seeking new ways to tax us more.  For example in Shelby County, the politicians are now talking about a hospital bed tax to fund The Med.   Read   On a national level,  there’s Obama’s war tax.  It never ends.    

However, even though there are some unfair inequities within our tax system, we have a favorable report from The Tax Foundation.  Overall, our taxes are among the lowest in the Nation.  

We need to keep it that way.  

We also agree the  sales tax should be reduced and/or eliminated on many items.

We feel that the only way to fair taxation is to reduce government expenses.   Then, some of the regressive taxes could be reduced.

It can’t be done?  Don’t think so?

Take a look at Representative Stacy Campfield’s list of things to do to save tax money.   List   

There are many other things governments could do.  A couple more to start with would be to stop hiring lobbyists and quit taking expensive trips (the Governor has been to China twice in the past two years).

Governor Bredesen is struggling at the present time with what cuts could be made.   However, he has so far only mentioned items that always make taxpayers uneasy to be without.  Read  Governor Struggles! 

At the same time the Governor talks about decreases in government spending, he predicts another increase in the unemployment tax paid by employers (which we all know are eventually passed on to the consumers, us).  Read Unemployment Tax Hike Unavoidable.  

This increase would follow a $160 million unemployment tax increase imposed on employers just this year.

Something has to give from the government side. 

Beware reports on taxes from special interest groups.  Most have an agenda and it could be to get more of your money.

If you wish to email your Legislators to let them know the we should cut spending and not raise taxes or impose new ones, here is a link to a list of the Legislators.    List

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 Does the State Have a Property Tax?

If it looks like a . . . .

Ask most State Officials if the State has a property tax and the answer will be, No!

We feel otherwise and submit that an analysis of the taxes the State levies against taxpayers will show the State does indeed have a property tax.

First, consider that the property tax most taxpayers are familiar with is the tax levied locally against their homes and businesses.  This tax is known as an “ad valorem” (according to value) tax on property and is applied by only the local governments.

Under this system, the local assessor of property uses methods required by law to value the properites on a county by county basis. 

Next, as required by the Tennessee Constitution, these values are multiplied by assessment ratio percentages based upon the type or class of property (commercial = 40%, residential and farms – 25%, and tangible personal property = 30%). 

The result for each property is an “assessment” or a percentage of the appraised market value.   This is also known as a fractional assessment.

This assessment is then multiplied by the various local property tax rates, depending upon the city and/or county location, in order to arrive at the amount of taxes. 

Under the State’s property tax system, the procedure is very similar. 

First  the value of the property is derived by the taxpayer, or sometimes the Commissioner of Revenue, by using the methods provided by law for obtaining the value.

Then, the value is multiplied times a State-wide tax rate (presently $.25 per $100 of value).

Do the procedures appear similar?

They certainly do.  There is no doubt that  both the local property taxes and the State’s property taxes are derived from the values of properties (ad valorem) as determined by law.  

One of the  main differences between the local property tax and the State’s property tax is that the State omits application of the classification percentages to the value to arrive at  fractional assessments. 

This means the State taxes property based upon 100% of its value.

Another difference from the local property tax is that the State applies the tax only against properties owned by corporations, limited partnerships, limited liability companies and business trusts chartered/organized in Tennessee or doing business in Tennessee.  

Oh yes!  There is one more difference between the two taxes.  The State calls its tax not a property tax, but a Franchise tax; the Franchise tax  portion of the Franchise & Excise taxes paid annually by the above named entities.  The Franchise tax is levied as a privilege tax for the right to do business in the State.

Apparently, if a State charges a tax and calls it a privilege tax for the right to do business in the State, the tax may discriminate against the taxpayers by not applying to all taxpayers and further it may (and does) discriminate against taxpayers by charging some taxpayers the same tax twice (double taxation) for the privilege of doing business.   

Our attorneys tell us under the privilege tax sections, the courts have upheld these forms of discrimination.   

It’s unbelievable our Tennessee Constitution permits such discrimination.  Perhaps the taxpayers should demand some fairness clauses inserted.

So, we have a legal State property tax applied against 100% of the value of property which is not uniformly assessed against all taxpayers.  

The obvious conclusion is that whatever else you may choose to call it or how you apply it, a tax on property is still a property tax!

© copyright – Tennessee Taxpayers Association – 10/28,2009

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Candidate Tim Burchett Votes in Senate
Against Taxpayers

Senator Burchett

State Senator Tim Burchett is currently running for Mayor of Knox County.  He is a well liked and personable candidate.

We understand that Knox County residents are mostly conservative Republicans and taxes in Knoxville and Knox County are now reasonable; at least relative to other parts of the State.

These principles have long standing importance to Knox County residents.

However, we are concerned about Senator Burchett’s activities in the Senate with respect to local taxes and how these may carry over into his taxing activities as the Knox County Mayor.

In the Legislature Senator Burchett is a member of two powerful committees; the State & Local Government Committee and the Finance Ways & Means Committee.  All tax legislation must pass through at least one of these committees.

Let’s take a look at his voting record on some tax bills for just 2009.

• He voted “Yes” to pass out of Senate Finance, Ways, & Means Committee the Unemployment Tax Increase bill (SB 2315) which cost the State’s (and Knox County) employers $ millions, at least $160 million.  When the bill hit the Senate Floor, he also voted “Yes” for passage.   Conservative Republicans in the Senate (more in the House) voted against the bill.   See our Post on the Unemployment tax increase.

• Voted “Yes” to pass out of Senate Finance, Ways & Means Committee SB 2318, the Governor’s Technical Corrections bill which contained numerous tax provisions adverse to taxpayers.  Included in this bill was the provision for the Department of Revenue to completely takeover the local gross receipts business tax reporting and collection function.  The bill also provided for fewer deductions for taxpayers (hidden tax increases) and for the State to keep all the local governments’ share of revenue collected from taxpayer audits.  The bill further provided that if a taxpayer is located inside a city limits, the business must pay the State twice for the privilege of operating one business.  When the bill hit the Senate floor, Senator Burchett again voted “Yes” for passage.  For more information, see our Post on the new law.

• Voted “Yes” to pass out of Senate State & Local Committee SB 2110 which would have deleted one of the important appeal rights the property taxpayers now have.  This right is to collaterally attack an illegally made assessment.  The Attorney General had stated that the taxpayer had this right, but the Executive Secretary of the State Board of Equalization wanted to remove it.  The bill passed out of Senator Burchett’s Senate Committee by a five to four vote, (Burchett’s vote being crucial) but the bill finally failed in the House State & Local Committee.  Please see our Post on the bill.

• Voted “Yes” to pass out of Senate State & Local Committee SB 2111.  This bill would have required property taxpayers to go to court from decisions made by the State Board of Equalization on a judicial review basis.  This would have forbidden taxpayers from introducing new evidence in court and would have denied their long standing right to do so.  The bill would also have prejudiced the right of taxpayers to select representatives other than lawyers to represent them in tax appeals.  The bill failed in Burchett’s Committee and his was one of only two votes the bill received from the members of the Committee.  For more information, see our Post on the bill.

• Voted “Yes” to pass out of Senate Finance, Ways, & Means Committee SB 0873 which permits local property taxpayers, who had received forced personal property assessments because they had not even filed schedules of their property with the assessor, two years to have their assessments corrected.  However, the Committee would not even listen to an amendment to give a similar correction period of two years to taxpayers who had actually filed property schedules, but filed the schedules late by just even a day.  These taxpayers only have two months to have their assessments corrected by the county board of equalization.  In addition, the bill penalized taxpayers who filed late, by even just a day, by denying them the right to receive automatic application of appraisal ratio.   Senator Burchett voted “Yes” once again when the bill came to the Senate floor.  Please see our Post on this new law.

• Voted “Yes” to pass out of Senate Finance, Ways & Means Committee SB 1570 which permits the State Division of Property Assessments to intervene as a party in local assessment and property tax appeals in the five largest counties in the State (Shelby, Davidson, Knox, Hamilton, & Rutherford).  Under the bill the Division has the unconditional right to intervene as a party equal to the assessor and may overrule an assessor’s position in the event the assessor wishes to settle an appeal.   The new law also allows the State Division to file appeals if the Division disagrees with a decision by any board of equalization, including the State Board.  The Division does not even make the assessments in these counties and are non-elected State representatives with powers equal to locally elected officials.   Senator Burchett again voted “Yes” on the bill when it came to the Senate floor for approval.  Please see our Post on this new law. 

We read Senator Burchett’s campaign website and about the only thing we could find about taxes was that he was against the State income tax.

While this is a popular stand and it would be hard to be a Republican without taking such a position, his position on other taxes, particularly local taxes,  is not mentioned. 

Mayors deal with all sorts of local taxes and Senator Burchett, as Knox County Mayor, will never have the chance to vote against the State income tax.

He will, however,  have great influence upon local taxes.

Before voting for Senator Burchett for County Mayor, Knox County voters should first consider his liberal voting record on taxes to determine how he may serve as County Mayor with regard to those taxes.

© copyright – Tennessee Taxpayers Association – 10/25/2009

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New State Law Involves State in Property Tax Appeals

While not a total takeover of the total taxing function, it is a further takeover of the taxpayer appeal process in the five (5) largest counties in the State and that just about completes the takeover of the entire State in that regard.  

This new Act (Public Chapter 256) provides that:

 The Tennessee Division of Property Assessments has the unconditional right to intervene in local assessment appeals in the five (5) largest Tennessee counties (Shelby, Davidson, Rutherford, Knox, and Hamilton). 

This means that if the State becomes interested in a local assessment appeal issue in Memphis or Nashville, it has the unconditional right to become a party to the appeal with all the rights and powers of the assessor of property. 

Bobby Lee, staff attorney for the Division of Assessments,  lobbied for the bill’s passage and spoke before the Committees.  He argued unopposed that the State needed the new law in order to maintain uniformity of decisions in tax appeals throughout the State.

 Since the State Board of Equalization makes these decisions, it seems to us that the Division is accusing the State Board of being inconsistent in its decisions.

What’s wrong with this new law? 

Consider:

1. First, the State does not collect or receive any of the property tax. The tax is strictly local.

 

2. Further, the non-elected representative from the State can approve or disapprove any appeal settlement the Assessor, an elected official, wishes to make with the taxpayer.

 

3. Also, if the non-elected State representative does not agree with a decision by any board at any level, the State may independently file an appeal of that decision to have it overturned.

 

4. Still further, the Division of Assessments is a “State” agency opposing a taxpayer in a hearing to be decided by the “State” (State Board of Equalization).  Both agencies are headed by the State Comptroller’s Office.  We feel this close relationship to be inherently biased against the taxpayer. 

 

5. Finally, an intervention by the State in a taxpayer’s appeal will bring the entire power of the State and its powerful resources (combined with those of the Assessor)  to bear against a taxpayer.

  This will not be a fair fight!

The Division of Assessments already makes all the assessments for 90 out of 95 counties in our State.  It is as though there are no assessors in those counties. 

In some counties, the State Division even prints the local property tax bills.

Now they have control of the appeal process in the remaining five (5) counties.  This makes the Division a powerful non-elected organization wielding enormous influence over local property taxation. 

However, in these five (5) large counties the Division does not make the assessments and nobody there voted for them to make assessments or contest taxpayer appeals. 

These counties also did not ask for the Division to have the unconditional right to intervene into local appeals affairs. 

Many taxpayers may be  surprised to see, instead of their elected Assessor, an unknown non-elected State representative opposing them in their appeals and protests.

This is yet another recently passed law that allows the State more control over our local taxing function and received no opposition to its passage!

© copyright – Tennessee Taxpayers Association – October 15, 2009

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Others Join In

Our breaking report in August this year on taxpayer paid lobbyists (Our Governments Hire Lobbyists to Raise Our Taxes) exposed the widespread use of lobbyists by local governments and related associations. We reported that these governments are probably the largest users of lobbyists in Tennessee and most are paid with our taxpayer dollars.

We pointed out that lobbyists were hired to assist the governments in raising our taxes and to pass other laws which diminish many of our rights including those to protest taxes. Our report also listed the names of these governments and related Associations which use lobbyists as well as the names of their lobbyists.

We let you know that numerous other governmental related agencies such as utility companies and school districts also hired professional lobbyists.

It now appears that our report has attracted significant attention and has sparked others to report on and join in the fight against taxpayer funded lobbying.

After our report was released, the Tennessee Center for Policy Research prepared a supplementary report, but it reports on the issues further. The Center’s report reveals the actual amounts of tax dollars that our various governments have paid to these lobbyists. We found their complementary report very informative and helpful to Tennessee’s taxpayers.

The Center’s full report may be read by CLICKING HERE.

Our report listed that the City of Memphis hired more lobbyists than any other government and also listed the numerous hired lobbyists. The Center’s report supplemented this information by reporting that Memphis paid more tax dollars to lobbyists than any other government. For the period 2007-09, Memphis paid lobbyists $638,357 to lobby the Tennessee Legislature and $453,785 was paid for lobbying the Federal Government.

The Center’s report lists some very interesting examples of tax increases and other passed legislation adverse to taxpayer rights which involved governments that hired lobbyists. These are obvious abuses of our tax dollars.

We at Tennessee Taxpayers Association are pleased to see that our vigilance and publishing of public information helps spur taxpayers and other organizations to engage in the taxpayers’ fight to oppose unfair laws, rules, and procedures.

Thanks to all.

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The press seems to blame any corruption or bad legislation mainly on the lobbyists.  Frankly, I have never read any good things that were printed in press articles which referred to lobbyists.

When there is reform due to some public corruption, the lobbyists usually wind up more restricted than the public office holders. 

This is why the public perception of lobbyists is so low.

We should feel differently.  Lobbyists are good for our system.  They serve the people.

They represent and make known to the Legislators the point of view and needs of their employers.  This needs to be done.  How else are the Legislators going to find out how a bill will affect the people or a segment of our society.   

With over 2,000 bills filed in the Legislature, the Senators and Representatives do not have time to read these bills.  Even reading them may not explain what a bill will actually do.  

To fully comprehend the effects of a bill, it is necessary that each law affected must be researched.  Then, often the punch line is missed, the hidden agenda, or the real purpose of the bill.

Therefore, the Legislators need lobbyists to explain the proposed legislation and how it will affect people.

Of course, just like any other profession or occupation, there are always a few bad apples in the barrel.  That will always be true.

However, lobbyists are good and honorable people who gain credibility by telling the truth to the Legislators. 

Once a Legislator has found out a lobbyist’s statements were misleading, the Legislator has lost reliance upon that particular Legislator.  Therefore, lobbyists must tell it like it is or they will lose their credibility and effectiveness and the Legislators no longer will listen.

There are all kinds of lobbyists.   There are large lobbyist firms with long client lists, small individual lobbyists, and in house lobbyists for Associations and Corporations.  

If these are all paid to lobby Legislators or the Administration, they must register with the Tennessee Ethics Commission which regulates them and their employers to ensure no illegal monies are paid or illegal activities take place.   The Commission polices the industry.

In Tennessee it is difficult and expensive to be a lobbyist.  It used to be easy.  Pay$25 and that was just about it.  The lobbyists were required to report their annual contributions to any Legislators and they were made public. 

The lobbyist laws are complex now and it is so difficult and regulated that some Legislators have even considered doing away with the Tennessee Ethics Commission and starting all over again.

Now, who uses lobbyists?  From the long list of employers registered with the Ethics Commission, the list is a cross segment of our society.   All types of special interest associations, corporations, individuals, and governments.

Therefore, we all directly or indirectly rely upon lobbyists to tell our story and protect our interests in the government process.

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