Falling Bills

property tax

Falling Bills

In a Knox County sample, most property owners both inside and outside city limits are effectively paying less in taxes than they were a decade ago.

by jesse fox mayshark • May 12, 2022

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property tax

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Are local property taxes up or down since 2010?

Neither city nor county taxes have kept up with inflation for many taxpayers.

In Knoxville and Knox County, that is a tricky question to answer. Knox County government hasn’t had a tax increase since 1999, which might lead you to conclude that county taxes have been flat for that entire period. 

The City of Knoxville raised its property tax rates in 2004 and 2014, which would lead you to think that for city property owners, the tax burden has increased. 

But neither of those assumptions is necessarily true. Because of the complex nature of property taxes, in which rates are readjusted after each countywide reappraisal — wiping out whatever revenue gains local governments would otherwise see from rising property values — even a tax hike might not keep up with inflation.

A Compass sample analysis of 50 residential properties in Knox County — half inside the City of Knoxville and half outside — suggests that many property owners are paying significantly less in effective taxes than they were a decade ago.

Of the 25 properties outside city limits, only one is currently paying more in inflation-adjusted taxes than it was in 2010. Even inside city limits, only six of the 25 city properties examined have a higher total tax burden now than they did then. For many city property owners, a drop in county taxes has more than offset the increase in city rates. And some city taxpayers are actually paying less in city taxes, too.

As Knoxville Mayor Indya Kincannon proposes a 50-cent increase in the city’s tax rate — about a 20 percent hike — we thought it was a good time to look at how property taxes affect local pocketbooks.

A few notes on our sample: We selected representative properties from neighborhoods and areas across the city and county. We looked only at properties that had been built before 2010, so that we would have a full decade of data.

This is not a scientific survey and can’t be used to extrapolate how much more or less the average homeowner is paying in taxes now vs. then. Many things can affect a given property’s assessed value, from sales prices in the area to home improvements or additions.

But the trends appear consistent across many areas of the county and many income ranges, from luxury dwellings to suburban subdivisions to modest homes in older city neighborhoods. In general, neither the city nor county taxes have kept pace with inflation, which means many people’s tax bills have effectively shrunk.

We used the federal government’s inflation calculator to adjust 2010 dollars to 2021 dollars. There was approximately a 21 percent inflation rate over those 11 years, so that $100 in 2010 had the buying power of about $121 in 2021 dollars.

Calculations are based on comparisons between the amount of property tax a property was paying in 2010 and 2021, in both county and city taxes. In constant dollars, most properties in the sample were paying less in 2021. 

We will talk through some examples both inside and outside the city. We will describe individual properties but not provide the addresses — although all of this information comes from public databases available online, we are not looking to identify any individuals. Well, except for two: the city and county mayors. Their tax bills contrast in much the same way as their politics.

In the City: More Downs Than Ups

City property owners pay both city and county property taxes, more than doubling their tax bill since the city’s rates have been higher than the county’s for more than a decade now. City taxes go to pay for fire protection, waste pickup and public transit — none of which are provided outside the city — along with the Knoxville Police Department and other city services and amenities.

The city’s rate is currently $2.46 per $100 of assessed value, and the county’s is $2.12.

Both of those numbers will change this year — in the city’s case, because of a tax increase (if it passes), and in both cases because of readjustment after this year’s reappraisal. Local governments are not allowed to receive increased tax revenue from an increase in overall property value, so they will both have to adjust their rates downward to account for the approximately 40 percent increase in valuation announced by Property Assessor John Whitehead.

But over the past decade, the city property owners in our sample mostly saw small if any increase in their tax payments.

In 2010, a modest three-bedroom home in a subdivision off of Piney Grove Church Road had assessed county taxes of $615 and city taxes of $641, for a total tax bill of $1,256. Adjusted for inflation, that would be $1,516 in 2021 dollars. But the property’s actual combined city and county tax bills last year were $1,416 — $655 to the county and $761 to the city. That is an effective 7 percent reduction from what the property was paying 11 years earlier.

Some other examples:

  • A large brick rancher in West Hills built in 1966 was taxed at a combined city and county rate of $3,764 in 2010. Adjusted for inflation, that would be $4,544 in 2021. But the property’s combined bill actually dropped over the decade, to $3,712 — its county bill fell by more than its city bill rose. That is equal to an 18 percent reduction in its total 2010 bill.
  • A three-bedroom rancher in Norwood had a combined 2010 tax bill of $1,046. Adjusted for inflation, its 2010 bill would have been $1,263 in 2021. But because its assessed value rose by less than the county average overall, both its county and city taxes have fallen, to a combined $893 — effectively a 29 percent tax cut over the period.
  • A four-bedroom, 2,600-square-foot house in Island Home had a combined tax bill in 2010 of $3,701. Both its county and city taxes actually rose over decade, reflecting increased valuations in the historic neighborhood. But even those increases did not keep pace with inflation. The property’s inflation-adjusted 2010 tax bill would be $4,836 in 2021, but its actual bill was $4,056 — an effective 16 percent decrease.

Of course, there are properties with values that have outstripped the pace of inflation, particularly in some of the city’s more affluent historic neighborhoods. Many saw large jumps in their assessed values over the past decade, as demand for large older homes boomed.

For example, a three-bedroom 2,400-square foot home in North Hills, built in 1945, was taxed at a combined $1,630 in 2010. Adjusted for inflation, that would be $1,967 in 2021. But the property’s assessment rose enough that both its county and city taxes rose, to a combined $2,220 — an effective 13 percent increase over the period.

Or consider Mayor Indya Kincannon’s home, in the historic 4th and Gill neighborhood. Valuations across the neighborhood jumped significantly over the past decade, reflecting high demand and sales prices for its showcase Victorian homes. As a result, Kincannon’s property tax bill has risen substantially, from a combined $1,713 in 2010 to $2,932 in 2021, with both city and county taxes rising. Adjusted for inflation, that’s still a 42 percent increase.

Of the 25 city properties we sampled, in neighborhoods from Norwood to Morningside to South Haven, only six were paying more in combined inflation-adjusted city and county taxes in 2021 than in 2010. Looking at their city tax bills alone, despite the 2014 tax increase, only nine properties were paying more in city taxes in 2021 than in 2010. The rest have all seen decreases in effective taxes.

Outside the City: How Low Can You Go?

The last time County Commission raised taxes was in 1999, when it pushed the county rate to $3.32 per $100 assessed — at the time, higher than the city’s rate. 

But since then, 22 years of no increases — which will almost certainly be extended to 23 years this year — have combined with reappraisals to drop the rate to $2.12. As a result, even as the overall valuation of county property has grown, much of it pushed by new development, many property owners outside the city have benefited from a gradual reduction in their effective tax payments.

Take the property owned by Kincannon’s counterpart. Knox County Mayor Glenn Jacobs bought a 5,300-square-foot home on five acres between Powell and Halls in 2014. In 2010, the county tax bill on the property was $1,819. By 2021, the bill had barely budged, rising to $1,832 — well below the rate of inflation. Adjusted for inflation, the property’s taxes have fallen 17 percent over the period.

Jacobs is hardly alone. Consider a 3,800-square-foot home in Toole’s Bend, with a river view. In 2010, its county tax bill was $3,791 — which would be $4,576 in inflation-adjusted 2021 dollars. But its tax bill last year was $4,056, an effective 11 percent reduction.

Some other examples:

  • A 30-year-old, 3,200-square-foot home in Hardin Valley was taxed at $2,364 in 2010, which would be $2,854 in 2021 dollars. But any increases in its valuation were lower than the county increase overall, so by 2021 its bill had dropped to $2,241 — effectively a 21 percent cut from its 2010 level.
  • A small, three-bedroom house in Strawberry Plains saw a much smaller decrease. Its 2010 county tax bill was $667, which would be $805 in 2021 dollars. Its actual 2021 bill was $794, an effective 1 percent drop over the decade.
  • A 3,200-square-foot home in Lyon’s Bend, built in 1984, had a 2010 county tax bill of $1,871, which would be $2,259 in 2021 dollars. But its tax bill actually dropped to $1,699 by 2021 — effectively a 25 percent decrease.

The only property in our sample outside the city that actually saw an increase in county tax bills during the period was a 1,200-square-foot rancher in Heiskell. Its valuation rose sufficiently to lift its county tax bill from $553 to $734, an inflation-adjusted increase of 10 percent.

It remains to be seen how low the county’s tax rate will drop after the current reappraisal is finished, but it will clearly be well under $2 per $100 assessed. We will circle back in a year to see what kind of impact both it and the city’s new tax rate have had.

For more on the complex mechanics of property taxes, see our earlier story.