March 2, 2004

How TABOR Will Boost Revenue in Spring Hill

The Taxpayers Bill of Rights proposal is in the news today - see the post immediately prior to this one - and while the proposal is for a cap on state taxes and spending, it's instructive to consider what is happening in Spring Hill, the first town in Tennessee to pass a local version of the taxpayer protection provision.

Take special note this Tennessean story, which reports that a developer is contemplating building a sizable development of luxury homes, above the $300,000 price level, in Spring Hill, Tennessee, which up 'til now had been growing mostly with lower-cost homes.

How is that related to TaBOR? Spring Hill recently passed a local version of the Taxpayers Bill of Rights, capping tax rates and requiring approval by voters to raise them. You do the math.

A homeowner is, essentially, a small-business owner merely by virtue of their investment in real estate. A person with the income level to choose where they invest in a house often will chose to invest in a location where their investment will generate the most return over time. A town with a capped tax rate and a provision that allows voters to control future tax rate increases must look like a very smart place to invest indeed.

The developer of the proposed luxury-homes subdivision in Spring Hill knows that homes in a city with a cap on tax rates will likely appreciate faster than homes in cities where taxes are out of control - and that such homes may well attract buyers more rapidly, and buyers who are willing to pay a higher price for the homes because they are such a good investment.

By capping property tax rates and giving voters control over future tax increases, Spring Hill has made itself more attractive to the small-business investor we call a "homeowner." The kicker is ... Spring Hill will reap more tax revenue from those higher-valued homes, even though (and because) it capped tax rates.