Suddenly everyone's into numbers.
Mayor Herenton started the latest round by proposing to withdraw Memphis tax support for public schools. Since then, members of the Shelby County Commission and the city and county school boards have struggled to balance their budgets while claiming, in so many words, that residents of Memphis and Shelby County are being taxed to the breaking point.
Are they? Dramatic statements make great quotes and sound bites, but just how high are taxes in Memphis and Shelby County?
The breaking point, of course, varies from one person and one family to another. What can be compared with reasonable accuracy, however, is the tax burden and cost of living in Memphis and other cities. The findings are surprising, as the following little true-false test shows. Thanks to Larry Henson, part-time geography instructor and full-time ace researcher at the Memphis Regional Chamber of Commerce, for supplying the numbers.
"Standardizing local taxes is the absolute, hardest thing on the planet to do," he said. On the other hand, "our taxes here are blessedly simple" because there are relatively few exemptions and hidden taxes.
With those thoughts in mind, away we go:
Tennessee is a low-tax state. True, mainly because there is no state income tax. The federal government pays for a nationwide comparison of taxes in Washington, D.C., and the largest city in each of the 50 states, which Henson said is widely used. A handout distributed by the school administration at the Memphis Board of Education meeting this week claimed that Memphis has "the fifth-lowest tax burden in the United States." Studies like the one Henson uses back this up. Memphis ranks either 44th or 46th for tax burden on a family of four with income of $50,000 to $150,000. There is a major exception, however: The tax burden is greater on poor people. When low-income households are compared, Memphis ranks 30th in the same survey.
You want low taxes? Move to Wyoming, Nevada, Alaska, or South Dakota. High taxes no problem? Try New York, New Jersey, or Pennsylvania.
Well-to-do people get a tax break in Memphis. True. The more you make, the more you benefit from the tax structure in Memphis and Tennessee. At $100,000 in family income, a Memphis family pays $5,847 in property, sales, and auto taxes, compared to $8,427 in Birmingham, $9,050 in Jackson, and $11,550 in Atlanta. Again, the kicker is the lack of a state income tax. Mississippi has a 5 percent state income tax, and Arkansas has a 7 percent state income tax.
Poor people are screwed by the current tax system. True. It's called regressive taxation, meaning overreliance on the sales tax and gasoline taxes. Poor people pay a greater percentage of their disposable income on such things. Many other states exempt food and clothing from sales tax, but without a state income tax, "we can't afford to," said Henson. The sales tax rate is 9.25 percent in Memphis and Shelby County, compared to 7 percent in DeSoto County and 5.13 percent in Crittenden County, Arkansas. The last Tennessee governor who tried to do something about this was Don Sundquist, a Republican. He failed and was shunned by his own party.
Memphis has relatively low property taxes. False. Depending on income level, Memphis ranks near the middle of that survey of the biggest city in each state. Our property taxes are higher than those in Birmingham, Nashville, Denver, Charlotte, Washington, D.C., and Louisville, among others.
People are fleeing Memphis for low-tax Mississippi. False, at least as far as tax comparisons are concerned. It is true that compared to Southaven, Memphis has higher property taxes. The owner of a $150,000 home pays $2,726 in Memphis and $1,898 in Southaven. But the overall tax picture favors Memphis. Mississippi has the highest auto taxes in the country, plus that 5 percent state income tax. At every income level, Memphians pay lower total taxes than residents of Jackson, Mississippi's biggest city.
Memphis has higher taxes than other cities in Shelby County and neighboring counties in Tennessee. True. The combined city and county property tax rate in Memphis is $7.27, while the next highest municipality is Germantown at $5.79. The lowest rates are in Covington in Tipton County ($3.87) and Somerville in Fayette County ($2.38). If you live in Tipton County, as Henson does, you have to figure the cost of commuting, which in his case takes him about 45 minutes each way.
Memphis has a low cost of living. True. The chamber calculates the cost of 59 consumer goods and services in different cities across the country. Memphis is lower than the metropolitan average and lower than all but two other cities surveyed, Knoxville and Jonesboro, Arkansas. But the difference between Memphis and other Southern cities is small. In fact, all of them are lower than the national average. The most expensive places to live are New York, San Francisco, and Los Angeles, and no city in the South is even close.
This stuff matters. True. Granted it's his livelihood, but Henson said numbers make a difference early in the game when Memphis is competing against other cities for new businesses. "The first part of a site sale is data-driven," he said. The impact on individuals is harder to measure. Homebuyers probably aren't running around with surveys and calculators, but an annual tax burden of $5,847 in Memphis compared to, say, $9,419 in Little Rock could well be a consideration for a family of four with $100,000 annual income.
Henson's personal view is that flight from urban problems is less of a factor for Memphis than the positive attractions of green spaces and bigger lots in the neighboring counties. Whether they're in northern Mississippi or Tennessee, employers don't care because "they're all using the same work force."