Davidson County Contemplates Half-Cent Sales Tax Increase for Transit Overhaul: What It Means For You

A New Vote on Local Transit Funding

Davidson County residents will cast their ballots this November in a vote on dedicated local transit funding. The only funding source currently under consideration by Nashville Mayor Freddie O’Connell’s administration is a raise in local sales tax by half a cent.

The increased revenue is slated to finance a range of transit projects. Total costs for these developments are expected to be in the billions.

Transit Improvement Plans In Prototyping Stages

Official plans for transit improvement projects and related funding models have not yet been finalized. However, current drafts indicate a focus on the “Choose How You Move” program, which anticipates funding for 86 miles of new sidewalks, 38 miles of dedicated bus rapid transit lanes centered on Nashville’s pikes, and around 600 traffic signals countywide.

O’Connell has pointed out that the goal of the plan is fiscal prudence, along with the creation of a high impact and low-cost transit solution.

Potential Impact of Sales Tax Hike On Davidson County Residents

Residents of Davidson County currently pay a 6.25% sales tax on most groceries, excluding prepared foods, alcohol, tobacco, candy, and dietary supplements. On everything else, the sales tax stands at 9.25%. A local sales tax increase of 0.5% would see these figures swell to 6.75% for groceries and 9.75% for other taxable goods.

In terms of cash impact on an average individual, this could result in additional $4 per month in tax on groceries and other household goods. Families with two adults and two children could expect to pay approximately $10 more per month.

Justifications for the Sales Tax Hike

A dedicated sales tax surcharge stands to offer consistent local matching funds for transit projects. This, in turn, allows Nashville to apply for extra federal grant funding. This concrete source of local funding makes Nashville an attractive applicant for federal, state, and organizational funds.

Why Sales Tax Was Picked Over Property Tax

The IMPROVE Act does not permit a property tax surcharge as one of the dedicated revenue sources. As a result, property tax was not part of the financial assessment for the referendum. While a raise in property tax could be used to fund transit projects, the allocation of property tax dollars can fluctuate yearly, and different administrations may have varying priorities.

Assessing the Costs of Relying on Sales Tax

Concerns have been voiced over the use of sales tax for transit funding, particularly given its regressive nature which can disproportionately affect lower-income taxpayers. However, critics argue that a robust transit system may allow households to potentially save thousands per year by reducing the number of vehicles they own.

Property Tax or Sales Tax: An Ongoing Debate

Property tax, favored by some economists as it acts like a “user fee”, varies based on the housing market, meaning owners may end up paying more taxes over time for the same level of service. While property taxes are considered beneficial for supporting basic infrastructure, the public will have to weigh up property tax against the prospect of a sales tax hike.

Although concrete plans have yet to be released, Nashville’s mayor has been praised for taking public opinions into account in these early stages. However, whether Nashvillians are willing to accept an increased sales tax for transit improvements remains to be seen.