(The Center Square) – Tennessee’s third-largest city could not meet more than $70 million in infrastructure requests, so the mayor is proposing a sales tax hike.
But the final word on the half-cent sales tax increase will not be up to Knoxville Mayor Indya Kincannon. The Knoxville City Council will decide on Tuesday of next week and June 24 whether voters will get a chance to decide on the November 2025 ballot.
The sales tax comes as Knoxville is experiencing population growth and an increase in tourism that is pushing the city’s infrastructure to the limits, Kincannon said in her proposal.
“This is Knoxville’s time,” Kincannon said. “Having the resources to address housing, neighborhood and infrastructure needs will enable us to build the best version of Knoxville to better serve our residents and visitors. And our children will thank us for responsibly making these needed investments, instead of kicking the can down the road.”
Kincannon is exempting groceries from the sales tax increase.
The sales tax could generate up to $47 million a year, according to Kincannon’s proposal. The most significant chunk of funding would go toward greenways and paving, with affordable housing, parks and sidewalks and traffic calming, each receiving $10 million. The remaining $5 million would be allocated to facilities and maintenance.
“We purposely didn’t get specific yet because we want to hear from you about what you think,” Kincannon told the Knoxville City Council during a workshop last week.
Tennessee’s state sales tax is 7% but the law allows counties and municipalities to charge an additional sales tax of up to 2.75%. Knoxville’s sales tax has remained at 2.25% since 1989, according to the Tennessee Department of Revenue local sales tax map. Anderson, Blount, Sevier, Jefferson and Grainger counties have increased to the max local sales tax rate of 2.75%.
“I want to give Knoxville voters that same option,” Kincannon said. “This also means everyone who spends money in our city, not just those who live here, will be contributing to the services they rely on.”
But Knoxville’s other surrounding counties have lower rates. Union County’s rate is 2.25%, and Loudon County’s is one of the lowest in the state at 2%.
Among the state’s largest cities, Nashville added a 0.5% local option transit surcharge to raise that city’s sales tax to 2.75%. Memphis is at 2.75% while Chattanooga’s rate is at 2.5%.
The Volunteer State’s combined sales tax rate is the second highest in the country at 9.56%, according to the Tax Foundation. Shoppers pay lower state sales taxes on food – 4%.
Republicans and Democrats proposed bills this year that would have removed the food tax. The bills failed to pass.
Tennessee does not have an income tax.
