Mayor Proposes a Half-Cent Sales Tax Increase for November Ballot

Knoxville Urban Guy·
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Announcement of Mayor Kincannon's Proposed Half-Cent Sales Tax Increase, City County Building, Knoxville, May 2025
Announcement of Mayor Kincannon’s Proposed Half-Cent Sales Tax Increase, City County Building, Knoxville, May 2025

In a hastily called news conference this afternoon (an email was sent to reporters just after 11:00 am for  a 1:00 pm press gathering) in the City County Building, backed by numerous city officials, Mayor Kincannon announced her proposal to add a half-cent to local sales tax charges within the city. The proposal is projected to raise an additional $47 million per year going forward, and would be applied to three categories within the city budget. It would not apply to groceries as defined by the state of Tennessee (which includes such items as diapers).

The categories, broadly defined, include affordable housing, increased neighborhood investment, and deferred maintenance projects in parks and other city properties. A bit more specifically, the funding would be projected to provide $12 million for greenways and roads, $10 million for parks, $10 million for sidewalks and traffic calming, $10 million for affordable housing, and $5 million for facilities and maintenance. These funds would be on top of the funding already provided for these categories in the recently submitted budget and, according to the mayor, would speed up some long term projects from a projected twenty-year completion to a five year completion.

Reading from prepared remarks, Mayor Kincannon said,

It is no secret that more people are moving here, the number of visitors here is skyrocketing, and our infrastructure is being pushed to its limits. This budget cycle alone, we had more than $70 million in infrastructure requests that can’t be funded. With so much uncertainty, it is more important than ever that we take action to generate more local dollars for local projects. This is Knoxville’s time. 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.”
Should city council agree to place the item on the November ballot, voters would have to approve the measure. With the increase, sales tax in Knox County would equal the majority of counties around us. From the press release, “The state of Tennessee has a 7% sales tax on items purchased across the state. Municipalities may charge a Local Option Sales Tax to generate money for their community’s needs. Since 1989, Knoxville’s Local Option Sales Tax has been 2.25%. This proposal would change that to 2.75%.”
While property taxes are a separate conversation, this would be the first local sales tax increase in Knox County since 1989. The neighboring counties already charging this half cent include Anderson, Blount, Sevier, Jefferson, and Grainger. She pointed out that when Knoxville residents visit the outlets in Sevier County, they pay to support infrastructure costs there via that tax, and she feels they should do the same for us. She estimated that half the tax increase would be borne by non-Knox County residents, saying:
Right now, more people are moving here, the number of visitors is skyrocketing, and our infrastructure is being pushed to its limit . . . This also means that everyone who spends money in our city, not just those who live here, will now be contributing to the services that residents and businesses rely on. With so much uncertainty right now, it is more important than ever that we take action to generate local dollars, with local control, for local projects.
As was noted in the questions after her initial statement, sales tax is considered more regressive because of its impact on working families, whereas property taxes hit existing wealth. She said that is why she exempted groceries, saying, “I have thought about the impact this would have on local families. That is why I made the decision that groceries, often a family’s biggest expense, will be excluded from this additional tax.” The tax will also not apply to other costs like gasoline, which is taxed separately.
Announcement of Mayor Kincannon’s Proposed Half-Cent Sales Tax Increase, City County Building, Knoxville, May 202
  Council will vote on the measure in June and if passed, it will be placed on the November 2025 citywide ballot. The city is providing a site for more detail and Mayor Kincannon also said the same site would be used for updates on how and when the money is spent, should the measure succeed.
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21 Responses

  1. I can get behind this increase; even though I don’t live in the city, I do live in Knox county and we do go downtown often. If raising taxes equals updated or maintained infrastructure, I’m always a yes.

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  4. Clearly that massive property tax hike a couple years ago just wasn’t enough. Man, between this and how everyone is getting nickeled and dimed simply going downtown– the city really is on a roll.

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    1. They don’t like us to remember that. Nor the fact they’re moving property assessments to every two years instead of every four. Nor the fact that in Indya’s first term that she boasted about record hospitality tax revenues. Which I’m sure have only continued to grow.

      To anticipate comments about the pandemic: no it didn’t really make that much of a change. Zero hotels closed here, and due to Billy’s (terrible for public health but good for the economy) policy about pretending the pandemic was a Soros-funded conspiracy theory, Knoxville still had lots of tourism.

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      1. Knoxville has gotten raises every year as costs have increased. That’s how percentages work.

        In 2001, the City’s grand total budget was $259.4M, for a population of 173k. That’s $1,500 per resident.

        In 2024, the City’s grand total budget was $606M, for a population of 202k. Thats $3,000 per resident.

        It’s not as simple as saying we have a tax problem or a spending problem. Don’t oversimplify this into your preferred camp.

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          1. That’s my point. KUG said “hadn’t had a raise since 1989.” In reality, by the nature of any percentage-based tax, the govt gets “raises” that keep up with inflation. Call it a “cost of living adjustment.” When inflation increases costs, sales tax reflects that higher cost via percentages.
            And as you pointed out, the current budget is actually higher than if tied strictly to inflation.
            I’m in favor of the tax increase. I’m in favor of a property tax increase too. But let’s be honest about tax revenues in order to keep the govt honest when they bring up 1989 as justification.

        2. I would argue we havent spent enough. The sidewalks in my neighborhood near town are trashed. South Knoxville sidewalks are some what dangerous. I have very mixed feelings about traffic calming stuff.

          Our county population has went from 385k in 2001 to 500k in 2023. A significant number of these people use the infrastructure downtown, they also spend a lot of money in downtown and thus pay a large amount of sales tax. That doesn’t account for all the extra tourism now that we have ample hotels downtown. Just spreading the budget numbers over population does not tell the whole story.

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          1. And that’s why the County is in financial distress. The City has increased property taxes since 2001. The County has not. Property taxes are required to be revenue neutral, ie when property valuations increase, the % goes down.

            The County is the one that really hasn’t gotten a raise since 2001. They let growth be their Ponzi Scheme – using tax dollars from new developments to pay for maintenance of older infrastructure.

  6. Sounds like it’s long overdue, and there’s great benefit for both residents and visitors alike. I never noticed that Knox County sales tax lagged behind neighboring counties. I’ll vote YES.

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  7. Is this a City sales tax (only within the Knoxville city limits) or a County sales tax (for all areas within Knox County)? It’s not clear which one is being proposed.

    If County is included, why was it a Kincannon announcement?

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    1. Its for the city only.

      So for every $100,000 it will cost an extra $500. Don’t think many people will feel that. I’m sure a lot will whine about it.

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  8. The subtle point made by Knoxville Urban Guy is well taken. Surely the sales tax increase proposal was not dreamed up just this morning.

    And as he points out, it’s regressive, affecting people of modest means the most. Groceries are excluded, fine, but everyone purchases more than groceries.

    But the poor are unlikely to complain about a sales tax increase, unlike people of means, who would surely object to a property tax increase.

    As Mayor Kincannon notes, the cause of the proposed sales tax increase is the rapid growth of Knoxville.

    Sadly, what she does not acknowledge is that rapid growth can destroy a city.

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  9. Thanks for posting this Alan, it was a surprise to see this announcement. KNS has a good summary about some aspects of this that are only alluded to here — I think you can read it for free, but the nuance is how Knox County decides to play this, since the city and county geographically are not 1:1. Furthermore, the bulk of this sales tax goes to the school system (72%), which is county-run. Apparently if the city council puts this to the voters, Knox County has 40 days to decide, via the commission, to make it a county wide referendum or not. The possible options are obvious: it’s a city only vote and adopted or not or it’s a county wide vote and adopted or not; if county wide and not adopted, apparently the city can try again on its own at that point, without involving the county. You can look up the rest, but the punch line is that if this ends up being adopted only in the city, then the city does not have to share the delta of 0.5% with the county for the schools or anything else (of course, the county then keeps its lower rate for sales tax until such time as it adopts the 0.5%). There’s a lot more detail in the KNS summary. Lastly, I’d point out that if you are keeping up with the county’s financial position, debt service is slowly crowding out the ability to fund “nice things people expect” from their government. Glenn Jacobs may slide out of office having continued the “no new taxes” pledge, but the next county mayor is going to have to make some decisions about taxes or spending that a lot of folks are going to find unpalatable one way or the other. The county continues to grow in areas that don’t involve the city and spend money on various things and punt the true costs of a lot of it to the future.

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  10. Does she not realize how hard it already is for small businesses to get out of state customers to spend money with us because of our already high tax rate compared to everyone else around us. I’ve been in business a long time and that has always been the thing that I have struggled to deal with

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  12. The wording Indya chose for this is terrible, and I’d like to believe it’s intentional. Would I vote for a “half cent” sales tax per item purchased? Absolutely. That’s nothing for me. But I certainly wouldn’t vote for a “half PERcent” increase when we already basically have the highest combined sales tax in the country. Shame on her for this.

    Reply

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