Tennessee Senate Bill SB2074

Tennessee 2025-2026 Regular Session

• Introduced: 1/22/26

Caption

AN ACT to amend Tennessee Code Annotated, Title 5; Title 6; Title 7; Title 49; Title 54 and Title 67, relative to the Local Government Revenue Stability Act.

Impact

If enacted, the bill will dramatically alter how local governments finance essential services such as education, public works, and law enforcement. By eliminating the authority of local governments to levy property taxes, the act seeks to centralize revenue collection at the state level. The intention is to guarantee continuity in funding for public services while reducing the administrative burden on local government entities. The annual disbursements from the newly created fund will be calculated based on historical property tax revenues from 2028, supplemented by a growth factor associated with sales tax revenues.

Summary

Senate Bill 2074, known as the Local Government Revenue Stability Act, proposes significant changes to local government funding mechanisms in Tennessee. The bill aims to replace ad valorem property taxes with a statewide surtax on sales, thereby establishing a more stable and broad-based revenue system for local governments. Beginning January 1, 2031, a 4% surtax on all sales subject to the state's sales tax will be charged, with revenues directed towards a dedicated Local Government Revenue Stability Tax Fund. This fund is designed to ensure that local entities receive an equivalent of their 2028 property tax revenues, adjusted for economic growth annually.

Contention

The proposal is likely to spark significant debate among legislators, local government officials, and the public. Proponents argue that this shift will ensure more equitable funding across all localities, maintaining stable funding levels regardless of fluctuations in property values. However, critics may voice concerns over local control and the potential loss of funding tailored to specific community needs. Questions about the effectiveness of sales taxes in sufficiently replacing property tax revenues and issues surrounding the potential for reduced local accountability and governance may arise as key points of contention during legislative review.