Tennessee has a lot of things going for it, with the state’s economy outperforming the nation as a whole in key areas such as unemployment, GDP growth, and personal income growth. State lawmakers have taken steps to make Tennessee a competitive state for businesses and families. In Beacon’s most recent report, Tennessee Trends: The State of the Economy, a historical view of Tennessee’s economy demonstrates previous legislative actions have reduced the tax burden on every individual and business. But until further action is taken, Tennessee may be at a standstill.
Tennessee ranks a respectable 8th nationally in the recently published 2025 State Tax Competitiveness Index, yet the report lays out that the Volunteer State is unlikely to move up to beat out states like Florida and Texas, until further changes are made. The report praises Tennessee’s recent tax reductions, saying the state has “slashed its gross receipts tax rate from 0.3 to 0.15 percent and made reforms to its state capital stock (franchise) tax to reduce burdens on businesses.” However, Tennessee’s high excise tax is only matched by Alabama in our eight surrounding states. Also, the state’s sales tax rate is only surpassed by California. Additionally, Tennessee is one of a few states that has a gross receipts tax. The index warns that “until these taxes are eliminated, however, Tennessee is unlikely to improve on its ranking of 8th overall.”
Further work can be done in the area of property taxes, where Tennessee ranks 33rd nationally. Being one of only four states without some form of property tax cap, Tennessee residents have no protections from massive increases. We’ve seen these large property tax hikes like Nashville’s 34 percent in 2020, Red Bank – a suburb of Chattanooga—raising their taxes 52 percent in 2023, and, just this year Washington Co. taxes jumped over 20 percent.
Enormous increases in property taxes are not the norm for millions of other Americans, but without taxpayer protections in Tennessee, like a property tax cap, local governments are free to jack up tax rates to no limit. To offer protection to all Tennessee residents, state lawmakers should look at the 46 other states that have implemented some sort of property tax cap and give Tennesseans similar protections.
Tennessee is a place that is welcoming to families and businesses, but reports like the State Tax Competitive Index show there is still work to do, and the state is unlikely to be the most competitive and welcoming it can be until those are addressed. Policymakers in the state owe it to Tennesseans to provide them with taxpayer protections provided in the vast majority of other states and to make Tennessee the best and easiest place to start a business and raise a family.