Have you ever wondered why developers and big corporations can thrive off Nashville’s booming economy, but the city government and residents are still strapped for cash? The deal is better for one side of the equation, and it isn’t the side for working-class residents. 

In this issue, we’ll explain:

• Why the city’s development is booming, but the city’s budget is broken.
• How restrictive state laws limit local budget revenues. 

The answer lies in how state law limits what revenue sources Metro can tap, a.k.a who gets to pick up the tab, to fund the budget. In the past, federal funds helped counterbalance controlling state laws. But since the 1980s, federal support for local budgets has declined. Adding to the problem, state and federal changes to local taxes and budgets over the years have increasingly stacked the deck in favor of the wealthy, severely limiting the tools available for Metro Nashville to raise money. We see it in the banning of local income taxes and impact fees, capping sales tax increases without a public vote, and making property‑tax increases and development fees a political minefield.

Tennessee has one of the most regressive tax systems in the country. That means our state imposes a higher tax burden on lower-income earners than on higher-income earners. The state constitution prohibits state and local income taxes, leaving only property and sales taxes as viable revenue sources for cities.

• During the 2026 fiscal year, 57% of Nashville’s revenue came from property taxes, by far the largest share. 
• The second largest share, 19%, came from sales taxes.

Because working-class people pay a greater percentage of their incomes in property and sales taxes than those with higher incomes, raising revenue for the city is in direct tension with basic affordability. These taxes also disproportionately burden Black and Latine households in Tennessee, which pay effective sales and excise (consumption) tax rates that are about 22% higher than those of white households. Even if the city were able to raise taxes, it would only place more strain on Black, brown, and working-class residents. This places an effective cap on the amount of tax revenue the city can bring in.

In comparison, the state legislature provided a $1.5 billion franchise tax refund in 2024, benefiting some of the biggest corporations with assets in the state, including Amazon, AT&T, FedEx, HCA, and Nissan. This system of benefits to big business and strain on Black and brown workers is what the Economic Policy Institute refers to as the failed Southern economic model, “rooted in racism” and slavery.

With the state’s thumb on Nashville’s ability to change how it taxes, the city instead focuses on increasing how much money existing tax tools bring in while keeping the tax rate the same. This fiscal dilemma pushes many city governments, including Nashville, into adopting a revenue strategy that promotes development while driving gentrification and rising housing costs. As a result, gentrification—not affordability—becomes the engine of the city’s budget. 

Later this week, we’ll unpack exactly how gentrification becomes the driving force for the city’s budget. Spoiler alert: development and tourism.

Lastly, will you spread the word about our letter to the mayor and city leaders? Our “We Want to Stay” letter is a unified statement from Nashville businesses and nonprofit organizations urging Mayor Freddie O’Connell to take bold action to secure housing solutions through budget funding. From the owners to their employees, and from the nonprofit leaders to the people they serve, stable housing is crucial for everyone. 

• If you lead a business or organization, please join the list in solidarity.
• If you don’t lead a business or organization, please share it with someone who does.