Quintero and Ginn: Give voters more control of property taxes
Far too many Texans are getting pummeled by property taxes.
In 2015, more than 4,100 local governments levied property taxes totaling $52.2 billion, or roughly $1,900 for every man, woman, and child in the Lone Star State. That’s a jump in the tax levy of more than $3 billion from the prior year and almost $12 billion compared with just five years ago.
Texans’ property tax bills aren’t just big — they’re also growing quickly. From 2000 to 2015, property tax levies soared statewide by 132 percent. Over the same period, standard economic measures like population growth and inflation increased just 79 percent.
These data reinforce what everyone already knows — that Texas’ property tax system is broken and needs an overhaul lest more people lose their homes, businesses, and futures.
Fortunately, the problem has not gone unnoticed at the Capitol where legislators are debating a number of different fixes, with one particular solution looking more and more likely.
In short, the Legislature looks poised to require cities, counties, and special districts to get permission from voters if already-high property taxes grow too fast in any one year. That focus on voter approval could be a real game-changer.
Today, Texans must know and understand what a rollback tax rate is, wait for one of their many local governments to exceed it, and then be ready to quickly obtain a sizable number of signatures to petition for an election. That’s a lot to ask from families who are busy working, raising kids, and generally dealing with life’s challenges.
To simplify the process and level the playing field, lawmakers are proposing to reduce the rollback rate by half and require an election to be held automatically if local officials want their budgets to grow by more.
By drawing a line in the sand and requiring an election if it’s crossed, Texans can expect future property tax bills to grow more slowly while still allowing local officials an avenue to raise tax revenue if they can make a sufficient case to the public. This not only puts more control in the hands of local voters but also creates a greater level of accountability.
Some critics have sought to cast these good government reforms in a bad light by suggesting that it would harm public safety. But as has been documented time-and-again, there’s plenty of waste, fat, and abuse in city budgets that can be better prioritized before we even get close to that point.
If the current legislative effort is deficient in any way, it’s that it excludes school district property taxes — a major driver of the problem. However, it’s excluded for a good reason: the school finance system is ridiculously complex and should be addressed separately.
Given these structural property tax reforms take effect, they would dramatically alter the local landscape for the better. However, these should only be considered intermediate reforms.
The ultimate prosperity- generating reform is to eventually eliminate property taxes, which another bill — HB 1050, which has yet to receive a hearing — proposes to do. Research undergirding the bill shows that this can be done in a revenue-neutral way by enacting a reformed sales tax that broadens the tax base and increases the rate from 8.25 percent to around 11 percent. This wouldn’t just be a tax swap but rather a much more efficient tax system that would contribute to higher incomes and more jobs created, and allow you to actually own your property.
Texans want more control over their livelihood instead of giving it to local officials that may unnecessarily raise their taxes to pay for excessive spending. These common sense structural reforms would enhance local control by voters.
James Quintero is director of the Center for Local Governance and leads the Think Local Liberty Project at the Texas Public Policy Foundation and Vance Ginn, Ph.D., is an economist in the Center for Fiscal Policy at the Texas Public Policy Foundation, a nonprofit, free-market research institute based in Austin.
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.