Texas’ 88th regular legislative session, sine die as of Memorial Day, will be remembered as the one that got Texas closer to looking like California and less like the leading pro-market and limited government Lone Star State.

Instead of the desired “largest property tax cut in Texas history,” school choice, and spending restraint that would best let people prosper, legislators passed the largest increases in spending, corporate welfare, and safety nets in state history.

Texas taxpayers can only hope that Gov. Greg Abbott’s (R) just-called special session will help with property tax relief but there will need to be more special sessions for universal school choice and other pro-prosperity priorities.

The newly passed total budget for the upcoming two-year period amounts to $321 billion, which is a 21.3% increase from what was initially appropriated in the prior period. Excluding federal funds, state funds increased by 31.7% to $219.1 billion. These are the largest increases in recent history and likely ever. And both are substantially above the rate of population growth plus inflation of 16% over the last two fiscal years.

In short, legislators passed massive budget increases which aren’t conservative or responsible and will make it difficult to sustain these expenditures over time. Making matters worse, the Legislature provides over $10 billion in new corporate welfare, the largest amount in state history.

This includes renewal of property tax abatements by school districts, HB 5, that had died in December 2022, money for the governor’s Texas Enterprise Fund, and subsidies for natural gas projects, movie production, broadband projects, water projects, state parks, and more.

And much of this will be on the ballot this November to create new funds to spend on these efforts, which voters should reject. Instead, these expenditures should be done in the normal budget process as constitutionally dedicating these taxpayer dollars will remove them from under the constitutional spending limit, allowing the state to spend even more.

Texans were quick to celebrate the movement toward new property tax relief efforts, which is a major burden for property owners across the state. And with a surplus of $33 billion, there was the opportunity to do so by rightfully returning these over collected taxes.

But those cuts never materialized in the wake of less effective solutions of appraisal caps and homestead exemptions taking precedence over the previously promised historical property tax cut.

The gold standard for relief of school district maintenance and operations property taxes is through compression, which means that the state uses mostly sales taxes to buy down those property tax rates and thus tax collections by the most possible. And the amount should be about $21 billion, or 25-cent compression, in inflation-adjusted dollars to have the same purchasing power today as what was the largest property tax cut of $14.2 billion in 2008.

This is a critical path to eliminating nearly half of the property tax burden in Texas so people can truly own their property instead of renting from the government forever.

Still, any relief provided is made much less effective with the passage of HB5, which is just Chapter 313 revamped.

HB5 gives more corporate welfare to big businesses by allowing school districts to give tax breaks to companies for new buildings, thereby choosing winners and losers among school districts affected. As school districts lose property tax funds at the hands of HB5, state funds must compensate for the loss on the backs of taxpayers across the state.

These big spending, big corporate welfare, and no tax relief represent a potential turning point in the wrong direction that harms a robust economy.

In the first called special session this week, there has already been a bill passed by the Texas House that would provide that opportunity by compressing school district M&O property taxes by 16.2 cents per $100 valuation with $12.4 billion. The Texas Senate has a proposal that would compress those taxes by 10 cents per $100 valuation and raise the homestead exemption by $60,000 to $100,0000 with $12.1 billion.

​So far, Gov. Abbott has said that the call was only for compression but Lt. Gov. Dan Patrick (R) has been pushing back. At the end of the day, compression is best as it helps everyone, is long-lasting as a share of taxable value, and, more importantly, is the only way to eliminate these taxes.

But what’s still a problem is that these amounts are only about one-third of the $33 billion surplus, meaning the Legislature wants to spend more money than return to taxpayers. This is not the path to prosperity as at least $21 billion in new tax cuts is needed for this to be the largest property tax relief in Texas history.

Lawmakers should prioritize responsible relief measures that encourage job growth and support initiatives that promote long-term economic prosperity by reducing spending, cutting taxes, and supporting prosperity.

​Originally published by The Center Square.

Larry and Glenda Legler think the state should be using much of its nearly $33 billion surplus to give Texans a break on their property taxes.

Larry Legler said, "The state's got an ungodly amount of money that they need to do something with."

But after months of promises to do that, Republican leaders still can't agree on the way to provide relief. "That's what's getting frustrating."

Governor Greg Abbott prefers ending the school maintenance and operations or "M&O" portion of your property taxes over ten years.

That portion alone is about 42% of your property tax bill.

To make that happen, the state would shift sales tax, other state revenues, and surplus money to pay for public schools.

That would allow the state to gradually reduce the rate for M&O property taxes until they're eliminated altogether.

Vance Ginn, a conservative economist and president of Ginn Economic Consulting, has pushed this idea for years. "It's the only way that you can get to $0 school district property taxes is by buying down those rates because that rate can go to zero which zero out of a hundred-dollar valuation for a home is $0. And so that is still $0, and you've eliminated that tax."

But Lt. Gov. Dan Patrick and the Texas Senate have a different plan.

While it uses more state revenues and less property taxes to pay for schools, it would also increase homestead exemptions for most homeowners from $40,000 to $100,000.

And for homeowners over 65, it would raise homestead exemptions from $70,000 to $110,000.

Patrick said it would provide nearly double the savings for homeowners than the Governor's plan.

CBS News Texas asked Patrick earlier this week if he doesn't support eliminating the school property tax.

He said, "You can't get there. You only have sales tax to prop up a state of 30 to 35 to 40 million people the next decade. What happens when we have a decline and sales taxes go down? You'll have no money to pay your bills. You can't be a one-legged horse."

Ginn disagreed. "The Comptroller said we're going to have about $27 billion in the rainy-day Fund. The rainy-day fund is there to cover unforeseen revenue shortfalls which would be exactly this sort of situation."

Abbott said 30 business and other groups support his plan.

The Leglers said because they're seniors, they prefer the plan from Patrick and the Senate. "Everything's gone sky high and when people can't get the medications they need, which is not our case, but many people we know, or they can't afford groceries, a loaf of bread at the grocery store, we got a problem."

Both the House and Senate have approved different legislation, and until they pass the same bill, the Governor cannot sign it into law. 

Abbott will speak Friday about this, and other issues related to the regular and special legislative sessions. 

Originally published by CBS Texas.

​State leaders promised “historic” property tax relief this session, but though it is near the finish line, it will not make it past the checkered tape before the body adjourns sine die on Monday.

Last summer, Gov. Greg Abbott called on the Legislature to appropriate “at least half” of the then-$27 billion projected budget surplus to provide “the largest property tax cut ever in the history of Texas.” The comptroller’s January Biennial Revenue Estimate increased that total to $32.7 billion in the state treasury and $27 billion in the Economic Stabilization Fund, also known as the state’s savings account.

That’s a lot of tax dollars to disburse, and number one on Abbott’s list was property taxes — which was also high on the list of both chambers.

But after a lengthy, attention-grabbing impeachment proceeding against Attorney General Ken Paxton on Saturday afternoon, the clock ticked on toward the midnight deadline to distribute the conference committee report for the last-remaining property tax proposal.

And then, some Sunday evening scrambling on a last-minute deal turned out to be more smoke than fire — the House conferees announced the signing of a deal last night, and posted a picture of them waiting for the Senate’s conferees to come sign it, but that ultimately did not happen. Details of that blueprint have not been disclosed as both sides have kept their cards close to their chest.

The Texan can confirm that plan included the $12 billion for rate compression, a $70,000 standard homestead exemption, a $100,000 elderly and disabled homestead exemption, and a 7.5 percent appraisal cap on all real property.

After a hastily convened meeting with Lt. Gov. Dan Patrick and Abbott, Speaker Dade Phelan (R-Beaumont) made a beeline for the House dais and adjourned the body until Monday morning with no deal announced on marquee property tax relief.

Discussions continued into Monday morning but no deal was struck — appraisal caps being the point of insurmountable disagreement. Abbott tacitly weighed into the debate, gesturing at putting rate compression above all else, but it did little to move the needle one way or the other.

The Texas House passed a revamped version of Senate Bill (SB) 3 on May 19 — a plan that included $12 billion for new rate compression and the 5 percent appraisal cap on all property from its original plan. But it also included a $100,000 homestead exemption, double what the Senate included in its proposal.

Ultimately, the two sides could not coalesce on a compromise; the House dug its heels in for an appraisal cap reduction and extension, while the Senate dug its heels in against it. The ramped-up homestead exemption was not enough to entice the upper chamber to swallow the appraisal cap pill. Lt. Gov. Dan Patrick has maintained it to be a total non-starter in the upper chamber.

As passed by the House, SB 3 would have amounted to $16.3 billion in property tax curtailment, plus the $5.3 billion already in the budget to maintain previous levels of compression.

Because of this stalemate, and the emphasis Abbott has placed on it, property tax relief is sure to be on the list of issues for the coming special session — expected, but not yet confirmed, to start Tuesday. Property tax relief was on the governor’s list of emergency items at the beginning of the session.

Even with the appraisal reform stalemate, there is a starting point of common ground between the chambers. The 2024-2025 state budget, approved by both chambers over the weekend, earmarks $17.3 billion for rate compression — $5.3 billion to maintain previous levels and $12 billion to add to it.

The budget has no line item for homestead exemption increases and the appraisal cap extension would not require any financial injection. When the two bodies reconvene, it’s unclear how this stalemate could be resolved other than both just throwing up their hands and moving forward only with the rate compression — the aspect they both agree on.

The previous record for the largest property tax cut is $14 billion in the mid-2000s. Both chambers of the Legislature have said their plans surpass that line — including the $5.3 billion to maintain current levels.

Critics of that claim — such as Vance Ginn, former chief economist for the Texas Public Policy Foundation — have set the line at $20 billion in today’s dollars accounting for inflation, and also say that the entire sum of dollars going toward property tax relief should be allocated to compression.

On top of this, add in the fact that to maintain levels of compression next biennium, the state will have to allocate the same amount of money toward it. Otherwise, tax bills will jump.

Before the House adjourned sine die, Lt. Gov. Dan Patrick issued a letter asking for Abbott to include the Senate’s property tax plan — a $70,000 standard homestead exemption, $30,000 elderly and disabled homestead exemption, a $25,000 business personal property tax exemption, and a business inventory tax credit — among a litany of other priorities.

Despite the appraisal stalemate running out the clock on this session, the Legislature will quickly have another go at the issue and the chance to fulfill the promises made before and during the 88th regular session.

Originally published by The Texan. 

​​Lt. Gov. Dan Patrick, along with several senators, announced a new bill package this week designed to reduce property taxes through several different methods.

Sens. Paul Bettencourt (R-Houston), Tan Parker (R-Flower Mound), Bob Hall (R-Rockwall), Joan Huffman (R-Houston), and Charles Perry (R-Lubbock) joined Patrick in a press conference on March 14.

The package included three bills that would offer a combined estimated $16.5 billion in property tax relief.

Lt. Gov. Patrick opened the press conference and invited Sen. Bettencourt to walk through the proposals, saying, “No one knows more about property taxes.”

“What we have is tremendously good news for Texas taxpayers today,” Bettencourt said.

“It’s important to know that we’re touching every taxpayer, every homeowner, every business owner, with needed tax relief,” Bettencourt claimed. “We’re spending the money as wisely as we can to get the maximum tax relief possible — and this plan has eye-popping numbers.”

Senate Bill 3, filed by Bettencourt, would increase the homestead exemption for property taxes from $40,000 to $70,000 and allow seniors to deduct an additional $30,000. Bettencourt claimed the increases would save homeowners $800 to $1,000 over the course of the next two years.

Bettencourt was also responsible for SB 4, which would contribute another $5.38 billion to buy down or “compress” school district property taxes, as explained in the bill analysis.

The final bill in the property tax reduction package was SB 5, filed by Parker. The proposal would increase the “business personal property exemption from a $2,500 de minimis exemption to a $25,000 universal exemption.”

Additionally, Parker’s bill would “provide eligible taxable entities a credit equal to 20% of the amount of ad valorem taxes paid during the period on which the report is based.”

In the press conference, Parker claimed the bill would deliver $1.5 billion of relief to business owners.

All of these measures were included in Lt. Gov. Patrick’s legislative priorities, as reported by The Dallas Express. Several of the property tax reduction measures have already garnered bipartisan support in the Senate.

“We’ve never had $16.5 billion dollars to throw at property tax relief, and that is a record number, and it is well spent, and I believe it will be well received by the citizens and taxpayers of the great state of Texas,” noted Bettencourt.

Patrick also explained, “The real key to save Texans’ taxes is to limit the size of government. That’s the key.”

However, the proposals have disappointed some economic policy experts and taxpayer advocacy groups, who had hoped for different approaches to the tax burden.

Vance Ginn, the president of Ginn Economic Consulting, directed The Dallas Express to a statement where he claimed, “[T]he Senate’s overly-complicated property tax package (#SB4, #SB4, #SB5) of $16.5B won’t put any property taxes on a path to elimination so Texans will continue to not have their right to own property.”

Instead, Ginn urged that Texas needs to “[s]pend less and use surpluses to reduce school M&O [maintenance and operations] property taxes by state and other property taxes by local [governments] until all are ZERO so Texans can finally have the right to own their property and ultimately stop renting and start owning.”

Similarly, Noah Betz, the executive director at the Huffines Liberty Foundation, explained to The Dallas Express, “We strongly believe this package falls short of being real property tax relief.”

A statement from former Texas Senator Don Huffines added that “[a] major shortcoming of the Senate bills is that they do nothing to limit future increases in rates and levies by local governments, including school districts.”

Tim Hardin, the president of Texans for Fiscal Responsibility, told The Dallas Express, “although we support any property tax relief we do not feel as though the Senate package goes far enough. … We would like to see property taxes be put on a path towards elimination.”

Originally published at Dallas Express. 

​Overview

• Texans face an affordability crisis from not only bad policies out of D.C. but also excessive government spending at the state and local levels, resulting in higher taxes than otherwise.
• While state and local governments cannot change President Biden’s costly regulations, Congress’ excessive deficit-spending, or the Federal Reserve’s over-printing of money, they can spend and tax less in Texas.
• To overcome these economic headwinds, state and local governments should pass frozen (no-growth) budgets, impose the no-new-revenue rollback rate on property taxes, return at least 90% of excess tax collections stolen from taxpayers to compress property tax rates until they are zero.
• Achieving this will help Texans with the affordability crisis and make Texas an economic juggernaut so that more people can prosper.

Texans for Fiscal Responsibility’s 3-Step Plan to Eliminate All Property Taxes

• Frozen State Budget of holding spending growth to zero so there is less intrusion of government in the private sector resulting in a maximum surplus available to provide property tax relief.
• Eliminate School District M&O Property Taxes with 90% of state surplus funds each biennium until nearly half of the total property tax burden is zero in just four years.
• Eliminate Other Property Taxes by passing a local spending limit, imposing the no-new-revenue rollback 

This paper was initially published by Texans for Fiscal Responsibility. 

Texans are struggling with high property taxes, soaring prices, and stagnant income. As a result, most big-budget players favor some property tax relief. For instance, Gov. Greg Abbot declared his intention to use half of the actual surplus fund ($16.3 billion) for this initiative. Likewise, Lt. Gov. Dan Patrick revealed that property tax relief is his first legislative priority.

However, the economic outlook for 2023 is not encouraging. The IMF has announced a slowdown in the global economy, and a third of the world’s economy is expected to be in a recession in 2023. Moreover, the consensus among large financial institutions is that the U.S. will have a recession this year.

Consequently, in such a bloomy scenario, caution is warranted on how to use Texas surplus funds prudently. Based on previous data, the Foundation finds that Texas has enough funds to use toward property tax relief, even in the worst-case scenario. Our three key findings are: 

• The Great Recession caused the largest fall in tax collections: The 2009-2010 biennium represented a fall in tax revenue of 8.5% in the first year and 6.5% in the next period. Sudden drops in oil prices also caused a decline in tax revenue in 1986 (4.6%) and 2016 (6.2%). Other negative shocks in the State’s finances were the early 2000s recession (4.1% total) and the COVID-19 pandemic in 2020 (3.4%). The Great Recession and the early 2000s recession were the only events of negative growth in revenue in two consecutive years since at least 1973.
• The worst-case scenario is a drop in tax revenue of $11 billion: By considering the most significant decrease in tax revenue from the Great Recession, we can compute how much the state of Texas might lose in tax revenue in the event of a recession. According to the comptroller, tax collections for 2022 are $76 billion. If we input the falls of revenue of 8.5% and 6.5% from the Great Recession for the 2024-2025 biennium, the Lone Star State would lose $11 billion in tax collections in the worst-case scenario. Another useful indicator is the expected loss, the average of all the negative shocks Texas has experienced since 1973. The expected loss is 3.9%, representing a loss of $3 billion in a moderate adverse scenario.
• Texas would have enough funds to cover property tax relief: Even considering the worst-case scenario of the revenue shortfall, the state finances have enough cushion to assume the $11 billion loss from the rainy fund of $13.7 billion. That leaves the surplus funds of $32.7 billion untouched for substantial property tax relief. Additionally, a property tax cut would also serve as a countercyclical policy by keeping more money in the hands of those in the productive private sector. It would generate growth, create more jobs and help with the affordability crisis in the housing market. As a result, property tax relief can mitigate some of the harmful effects of a recession.

Considering that the State’s finances are robust enough to face a recession, the Foundation has proposed a path toward completely eliminating school districts’ maintenance and operations property taxes by using state surplus general revenue-related (GRR) funds to buy them down over time to zero.

By following the spending limit of population plus inflation, assigning at least half of the current surplus and 90% of the future surplus thereafter, we should expect the elimination of school district M&O property taxes over the next decade. In case of any revenue shortfall, school districts could cover it with their reserve funds.

By gradually replacing property taxes with more efficient sales taxes, more Texans would be able to boost their savings, afford a new home, and preserve their property while improving their ability to afford housing and other necessities.
​
Originally published at TPPF. 

​In the last two decades, local property taxes in Texas have grown far faster than the average taxpayer’s ability to pay for them. Moreover, high property taxes are aggravating the housing affordability crisis by increasing the overall out-of-pocket cost of keeping a property. Therefore, we propose a buydown plan for property tax relief. Our simulation shows that the state can limit spending and use the resulting surplus state taxes collected to buy down school district maintenance and operations (M&O) property taxes until they are eliminated over the next decade. If, in addition, all local governments in Texas were to also limit spending and use the resulting surplus funds to reduce their property taxes, Texans could have substantial tax relief to mitigate this affordability crisis.
​
Key Points

• Local property taxes in Texas have been growing faster than the average taxpayer’s ability to pay for them.
• This rising burden on Texans has contributed to a housing affordability crisis, especially for those at the lower end of the income ladder.
• Effectively limiting state government spending with the state’s new spending limit and using surplus funds to reduce school district M&O property taxes could provide relief.
• Texans could see substantial relief by combining this buydown approach with other local jurisdictions limiting spending and using their own surplus dollars to reduce their property taxes.

Original publication at TPPF -- Updated January 2023 after publication in December 2022.

​Americans are facing a housing affordability crisis – and Texans are no exception.

Texas families struggle to make ends meet with high inflation, stagnating wages, and rising mortgage rates. Add high property taxes to the equation, and it is not difficult to see why 1-in-2 Texans reported that they were behind on rent or mortgage payments and that eviction or foreclosure in the next two months is likely.

Property tax relief is needed more than ever to help homeowners, renters, and businesses during these challenging times. For this purpose, the Texas Public Policy Foundation proposes a way to cut local property taxes substantially next year, and cut them nearly in half over the next decade.

In Texas, the housing market is cooling as there were three months of supply of homes for sale relative to demand in September 2022, which is the highest since May 2020 after a couple of years of a very tight housing market. This cooling of the housing market resulted from mortgage rates topping 7%, a 20-year high that dramatically raises borrowing costs and monthly payments.

Another contributing factor to the affordability crisis in Texas is high and rising local property taxes.

Texas is blessed to have constitutional bans against a personal income tax and a statewide property tax. But while Texas has a costly gross receipts-style tax called a franchise tax, which should be eliminated, the most burdensome taxes discussed during soccer practices or business events are local property taxes.

These taxes have nearly tripled over the past 20 years. And it’s wrong to think that property taxes are high because there is no personal income tax, as other states like Florida and Tennessee have much lower property tax burdens. The problem is excessive local government spending that requires more taxes.

Property taxes are regressive. The Texas Comptroller’s office estimates that the lowest 20% of income earners will pay 6.9% of their total income in property taxes compared with 1.9% for the highest income quintile in 2023.

Moreover, the Tax Foundation ranks Texas 11th in property tax collections per capita, 6th for its burden on homeowners, and 13th most burdensome to businesses, which is ultimately passed to consumers.

Consequently, property tax relief is a top priority to help relieve some of the housing affordability issues. Reducing property taxes for Texans would keep more money in their pockets to satisfy their desires during a rising affordability crisis.

​To do so, the Foundation proposes eliminating nearly half of total property taxes. The proposal uses state general revenue-related funds to replace the maintenance and operations (M&O) property taxes partially funding independent school districts (ISD), which is about $60 billion per biennium.

Specifically, most, if not all, surplus general revenue-related funds, which the Legislature has the most control over, above the state’s new state spending limit based on the rate of population growth plus inflation would be used to replace the ISD M&O property taxes each period until they’re eliminated.

We calculate that this could happen in a decade. We use the average two-year growth rates over the last decade from 2012 to 2021, given that the state has a biennial budget for general revenue-related funds of 9.3% and a rate of population growth and inflation of 6.7%. We then use a reasonable 90% of this 2.6-percentage points surplus each biennium and half of the latest 2022-23 surplus of $27 billion to find this is achievable while fully funding public schools based on the current state-determined school finance formulas.

With a record $27 billion expected surplus and another $14 billion likely in the state’s rainy day fund, the state has plenty of taxpayer money to fund limited government provisions within the normal taxes collected while returning surplus money to Texans.

This is a historic opportunity to provide substantial property tax relief and more opportunities for businesses to move to Texas without costly incentive deals. The result would be Texas having a more robust economy, more job creation, more investments, and more opportunities to prosper so that Texans can be more able to afford their desired livelihood.

Originally published at The Center Square

​Americans are facing a housing affordability crisis—and Texans are no exception.

Texas families struggle to make ends meet with high inflation, stagnating wages, and rising mortgage rates. Add high property taxes to the equation, and it is not difficult to see why 1-in-2 Texans reported that they were behind on rent or mortgage payments and that eviction or foreclosure in the next two months is likely.

Property tax relief is needed more than ever to help homeowners, renters, and businesses during these challenging times. For this purpose, the Foundation proposes a way to cut local property taxes substantially next year, and cut them nearly in half over the next decade.

In Texas, the housing market is cooling as there were three months of supply of homes for sale relative to demand in September 2022, which is the highest since May 2020 after a couple of years of a very tight housing market. This cooling of the housing market resulted from mortgage rates topping 7%, a 20-year high that dramatically raises borrowing costs and monthly payments.

Another contributing factor to the affordability crisis in Texas is high and rising local property taxes.

Texas is blessed to have constitutional bans against a personal income tax and a statewide property tax. But while Texas has a costly gross receipts-style tax called a franchise tax, which should be eliminated, the most burdensome taxes discussed during soccer practices or business events are local property taxes.

These taxes have nearly tripled over the past 20 years. And it’s wrong to think that property taxes are high because there is no personal income tax, as other states like Florida and Tennessee have much lower property tax burdens. The problem is excessive local government spending that requires more taxes.

Property taxes are regressive. The Texas Comptroller’s office estimates that the lowest 20% of income earners will pay 6.9% of their total income in property taxes compared with 1.9% for the highest income quintile in 2023.

Moreover, the Tax Foundation ranks Texas 11th in property tax collections per capita, 6th for its burden on homeowners, and 13th most burdensome to businesses, which is ultimately passed to consumers.

Consequently, property tax relief is a top priority to help relieve some of the housing affordability issues. Reducing property taxes for Texans would keep more money in their pockets to satisfy their desires during a rising affordability crisis.

To do so, the Foundation proposes eliminating nearly half of total property taxes. The proposal uses state general revenue-related funds to replace the maintenance and operations (M&O) property taxes partially funding independent school districts (ISD), which is about $60 billion per biennium.

Specifically, most, if not all, surplus general revenue-related funds, which the Legislature has the most control over, above the state’s new state spending limit based on the rate of population growth plus inflation would be used to replace the ISD M&O property taxes each period until they’re eliminated.

We calculate that this could happen in a decade. We use the average two-year growth rates over the last decade from 2012 to 2021, given that the state has a biennial budget for general revenue-related funds of 9.3% and a rate of population growth and inflation of 6.7%. We then use a reasonable 90% of this 2.6-percentage points surplus each biennium and half of the latest 2022-23 surplus of $27 billion to find this is achievable while fully funding public schools based on the current state-determined school finance formulas.

With a record $27 billion expected surplus and another $14 billion likely in the state’s rainy day fund, the state has plenty of taxpayer money to fund limited government provisions within the normal taxes collected while returning surplus money to Texans.

This is a historic opportunity to provide substantial property tax relief and more opportunities for businesses to move to Texas without costly incentive deals. The result would be Texas having a more robust economy, more job creation, more investments, and more opportunities to prosper so that Texans can be more able to afford their desired livelihood.

Originally posted at TPPF

​Texans face an affordability crisis with inflated bills, diminishing savings, and a looming U.S. recession. While this is mostly the result of Washington’s irresponsible policies, Texas governments can help by using massive surpluses to dramatically reduce the sixth most burdensome property tax system in the nation without harming the delivery of core services. The Foundation’s Lower Taxes, Better Texas plan accomplishes this by lowering maintenance and operations (M&O) property tax bills while adequately funding core services.

​Published at TPPF with James Quintero.

​High property taxes are not just an urban and suburban problem. In rural Hays County (San Marcos and surrounding), for example, property appraisals are shooting up.

“The overall market value of Hays County’s 2022 preliminary appraisal roll rose to nearly $59 billion, up 53.27% from $38.4 billion in 2021,” the Hays Free Press reports. “Commercial and industrial real property increased in value nearly 41%, up from nearly $3.6 billion in 2021 to $5 billion this year.”

One year. And that burden will have to be shouldered by rural Texans who tend to be older and have less income than their urban counterparts.

Yet opponents of property tax reform will use rural Texans as a prop in their argument. But rural Texans need property tax relief, too. And our plan, which will use state surplus funds to buy down the maintenance and operations (M&O) portion of school taxes (the biggest part of your tax bill), will benefit all property owners in every part of the state. The Foundation’s Lower Taxes, Better Texas plan provides a practical way to achieve this goal while funding critical government provisions.

Some have expressed concern that rural counties won’t be able to pay for their first responders—police and firefighters.

But the fact is, our plan is revenue-neutral and would continue to fund critical government services. It would allow for budgets to grow, but would limit increases in spending to no more than the rate of population growth plus inflation—anything more than that is just growing government. Yet within that framework, both schools and local governments would be fully funded. In fact, if cities, counties and special districts use the same formula (population growth plus inflation) to keep their spending in check, they can use surplus revenues to buy down their own property tax rates.

Sales taxes are also a key part of our longer-term plan.

Some have worried that rural Texas, with its more limited sales tax base, would suffer under our plan to broaden the sales tax to completely eliminate school district M&O property taxes within 10 years. But that’s not the case.

Local governments (i.e. cities, counties, and special purpose districts) would have the option to raise their sales tax rate along with the increased funding from the broader base to eliminate their own M&O property taxes. If they don’t do this because they don’t have a sufficiently large sales tax base, then they have the flexibility to not eliminate their M&O property taxes but rather buy them down over time.

There are also concerns that if the economy takes a hit, the state’s general revenues will decline, forcing higher school district M&O property tax rates in response. But our plan would have the state lower school district M&O property taxes only if there is a sufficient general revenue surplus while making permanent past reductions.

There looks to be at least a $12 billion available in general revenue surplus at the end of the current budget period for this property tax relief. If there is a major recession, then the state could call on state agencies to find savings to soften the blow. That has been done before. And the state could turn to the at least $12 billion in the state’s rainy day fund created to cover unforeseen revenue shortfalls. And school districts are sitting on about $20 billion in excess reserves. That could also help them get through a tough recession.

Property taxes are a major problem for rural Texans, whose budgets are already hurting from high gasoline prices (they drive longer distances), high food prices, and general inflation. Don’t use rural Texans to argue against the relief they need.

https://www.texaspolicy.com/rural-texans-need-property-tax-relief-too/

Texans are facing a crisis when it comes to paying for their skyrocketing property taxes, inflated bills, and saving for a rainy day. In fact, many Texans are living with the fear that exorbitant taxes could take their home away or keep them from buying their first home. The Foundation has developed a balanced, practical solution to lower property taxes by eliminating the maintenance and operations (M&O) property taxes while also funding the needs for critical services.

​Invited Testimony Before the Texas Senate Finance Committee 
https://www.texaspolicy.com/lower-taxes-better-texas-3/​

​Texans are facing a crisis when it comes to paying for their skyrocketing property taxes, inflated bills, and saving for a rainy day. In fact, many Texans are living with the fear that exorbitant taxes could take their home away or keep them from buying their first home. The Foundation has developed a balanced, practical solution to lower property taxes by eliminating the maintenance and operations (M&O) property taxes while also funding the needs for critical services.

Invited Testimony Before the Texas House Ways & Means Committee

https://www.texaspolicy.com/lower-taxes-better-texas-2/

Texas is a leader in the economic recovery from the severe spring 2020 shutdown recession. Texans have overcome many challenges especially since the state was fully opened in March 2021, without statewide mask, closure, or vaccine mandates since then—as these should be voluntary. The 87th Texas Legislature supported the recovery with the passage of many pro-growth policies like the nation’s strongest state spending limit, but there were missed opportunities like permanent, broad-based property tax relief. Given other states are drastically cutting or eliminating taxes, Texas must make bold reforms so it can remain an economic leader, support more opportunities to prosper, and withstand bad policies from D.C.

https://www.texaspolicy.com/texaseconomy/

​Overview

• Over the last 20 years, property taxes have increased 81% faster than the average taxpayer’s ability to pay for them, contributing to too many Texans struggling to pay bills and keep their home.
• Our Lower Taxes, Better Texas plan will help Texans by eliminating local maintenance and operations (M&O) property taxes in a revenue neutral way by no later than 2033.
• This balanced solution will give Texans the relief they demand while continuing to fund critical services, like public safety and education.
• After eliminating the M&O property taxes, which represent 80% of all property taxes in Texas, constitutional changes should prohibit re-imposing these taxes.
• Texas governments ought to embrace this fiscal framework to ensure all Texans can flourish and deliver real peace of mind to Texas homeowners in a timely way.