Similar version originally published at Texans for Fiscal Responsibility. ​

As Texas faces rising property taxes and record-high government spending, it’s time to reassess the path toward long-term prosperity. Recent data illustrates Texas’ strengths and challenges. In August 2024, Texas maintained a 4.1% unemployment rate, while the state’s GDP grew by 3.5% in Q2 2024, outpacing national averages. However, the last legislative session resulted in unprecedented government spending increases, threatening Texas’ fiscal stability. 

The solution is clear: spending cuts, lower taxes, and imposing the strongest possible spending limits on state and local governments. This can be done by ending excessive spending of at least $30 billion, which is a 15% cut in state funds.

Corporate Welfare: A Drain on Taxpayers of $10 billion
New constitutionally-dedicated funds like the $5 billion to Texas Energy Loan Fund, $1 billion to Texas Water Fund, and $1.5 billion to Texas Broadband Infrastructure Fund create even more opportunities for contractors and financial firms to benefit at the taxpayer’s expense. Expanding these programs is already being discussed, adding to concerns about unchecked government spending. Not spending these funds and instead redirecting them toward broad-based tax relief would benefit all Texans, not just a select few private entities. Other corporate welfare programs like the Texas Enterprise Fund (TEF) and Chapter 403, the newly revamped property tax abatement program that replaced the expired Chapter 313, continue to burden taxpayers. 

Overfunding the Government School System by $17 billion Annually
Texas is overfunding its monopoly government school system, spending billions of dollars annually on a system that lacks competition and efficiency. A transition to universal Education Savings Accounts (ESAs) would inject competition into the education sector, allowing parents to choose the best educational options for their children. Moving to universal ESAs could save the state an estimated $17 billion per year by allowing the state to spend $12,000 per 6.3 million school-age kids instead of $16,792 per 5.5 million enrolled at government schools. These savings could be used to eliminate school property taxes, providing meaningful relief for homeowners and fostering a more dynamic, competitive education system.

Medicaid Reform: Lowering Costs with HSAs for Savings of At Least $3 billion Annually
Healthcare spending, especially through Medicaid, is another area where Texas can find significant savings. Shifting Medicaid recipients to work requirements and Health Savings Accounts (HSAs) would encourage more cost-effective healthcare decisions, saving the state at least $3 billion annually. These savings could then be applied toward property tax relief, allowing Texans to benefit from lower overall taxes while promoting personal responsibility in healthcare. 

Achieving Property Tax Elimination Through Fiscal Discipline
By combining savings from eliminating corporate welfare, passing school choice, and reforming Medicaid, Texas could save at least $30 billion per year. These funds could eliminate most, if not all, school district M&O property taxes, providing substantial relief for homeowners. It is also critical to enact the strongest possible constitutional spending limit, tying state and local government spending growth to a maximum of population growth plus inflation. But with record spending increases in the most recent legislative session, including the creation of the Texas Water Fund and Texas Broadband Fund, it’s crucial to cut government spending, pass Frozen Texas Budgets, and provide fiscal responsibility.

Securing Texas’ Economic Future
Texas is at a crossroads. While the state’s economy remains relatively strong, with low unemployment and impressive GDP growth, the rapid rise in government spending, corporate welfare, and property taxes pose significant risks to its long-term success. Texas can secure a prosperous future by embracing a strategy of lower taxes, spending restraint, and market-driven reforms. Eliminating corporate welfare, expanding school choice, and adopting Medicaid reform will unleash the opportunity to eliminate school district M&O property taxes, allowing Texans to keep more of their income and ensuring that the state remains a beacon of economic freedom.

​Originally published at Texans for Fiscal Responsibility.

Texas is at a critical point in addressing its housing affordability crisis. As the property tax burden on Texans is at historic highs, the State’s housing market faces serious challenges that drive up costs and limit access to affordable homes. Solving this crisis requires a bold approach to removing restrictive zoning laws, reforming property taxes, and pursuing paths that enable true homeownership.

Property Taxes are Soaring, Limiting Homeownership
Property taxes in Texas have risen sharply in recent decades. Data from Texas Comptroller shows that total property taxes in Texas have skyrocketed from nearly $19 billion in 1998 to over $81 billion in 2023—a staggering 328% increase over 25 years. Most of this growth comes from school districts and local governments, where spending has far outpaced population growth and inflation. Despite the recent relief push, property taxes remain an ever-growing burden, keeping many Texans from achieving affordable homeownership.

Restrictive Zoning Laws Inflate Housing Costs
Restrictive zoning policies are another roadblock to affordable housing. By limiting where and what types of homes can be built, these zoning restrictions constrain housing supply, causing prices to rise. Opening up zoning could allow developers to build more homes, increasing competition and reducing costs for prospective buyers and renters. Such zoning reforms would enable the Texas housing market to meet demand more effectively, driving down prices and making homeownership more attainable for all Texans.

The Case Against Rent Control and for Free-Market Solutions
Some advocate for rent control to address housing affordability, but this policy only exacerbates the problem. Rent control limits lead to reduced housing supply, lower property maintenance standards, and an overall decline in housing quality. Texas should adopt free-market solutions instead of price controls that distort the market. Reducing zoning restrictions and property taxes provides a far more sustainable approach, encouraging private investment and expanding housing options without compromising quality.

A Path to Property Tax Elimination
True homeownership means owning a home without a continuous tax burden. For Texans to experience this freedom, we need a serious commitment to eliminating property taxes. Here’s a practical approach:

1. Close Loopholes and Enforce Levy Limits: Many local governments exploit loopholes to bypass levy limits, defeating the purpose of voter-imposed controls. Enforcing a 0% threshold for property tax hikes without voter approval would prevent local entities from sidestepping taxpayers’ voices.
2. Limit State and Local Spending: Effective property tax reform requires disciplined spending control. Limiting state and local government spending, combined with strict fiscal caps, would prevent the spending growth that drives up property tax rates.
3. Use Surplus Revenues to Reduce Property Tax Rates: Texas can use budget surpluses to gradually phase out property taxes, with the state cutting school district maintenance and operations (M&O) tax rates and other local governments eliminating their property taxes. This surplus-driven approach would allow for a consistent reduction in property tax burdens until zero, without jeopardizing critical public services.

Learning from Other States
Several states are already exploring ways to move away from property tax dependence. For instance, North Dakota and Wyoming could soon eliminate property taxes, offering a potential model for Texas. By setting ambitious targets, these states show that property tax elimination isn’t just an idealistic vision—it’s a practical policy choice that puts residents on the path to true home ownership.

Political Courage is Key
Implementing these solutions requires political will and determination to prioritize Texans’ well-being over short-term spending interests. Texas lawmakers need to recognize that high property taxes are not just an inconvenience—they’re a barrier to affordable living, an obstacle to homeownership, and an economic drain that weakens communities. Texas can lead the nation in housing affordability and economic freedom by reducing zoning restrictions, enforcing strict levy limits, and working toward eliminating property taxes.

Conclusion: A Sustainable Solution to Housing Affordability
The housing affordability crisis in Texas won’t be solved overnight, but a commitment to sustainable, free-market reforms can provide real relief. By removing restrictive zoning, eliminating property taxes, and rejecting failed policies like rent control, Texas can make homeownership affordable and achievable for more people.
​
Now is the time to pursue policies that support true homeownership, economic freedom, and prosperity for Texans. Let’s choose a path that addresses the root causes of our housing crisis, unleashing the potential for a thriving, accessible housing market.

Chairman Bettencourt and members of the committee,

Thank you for holding this hearing. I am Dr. Vance Ginn, president of Ginn Economic Consulting, Texan, and father who is concerned about Texas's housing affordability crisis. While the state can’t address general inflation and interest rates, as those have been failures of Washington, policymakers can tackle restrictive local zoning and high property taxes.

First, restrictive zoning regulations restrict the housing supply, driving up housing prices faster than many can afford. 

• Reducing these housing restrictions imposed by mostly local governments can increase the housing supply, helping lower prices. Less restrictive zoning isn’t just good policy; it’s essential for making Texas affordable. The high cost of rent control, zoning rules, and other government failures highlight the importance of free-market solutions.

Second, regarding the 11th most burdensome property taxes, achieving affordable housing means committing to eliminating them. ​

Originally published at American Institute for Economic Research.

​On November 5, North Dakota will vote on Measure 4, a ballot measure that could make it the first state to eliminate property taxes. This decision isn’t just a local concern; it’s a critical moment that could shape the future of property tax reform nationwide. 

If successful, the measure will challenge the notion that property taxes are a permanent fixture, forcing us to reconsider the tax model that has held American homeowners in a perpetual cycle of payments to the government. 

While Measure 4 opens a path toward exploring tax systems that foster true homeownership and economic freedom, there’s a significant caution. Without first eliminating personal income taxes and establishing a clear, structured plan to replace funding for essential government services, North Dakota could face fiscal and economic headwinds.

Property Taxes: An Endless Burden on Homeowners
Property taxes impose a recurring burden on homeowners, functioning as an annual wealth tax that rises yearly, driven by local government assessments and tax rates. Even once a mortgage is paid off, homeowners must continue to pay these taxes, making them permanent renters from the government. This system is particularly harmful to retirees, fixed-income earners, and families trying to keep up with rising housing costs. 

Property taxes create a compounding burden in Texas and elsewhere due to rising property values assessed by government appraisers and rates set by various taxing entities. This “double impact” on property taxes drives many taxpayers to the edge financially, even if they’ve lived in their homes for decades.

The reality is that property taxes are an economic anchor, tying property owners to the whims of government budgets and leaving little flexibility to opt out of escalating taxes. Appraisal limits, like those in California’s Proposition 13, attempt to keep assessments under control. Still, they result in an inequitable “lock-in” effect that penalizes new buyers with higher rates and discourages turnover. This system has also increased housing prices, making it harder for new buyers to enter the market while reducing the motivation for existing homeowners to downsize or relocate.

Why Eliminate Income Taxes First?
The best starting point for states looking to reform their tax systems is elimination of the income tax. Income taxes directly tax labor and productivity, discouraging work and reducing individual take-home pay. 

States that have avoided income taxes — like Texas, Florida, and Tennessee — have seen impressive economic growth and strong net migration rates due to their lower tax burdens and other factors. Florida and Tennessee, though not Texas, have managed to keep property taxes more reasonable by practicing better local spending restraint and avoiding the need to offset forgone income taxes with higher local taxes. This approach fully incentivizes labor and draws businesses and families seeking a more favorable tax environment.

Once income taxes are removed, states can focus on property taxes, which burden homeownership by taxing unrealized gains on property values, acting much like a wealth tax. Without income taxes, states can adopt more consumption-based models, particularly a flat final sales tax, that avoids taxing wealth or earnings directly and ties tax burdens to individuals’ activity in market. This sequence of reform — income tax elimination followed by property tax reduction — can lay a solid foundation for sustainable growth and homeowner stability.

How North Dakota and Texas Can Lead on Property Tax Reform
North Dakota has an opportunity to demonstrate that a state can operate without property taxes, but success requires spending control and careful planning. 
Although critics argue that the estimated $3.15 billion biennial revenue from property taxes funds vital services, North Dakota’s $11 billion reserve fund, and strong oil-driven revenue give it unique fiscal flexibility. The state would benefit, however, from placing spending limits tied to population growth and inflation, similar to Colorado’s Taxpayer Bill of Rights (TABOR), to ensure that budget growth does not erode tax relief.

Texas, too, provides a relevant case study. Over the past decade, Texas lawmakers have allocated funds to reduce school district maintenance and operations (M&O) property taxes, but excessive state and local government spending has minimized the relief’s impact. Despite a $32.7 billion surplus last year, only $12.7 billion was used for property tax relief, with most of the rest going toward increasing state spending, which increased by a record 32 percent. The result was minimal total property tax reduction because other local taxing entities raised their property taxes substantially.
Without strict state and local spending caps, even substantial surplus funds can fail to yield lasting tax relief.

The Cautionary Note for North Dakota’s Measure 4
While North Dakota’s vote on Measure 4 is a bold step, it comes with potential pitfalls. 

With a well-defined replacement plan for the revenue currently generated by property taxes, the state could avoid fiscal challenges that offset the intended benefits of property tax elimination. Measure 4 leaves it up to the state legislature to devise a revenue strategy. Essential services could suffer budget shortfalls, forcing the state into difficult cuts or prompting alternative tax increases.

Furthermore, the absence of a strategic plan could lead to ad hoc fiscal decisions, causing instability for residents and uncertainty in budgeting. To make property tax elimination feasible, North Dakota must adopt firm spending controls to match any revenue replacement strategy. By securing the proper fiscal framework, the state could avoid potential pitfalls and ensure that this ambitious tax reform strengthens, rather than destabilizes, its economic foundation.

Addressing Both State and Local Property Taxes
The most effective approach is to address property taxes at the state and local levels.
 
States should take the lead in eliminating school district property taxes, which often constitute a major portion of the overall property tax burden. In Texas, for example, school district taxes are “local” in name only, as state-level finance formulas heavily influence them. Once these are phased out at the state level, local governments should then work toward eliminating other types of property taxes, using surpluses and revenue growth to reduce rates to zero gradually.

By creating a model that addresses school district property taxes through state policy and the rest through local adjustments, states avoid funneling taxpayer dollars to local governments to subsidize shortfalls. Prioritizing true local control prevents the inefficient redistribution of funds from state coffers to local budgets.

Shifting to a Consumption-Based Tax Model
Replacing property taxes with a consumption-based tax, such as a broad-based final sales tax, would align the tax system more closely with individual spending power. Unlike property taxes, levied regardless of a homeowner’s choices, sales taxes are paid when residents choose to spend. This method introduces flexibility for taxpayers, who can control their tax contributions more directly rather than bearing a constant, unavoidable tax burden on their homes.
​
North Dakota could adopt a broader sales tax base or modest rate adjustments to offset lost property tax revenue while maintaining competitive tax rates. Tennessee and Florida offer strong examples of how states without income taxes have kept overall property tax burdens relatively low through spending restraints and controlled local budgets.

Originally published at Texans for Fiscal Responsibility.

​​In the latest economic showdown between Texas and California—the two largest U.S. states by population and economic output—the results are clear: Texas is outpacing California in job creation and overall economic performance. 

Over the year leading up to September 2024, Texas added 327,400 jobs, an impressive 2.3% growth rate, while maintaining an unemployment rate of 4.1%. In contrast, California gained 265,300 jobs, or 1.5%, and continues to grapple with a rising unemployment rate of 5.3%.

These figures highlight the profound impact of the two states’ contrasting economic models. 

With its more free-market policies—marked by lower taxes, minimal regulations, and a commitment to personal responsibility—Texas has fostered an environment ripe for growth. Meanwhile, California’s more interventionist, big-government approach, characterized by higher spending, taxes, and regulation, is struggling to keep up.

Texas’s Free-Market Approach: A Proven Model for Prosperity
Texas’s economic success is no accident. The state has long embraced a model of limited government intervention and a business-friendly regulatory environment. This combination has made Texas a magnet for businesses and workers seeking economic opportunity and a lower cost of living.

A key driver of Texas’s success is its lack of a personal income tax, which provides an immediate financial advantage for individuals and businesses. This tax-friendly environment has attracted major corporations, including Tesla, Oracle, and Hewlett Packard Enterprise, who have moved their headquarters to Texas in recent years. 

These relocations have boosted job creation and solidified Texas’s reputation as a national leader in economic opportunity.

Texas’s economic growth is also bolstered by its diverse industry base. The state is home to many sectors, from energy and manufacturing to technology and health care, which has helped insulate it from economic downturns. 

Even as national challenges like inflation and supply chain disruptions persist, Texas’s economy has grown, driven by its robust job market and pro-growth policies.

California’s Struggles: Big Government Holding Back Growth
While California remains the largest state economy in the country, its economic growth is being held back by its big-government approach. The state’s high taxes and overregulation have created significant barriers to business growth and job creation, contributing to slower employment gains and a higher unemployment rate than Texas.

One of California’s most significant challenges is its sky-high cost of living, particularly in housing. Regulatory hurdles, including restrictive zoning laws and environmental regulations, have limited the supply of affordable housing, driving up costs and forcing many residents to seek opportunities in states like Texas. This outmigration has become a growing problem for California, weakening its workforce and tax base.

Furthermore, California’s heavy reliance on government spending and expansive social programs has created long-term fiscal vulnerabilities. The state’s large budget deficits often necessitate spending cuts in public services, and its high tax rates continue to burden residents and businesses. In contrast, Texas’s greater fiscal discipline and commitment to balanced budgets have enabled the state to grow without relying on excessive government intervention or spending.

The Future for Texas: Opportunities for Continued Growth
While Texas outperforms California in job creation and economic growth, the state still has room to improve.

One key area where Texas could enhance its long-term success is by addressing government spending at the state and local levels. Despite its reputation for fiscal conservatism, Texas has seen increases in government spending in recent years, which pose challenges to its pro-growth model.

To maintain its competitive edge, Texas should continue pursuing policies that reduce the government burden on individuals and businesses. One such policy would be eliminating school district maintenance and operations (M&O) property taxes, providing substantial tax relief to homeowners and further supporting faster economic growth. 

By spending less and using budget surpluses to phase out these taxes over time, Texas could solidify its position as a low-tax state and continue to attract businesses and residents seeking economic freedom.

Additionally, Texas should focus on maintaining its business-friendly regulatory environment. As states compete for talent and investment, keeping regulations minimal and predictable will ensure that Texas remains a top destination for companies and workers.

Conclusion: Texas Shows the Power of Free Markets
The latest employment data clarifies that Texas’s free-market approach is driving stronger economic growth and job creation than California’s more interventionist model. 

With 327,400 new jobs added over the past year and a 4.1% unemployment rate, Texas stands as a testament to the power of low taxes, limited regulation, and fiscal responsibility. In contrast, California’s slower job growth, higher unemployment, and economic struggles reflect the limitations of big-government policies.

As Texans thrive, the state offers a blueprint for other states seeking to boost economic performance and job creation. By prioritizing free markets and personal responsibility over government intervention, Texas proves that economic prosperity comes from empowering individuals and businesses to innovate, invest, and grow. But there’s more to do!

From The Freemen News-Letter.

​Editor’s note: this piece was originally published here.

A viral clip on X (formerly Twitter) has reignited the debate over rent control, and for good reason. 

The video features a New York City tenant, Hattie Kol, paying just $1,334 monthly for a 1,500-square-foot Upper West Side luxury apartment with fireplaces, chandeliers, and a butler’s pantry. This rent is well below the market rate and median rent in the city of $3,500. Her family acquired the unit through rent stabilization 22 years ago, allowing her to stay indefinitely. She is now paying only 39 percent of the median rent in the city, highlighting the mismatch created by rent control. 

While this may seem like a win for the tenant, it’s a loss for the broader market, particularly for lower-income renters forced to compete in an increasingly constrained housing market.

At its core, rent control is a well-intentioned policy aimed at keeping housing affordable by capping rents. However, it disrupts the natural balance of supply and demand, discouraging developers from building new housing and disincentivizing landlords from maintaining or upgrading existing units. 

In the long run, this creates a housing shortage and degrades the quality of available units, all while keeping the most vulnerable renters stuck in a perpetual housing crisis.

The Flawed Economics of Price Controls
Rent control is a classic case of how price controls distort markets. By capping rents below the market rate, it prevents prices from reflecting the true quantity demanded and supplied for housing. This results in fewer new units being built and existing properties falling into disrepair because landlords have less incentive to invest in them. By reducing the quantity supplied of housing, rent control limits choices and increases the quantity demanded for the few units that remain on the market.

The economic consensus against rent control is overwhelming. Nobel laureate economist Milton Friedman famously argued that price controls, including rent control, are among the surest ways to create shortages. In the case of housing, this policy leaves cities like New York with fewer affordable units and an overall decline in the quality of available housing.

Who Benefits From Rent Control?
While rent control is marketed as a tool to help low-income renters, the reality is quite different. Higher-income tenants often benefit the most, locking in rent-controlled units because they pay far below market value. In cities like New York and San Francisco, people who can easily afford market rates stay in these units for years, while low-income families face fierce competition for a limited number of affordable apartments.

The woman in the viral clip is paying just 39 percent of the market rent, but there’s no evidence she needs that discount to survive. Meanwhile, those who do need affordable housing are crowded out. The result is a system where rent control helps the fortunate few while pushing the most vulnerable out of the market.

Government Failures vs. “Market Failures”
Proponents of rent control often cite “market failures” to justify government intervention. However, government failures are far more damaging, especially in housing. Rent control policies in places like New York and San Francisco have created severe housing shortages, leading to skyrocketing rents in the non-controlled market and forcing people to compete for fewer and fewer units.

Take Houston, a city that has embraced more free-market housing policies. Without zoning laws or rent control, Houston has managed to maintain much more affordable housing by encouraging the free market to meet demand. Rather than dictating prices, the city has allowed builders and developers to respond naturally to market signals, increasing housing supply and lowering prices.

The Unintended Consequences of Rent Control
​One of the greatest flaws in rent control is that it fails to address the underlying reasons for high rents. Instead of tackling restrictive zoning laws, excessive regulations, high property taxes, rising insurance, or other government-imposed barriers that drive up housing costs, rent control merely treats the symptoms. The result is fewer available units, a deteriorating rental stock, and even higher rents for those outside the rent-controlled system.

Landlords, faced with below-market rents, often convert rental units into condos or leave them vacant rather than rent them out at lower rates. This leads to a further reduction in available rentals and worse living conditions for tenants. It’s a vicious cycle that harms the housing market and the people relying on it.

The Path Forward: Embracing Free Markets
The solution to housing affordability isn’t more government intervention — it’s less. Instead of imposing price controls that distort the market, governments should focus on reducing housing construction and investment barriers. This means reforming zoning laws, streamlining building regulations, and encouraging new development. By allowing the market to function freely, we can increase housing supply, drive down costs, and create more opportunities for people at all income levels.

The viral clip on X is a powerful reminder of why rent control fails. While it may provide short-term relief for a select few, it harms the broader housing market and exacerbates the problems it purports to solve. If we want to make housing truly affordable, we need to let the market work — by encouraging development, reducing regulatory burdens, and allowing supply to meet demand.

Let’s move beyond failed policies like rent control and embrace free-market solutions that benefit everyone, especially those needing affordable housing.

Originally published at Market Watch.

​Supporters of Measure 4 say it would repeal the 'most egregious and least moral of all the taxes.' Critics say it would 'create chaos.'

Many homeowners across the U.S. aren't happy with property-tax bills that have climbed alongside a pricier real-estate market. But voters in North Dakota have a chance to act on that discontent next month by repealing property taxes and barring counties, towns and other local governments from levying them.

If the ballot measure passes, North Dakota would become the first U.S. state to end property taxes. Its passage could also add muscle to the push to eliminate the tax elsewhere, property-tax skeptics say. The idea has been floated in states like Texas, Nebraska and Michigan, while lawmakers in the Great Plains and Mountain West states say big reforms are needed quickly.

Property taxes are the "most egregious and least moral of all the taxes," according to Rick Becker, chair of the organization that put Measure 4 on the North Dakota state ballot. The ballot measure would repeal residential, commercial and agricultural property taxes, he noted.

These taxes uses opaque formulas to make homeowners keep paying for property they already own, he said. They're also based on the "unrealized" paper value of a home, he added.

For Becker, a "yes" vote is a win inside the state and beyond. "Once that happens, the light turns on for so many people. As soon as a state steps outside that box, the other states see how possible that is," Becker said. "The sky didn't fall, and maybe we should give it a try."

On the other hand, Chad Oban, who chairs Keep It Local, a coalition opposing the ballot measure, argued that property taxes need fixes - but not a "sledgehammer approach." The group's members include utility companies, farmers, educators, business groups and law enforcement.

"I think we're going to defeat Measure 4," said Oban. "But I do think if it passes, there will be a lot of other states doing something similarly, or feeling like there's a political appetite."

However, "if North Dakota - ruby-red North Dakota - thinks it's a bridge too far," it could make others reconsider their bids to bury the tax, Oban noted. The measure leaves it to state legislators to figure out where money comes from next for schools, parks and roads, he said. "It will create chaos, frankly, if it passes."

Four in 10 North Dakota voters say they oppose the ballot initiative and 28% say they'll vote for it, according to a late-September poll of 500 voters commissioned by the North Dakota Monitor, a state news outlet. One-third of voters hadn't made up their minds, the poll said.

Same proposal, rising property-tax frustration

North Dakota voters easily rejected a 2012 proposal to end the state's property taxes. But the current proposal is coming at a time when voters are more frustrated, Becker and Oban both said.

Municipalities across the country collected $363.3 billion in property taxes from single-family homes last year, according to Attom, a real-estate data-analytics company - a nearly 7% annual increase. The average property-tax bill climbed 4%, to more than $4,000, Attom said.

Nationally, homeowners faced an effective tax rate of 0.87% on their home's estimated market value, per Attom data. North Dakotans paid a higher-than-average rate, at 0.99%, but still far less than residents of top-taxing states like Illinois, New Jersey and Connecticut.

Seven in 10 people (69%) say their property taxes are too high, slightly more than the 67% who say their federal income taxes are too steep, according to a poll conducted in December 2023 by the University of Chicago Harris School of Public Policy and the Associated Press NORC Center for Public Affairs Research. Six in 10 people say their property-tax bill is unfair, the survey said.

Though property-tax bills have climbed on the back of higher assessed values, people feel they aren't getting the same increase in services, said Jared Walczak, vice president of state projects at the Tax Foundation, a center-right think tank. Even when municipalities hold their property-tax rates steady, they are still collecting more tax revenue from rising property values, he noted.

"To some degree, it's been opportunistic," he said. "That's why it's rubbed so many homeowners the wrong way."

Read more: My property-tax bill spiked 40%. I fought the city - and won. Can I get tax write-offs for my time and costs?

Property-tax ire isn't new, Walczak added. California voters famously capped property-tax hikes with the Proposition 13 ballot measure way back in 1978. States also have all sorts of tax breaks geared toward property-tax relief, especially for senior citizens.

Talk of repealing property taxes has long occurred at the margins, Walczak said. "It's one thing to have this ongoing low murmur; it's another thing to have it start to bubble up to the surface," he said. "That seems to be where we are going now." Still, while there are good justifications to reform the tax, "none of this is a good reason to repeal the property tax," Walczak said.

Karla Wagner, executive director of the organization AxMiTax, led an effort in Michigan this year to get a property-tax repeal on the ballot. The first-time attempt didn't gather enough signatures, but Wagner said her organization would try again.

The taxes are salt on the wound when people are already stretched thin, according to Wagner. "Pickleball courts or someone's home - which is more important? Stop spending our money foolishly. Stop taking our homes away when we can't afford our bill," she said, referring to the state's tax-foreclosure laws.

If they catch on, repeals are "going to spread like wildfire," Wagner said. Approval of the ballot measure in North Dakota, she added, would be "the gas on the spark."

How Measure 4 might play out

Measure 4 would "require the state to provide replacement payments" to the local government entities at "no less than the current real property-tax levies," according to the ballot measure's text. It could cost the state's coffers $3.15 billion over a two-year window, according to the measure.

The projected aftermath of Measure 4 is a good reason to vote "no," according to North Dakota Gov. Doug Burgum, a Republican.

"What you will do is, you will cause someone else to pick up the tab. That's what this whole thing is about. It's about, who's going to pay for it? It doesn't lower the cost of delivering anything in our state," Burgum said in August, according to the radio news outlet Prairie Public.

Burgum's office did not respond to a request for comment.

Becker, a Republican former lawmaker who served 10 years in the state's House of Representatives, said the state can afford the change with better decisions on its own budget. It's on counties, towns and cities to figure out how to pay for costs above what the state covers, he noted. One idea is establishing formulas for residents and businesses to pay their share of those costs.

In response to critics who say the measure would take away local control over spending decisions, Becker said the approach keeps local residents in control - just not with a tax pegged to a property's assessed value. He added that, by design, the specifics of legislative next steps aren't part of the state constitutional measure; those are for elected lawmakers to decide.

Vance Ginn, an economist in Texas, said state and local governments should find a way to move past property taxes, which he views as an "immoral form of taxation."

Spending guardrails and changes to sales taxes could be part of the answer, according to Ginn, president of an economic consulting firm whose clients include conservative-leaning think tanks like Americans for Tax Reform.

Ginn said he supports Measure 4 generally, but is concerned there "isn't a tangible path forward." If the vote fails, it's a lesson that crystal-clear funding alternatives need to accompany future repeal attempts, he added.

Nevertheless, "what North Dakota is doing is helping to drive the narrative for the need to do something about property taxes," Ginn said.

As Walczak sees it, turning to other taxes as a replacement would hurt "far more than a property tax does now." He's waiting to see what happens with the North Dakota vote, and what could come next.

"It's likely to turn out very poorly - but it could be hard to reverse," he said.

-Andrew Keshner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


 
(END) Dow Jones Newswires

10-21-24 0600ET

Copyright (c) 2024 Dow Jones & Company, Inc.

Originally posted at The Sentinel. 

​​In a recently released report, the Kansas Department of Legislative Post Audit found that an economic development tool popular with cities across the state often do not work as intended.

The department evaluated six “Tax Increment Financing” districts across the state to determine if they were working as designed.

In 1976 the Kansas State Legislature authorized cities to create TIF districts. A TIF district, also known as a redevelopment district, is a defined area within a city that uses a tax increment to help fund development. 

When a city establishes a TIF district, the assessed valuation of all existing real property located in the district is effectively frozen at a base level. Any subsequent property tax revenue generated above the base level — either from increases to the value of existing property or from the added value of new property — is called the “tax increment.” The development can involve building houses or apartments, renovating retail space, cleaning up environmental contaminants, and more.

The idea is to leverage future tax revenue from value increases to pay for development that might not otherwise have occurred.

There are 114 TIF districts in the most populous cities in Kansas — most in Kansas City, Kansas and Wichita — and Post Audit picked six from across the state for study:

- Melrose (Kansas City): this is an industrial (business and industry) district that was created in 2002. It was completed in 2022.
- College Hill (Topeka): this is a mixed-use district (with a large residential component) that was created in 2006. At the time of the report, it was still active.
- Douglas & Hillside (Wichita): this is a mixed-use district (with a large residential component) that was created in 2006. At the time of the report, it was still active.
- Lambertz (Salina): this is a retail district that was created in 2007. It was completed in 2020.
- Ken Mar (Wichita): this is a retail district that was created in 2008. At the time of the report, it was still active.
- Valley View (Overland Park): this is a retail district that was created in 2010. At the time of the report, it was still active.

Post Audit reviewed project documents and tax records to determine the construction and financing timelines for the selected TIF districts and found that three of the six TIF districts reviewed are not expected to pay off their TIF costs on time or have not generated enough revenue to cover these costs.

All six of the TIF districts reviewed are on track to be at or below estimated costs, but most experienced delays in construction.

Additionally, Post Audit said of the TIF districts they reviewed, cities have incurred between $1.6 and $7 million in direct costs and in at least four of the districts there are significant indirect costs because of and increase in crime.

Moreover, it is difficult for the state to determine the efficacy of TIF districts as — while state law authorizes them — they are administered by local city governments.

TIF districts don’t have the benefits many claim
While Post Audit was at pains to note that six districts is too small a sample size to extrapolate results for all 144 state-wide, Economist Dr. Vance Ginn, a senior fellow at the Kansas Policy Institute — which owns the Sentinel — said in a recent post on the KPI website, that the issue is far more complicated than it might seem.

“The reality of TIF projects is far more complicated, as audits frequently show delays in cost recovery and overestimated economic benefits,” Ginn wrote. “Worse, these government subsidies often crowd out private investment and leave taxpayers footing the bill for developments that may not deliver their promised benefits.”

As an example, Ginn noted the College Hill district — audited by the department — in Topkea.

“The audit for Topeka’s College Hill district revealed that the city is expected to use general funds to cover 40% of project costs — diverting resources from other essential services,” he wrote “This mismanagement highlights a fundamental problem with TIF districts: they often fail to deliver the economic benefits they promise while locking cities into long-term financial commitments.”

Ginn, who was also the former chief economist in the White House Office of Management and Budget also noted that — while the audit was successful at quantifying direct costs to the cities, it “overlooked a more significant issue — the opportunity costs to taxpayers.”

“What if the funds tied up in these TIF projects had remained in the hands of taxpayers instead?” Ginn asked in the column. “Instead of subsidizing developers, that money could have stayed in local pockets, allowing individuals to spend, save, or invest in ways that meet their needs and preferences. This missed opportunity for organic economic growth — driven by individual decisions rather than government intervention — should not be ignored.”

Moreover, Ginn said, the direct costs noted by the audit do not include the additional interest on the debt accumulated when cities use bonds to finance their portion of the projects.

“These costs ultimately fall on taxpayers, as cities must dip into general funds or raise taxes to cover the shortfalls,” Ginn wrote. “Worse, these funds could have been used for other purposes — like lowering taxes or investing in essential public services — if the city had avoided entering into these development deals in the first place.”

Ultimately Ginn said, TIF districts are simply inefficient and expensive.

“The audit of Kansas’s TIF districts reveals deep flaws in the management and outcomes of these projects,” he wrote. “Rather than continuing to gamble on subsidies that rarely deliver, policymakers should focus on spending less and putting more money back into the hands of taxpayers. The costs of TIF districts — direct and in terms of missed opportunities — are too great to ignore. 

“A more prosperous future lies in allowing individuals to drive economic growth through their choices rather than relying on government subsidies that pick winners and losers.”

​Join me for Episode 117 of the Let People Prosper Show with Dr. Tom Oliverson, state representative of Texas, for a thought-provoking discussion about key policy issues in Texas, such as property taxes, the budget, and insurance policy, and what this means for the upcoming 2025 Legislative Session.

Please share and rate the Let People Prosper Show wherever you get your podcasts, visit vanceginn.com for more insights, and subscribe to my newsletter for show notes at vanceginn.substack.com.

Originally published at Kansas Policy Institute. 

​Tax Increment Financing (TIF) districts have long been used as a development tool by local governments, including in Kansas, where the Legislature first authorized their use in 1976. TIFs allow cities to designate areas for development, freezing property tax levels in those districts and using the increased tax revenue generated by new development to fund the project. In theory, TIFs are designed to encourage growth in otherwise stagnant areas. While this concept sounds beneficial, a recent audit in Kansas reveals the substantial flaws and opportunity costs of these subsidies.

Kansas is not alone in its reliance on TIFs. Across the country, states use TIFs to stimulate development, though with varying degrees of success. From Texas to California, local governments have utilized TIF districts to attract commercial, residential, and mixed-use developments, often promising job creation and increased property values. However, the reality of TIF projects is far more complicated, as audits frequently show delays in cost recovery and overestimated economic benefits. Worse, these government subsidies often crowd out private investment and leave taxpayers footing the bill for developments that may not deliver their promised benefits.

Key Findings: TIF Projects Miss Their Targets
In Kansas, Representative Susan Estes requested an audit to assess whether TIF projects are delivering on their promises. The results were concerning. Three of the six TIF districts reviewed failed to recover their costs on time, with two Wichita districts—Ken Mar and Douglas & Hillside—falling behind in debt repayment. This has forced the city to cover shortfalls with non-TIF funds, placing additional strain on the city’s budget.

The audit for Topeka’s College Hill district revealed that the city is expected to use general funds to cover 40% of project costs—diverting resources from other essential services. This mismanagement highlights a fundamental problem with TIF districts: they often fail to deliver the economic benefits they promise while locking cities into long-term financial commitments.

Missed Opportunity Costs: What Could Have Been
While the audit did a thorough job of highlighting the direct financial costs, it overlooked a more significant issue—the opportunity costs to taxpayers. What if the funds tied up in these TIF projects had remained in the hands of taxpayers instead? Instead of subsidizing developers, that money could have stayed in local pockets, allowing individuals to spend, save, or invest in ways that meet their needs and preferences. This missed opportunity for organic economic growth—driven by individual decisions rather than government intervention—should not be ignored.

TIF districts freeze property tax levels in designated areas, meaning the natural increase in property values is funneled back into the project rather than benefitting the broader community. Rising property values could have led to a broader tax base without the TIF, reducing the tax burden for all citizens. By keeping funds in taxpayers’ hands, cities could empower individuals and businesses to fuel local economic growth more efficiently than any government program.

The Direct Costs: Subsidies at a Steep Price
The audit revealed that the direct costs of Kansas TIF projects ranged from $1.6 million to $7.0 million. However, this doesn’t include the additional interest on debt that accumulates when cities use bonds to finance their portion of the projects. In Wichita, for example, bond financing has added to the financial strain as the city struggles to generate enough revenue from these TIF districts to cover its obligations.

These costs ultimately fall on taxpayers, as cities must dip into general funds or raise taxes to cover the shortfalls. Worse, these funds could have been used for other purposes—like lowering taxes or investing in essential public services—if the city had avoided entering into these development deals in the first place.

Overestimated Benefits: A Questionable Return on Investment
The audit shows that while some TIF districts experienced increases in property values, those gains are often exaggerated. For example, the Ken Mar district in Wichita, established in a developed retail area, saw only marginal property value increases. In this case, the development occurred naturally without needing TIF incentives.

Additionally, while job creation is often touted as a major benefit of TIF districts, it’s unclear whether these are truly new jobs or simply relocations from other parts of the city. The benefits are often overstated, and the actual economic return on investment is minimal. With these subsidies, governments are gambling with taxpayer money, often without realizing the full economic benefit they claim to pursue.

This is a reason why the STAR bonds approval this year for the possibility of luring in the Kansas City Chief and Royals likely won’t bring the bang for the buck like some suggest. Picking winners and losers by governments doesn’t work because they lack the knowledge of the marketplace and are using other people’s money thereby sending bad signals and costing taxpayers over time.

Putting Money Back in Taxpayers’ Pockets
What’s truly missing from the audit’s analysis is an acknowledgment of what taxpayers could have done with their money if it had not been tied up in inefficient TIF projects. Cities could lower spending and taxes to provide more spontaneous growth. Taxpayers could invest in their businesses, save for their children’s education, or spend on goods and services benefiting them and the local economy. Instead of relying on politically-driven development projects, governments spending less and leaving money in the hands of taxpayers allows for a more responsive and dynamic economy.

Conclusion: A New Approach to Economic Development
The audit of Kansas’s TIF districts reveals deep flaws in the management and outcomes of these projects. Rather than continuing to gamble on subsidies that rarely deliver, policymakers should focus on spending less and putting more money back into the hands of taxpayers. The costs of TIF districts—direct and in terms of missed opportunities—are too great to ignore. A more prosperous future lies in allowing individuals to drive economic growth through their choices rather than relying on government subsidies that pick winners and losers.