This commentary, written by Dr. Vance Ginn and Nozim Ishankulov, originally appeared in print in the Midland Reporter-Telegram on December 27, 2015.
Despite slower economic activity in Midland County, property taxes owed continue to skyrocket. Therefore, lawmakers should consider options to provide permanent relief of these onerous taxes to fund essential local government services. Contributing to the slower economy is a sustained drop in oil prices that’s led to a 22 percent decline in active rigs to only 32 in the County according to Baker Hughes. Less employment related to oil and gas activity has pushed the unemployment rate up from a cyclical low of 2.2 percent last December to 3.5 percent in October. Although this mild slowdown suggests a weaker housing market, homeowners noticed that their home appraisal increased, on average, by 12 percent. They would ordinarily cheer the increase as it improves their wealth, but it also means that they face higher property tax bills that may not be associated with an increase in income. Add to that the 11 percent increase in the County’s property tax rate excluding any other changes and many will risk living paycheck-to-paycheck or losing their home from a mounting property tax burden. This isn’t just in Midland, homeowners statewide face the 14th highest property tax burden in the nation according to the Tax Foundation. Increases in the average appraisal value and tax rate in Midland will hurt those with low and fixed income the most, particularly the working poor and elderly, as property taxes rise from factors out of their control. A new school nearby may raise their home value forcing them to move to another area with cheaper housing and worse living conditions. This type of life-changing event determined by the government and not voluntary exchanges in a market has reasonably created unrest among homeowners. For example, there were 701 people in Midland who signed a petition protesting the increase in the County’s property tax rate. Being politically engaged is important to confront higher taxes from excessive spending, but far too often citizens are unaware of their property tax liability. To alleviate some of this burden, last month voters overwhelmingly approved the constitutional amendment passed by the Texas Legislature known as Prop 1. It increases the homestead exemption for school property taxes by $10,000 to $25,000. The recent Texas Public Policy Foundation’s report The Freedom to Own Property outlines how this will provide only short-term relief while eliminating property taxes and replacing lost revenue with a reformed sales tax advances liberty and prosperity. The reformed sales tax could be as low as an 11 percent total rate compared with the current 8.25 percent state and local combined rate by broadening the base to include the sale of property and most goods and services taxed in at least one other state. Unlike property taxes that are many times hidden in homeowners’ escrow account or in renters’ rent, the sales tax is easy to see on every receipt. While property taxes must be paid regardless of affordability, the sales tax is based on an individual’s discretion to purchase something. By having more disposable income from paying lower mortgage payments and rent, Texans can allocate their income as they see fit whether it be to put food on their table, save for a rainy day, or hire new workers. Research highlighted in the Foundation’s paper finds that this swap could lead to substantial economic gains in the ballpark of $60 billion in new personal income and 340,000 new jobs over five years compared with the current trajectory. Finally, and most importantly, this swap gives Texans the freedom to own property instead of renting from the government. For the working poor and all Texans to benefit from owning property, more job opportunities, and more economic prosperity, lawmakers should consider long-term solutions to resolve skyrocketing property taxes with ending them being the best option.
0 Comments
Leave a Reply. |
Vance Ginn, Ph.D.
|