Texas PolicyCast: Abolishing the school property tax

Because of the substantial burden imposed by property taxes, the lack of a rational link between school property taxes and educational services, and the constitutional complexities surrounding the school property tax, many believe it is time to eliminate property taxes altogether. One of them is State Rep. Phil King of Weatherford, who has filed House Joint Resolution 97, which would abolish the maintenance and operations school property tax by 2014 and force the legislature to find a fairer method to pay for public schools. He discusses his proposal with us this week.

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TPPF commentary: Employment statistics highlight need for more pro-growth policies

By James Quintero

Finding a job in Texas just got harder.

Last month, the Texas Workforce Commission reported that the state’s economy shed 25,700 jobs in December 2008. Among the hardest hit industries were manufacturing and trade, transportation, and utilities which lost a combined 16,100 jobs.

The state’s unemployment rate rose to 6 percent, its highest level since July 2004, and is projected to reach 6.6 percent later this year.

December’s sour employment figures mark the second consecutive month that seasonally adjusted non-farm employment fell. The national recession and falling oil and gas prices, it seems, have finally begun to take their toll on the Texas economy with more trouble on the way.

Comptroller Susan Combs’ recent assessment of the Texas economy warns that 111,000 jobs will disappear over the first two quarters of this year before the job market begins to rebound in the fourth quarter. The economic recovery, however, hinges on whether or not businesses have the confidence to begin hiring again in the months ahead. Based on the results of one recent survey, things aren’t looking too good.

The Federal Reserve Bank of Dallas’s Texas Manufacturing Outlook Survey, which polled over 100 Texas manufacturers, found that 47 percent of business executives felt their companies faced a “dismal outlook” moving forward while 55 percent of respondents were concerned about “worsening market conditions.”

With employers skittish and unemployment certain to rise over the next few months, the need for more pro-growth policies couldn’t be more real. The economy is going to need smart public policy that frees Texas businesses, workers, and families from the costs of big government.

Fortunately, a number of promising bills are working their way through the Legislature.

Several legislators have already filed proposals to increase the exemption for the state’s new margin tax from $300,000 to $1 million, allowing more small businesses and entrepreneurs – the heart of the state’s economy – to keep more of what they had earned. The timing of this bill couldn’t be better as many small businesses are just trying to keep their doors open.

Another encouraging piece of legislation is House Bill 508, authored by Representative Lois Kolkhorst. The bill would authorize the Comptroller’s office to investigate the effects of replacing Texas’ property taxes with a broad-based sales tax. Although the bill would only authorize a study and does not guarantee any future tax relief, alternatives to the property tax system need to be reviewed.

Texas businesses and homeowners pay some of the highest property taxes in the nation – the state ranked 13th nationally in per capita property tax collections for fiscal year 2006, according to the Tax Foundation. If Texas is going to successfully attract businesses and jobs, we must address the issue of ever-escalating property taxes.

One of the most important bills in the upcoming session is House Bill 994 by Representative Ken Paxton, which would change the state’s constitutional spending limit away from the growth in personal income to the sum of population growth plus inflation.

This measure is important because it effectively caps the cost of state government per person. Growth in the state’s budget must be closely guarded to avoid higher taxes in the future, and let businesses who are looking to relocate or expand know they are welcome in Texas.

Bringing jobs back to Texas is going to require smart, forward-thinking public policy that emphasizes low taxes, fiscal discipline, and limited government. How closely lawmakers choose to follow that model will dictate much of the coming economic recovery and how quickly all of us see an improved job market.

James Quintero is a fiscal policy analyst at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.

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TPPF COMMENTARY: For Texans, a "Proposition 13" moment

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For Texans, a “Proposition 13” moment

By William Murchison

Oh, look, it’s our friend the postman, bearing to our doorsteps the fragrant tidings of springtime: such as how much we will soon owe the county or the school district in property taxes!

It goes with the robins and the roses – the bad news of what property ownership costs in a society that leans heavily, for the satisfaction of public wants, upon the owners of homes and businesses. Which is why I read with more than academic interest my Texas Public Policy Foundation colleague Talmadge Heflin’s well-reasoned argument, on the TPPF website, for substitution of the sales tax for the exactions of the property tax.

Could it happen? Few enough of us have the prophetic insight to say. What we might possibly say is, things can’t go on much longer with property taxes the way they are soaring: not just here in Texas but throughout the rest of the country, as states slough off their responsibilities upon counties and communities. States like Florida, Minnesota, North Dakota – even New York – are aboil with indignation over the steady rise of the property tax.

Concern with, and resentment of, too-general reliance on property taxes for the financing of local government may be reaching the anxiety level at which Californians, just 30 years ago, snapped, passing Proposition 13 and sending notice to the taxing authorities that the patience of put-upon property owners is easy to overestimate.

Proposition 13 declared that “the maximum amount of any ad valorem or real property tax shall not exceed One percent (1 percent) of the full cash value of such property.” Not that expression of the people’s sovereign will was going to stop in their tracks those parties determined to enlarge the role of government. What “Prop 13” did do was roll back California property taxes by an average 57 percent and advise the taxing authorities to exploit other victims besides the California property owner. So there!

Texas’ property tax burden – our rates, as Heflin notes worriedly, are the 14th highest among the 50 states – has a semi-benevolent explanation. This is to say, we’ve no income tax; nor have Texans, if it comes to that, as large an inclination toward big government programs as the majority of Americans seem to.

Heflin, it seems to me, rightly takes aim at the burdens inflicted on property owners by the state’s undue reliance on property taxes. Case in point: the egregious scheme known as “Robin Hood,” whose nominal purpose is the evening out of public school spending across the state. Taxpayers in “property wealthy” districts have had to fork over to “property poor” districts for no better reason than that state lawmakers couldn’t or wouldn’t come across with the funds to meet educational obligations.

A consequential point emerges here. What if the Legislature took with full seriousness its obligation to spend state revenue in ways that conduce most to the general good, starting from the premise that not every problem has, or even deserves, a government solution?

What if state government kept a closer watch both on expenditures and performance, so as to make sure that reliance on government didn’t become an unseemly habit, and that, wherever government’s duty to the people was unquestioned (as with education) the job got done with maximum efficiency?

Wouldn’t it be fascinating, for instance, to look at how all those Robin Hood dollars have gotten spent, and what the educational results have been?

Maybe, if state government regarded with a combination of fear and respect its role as steward of the people’s money, and correspondingly kept taxpayers’ burdens as light as possible – well, maybe, the likes of Brother Heflin wouldn’t have to spend valuable time proposing reinvention of the tax system. Talk about a deal – finally – for the taxpayer!

William Murchison is a Senior Fellow at the Texas Public Policy Foundation.

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TPPF COMMENTARY: Schools Can't Break Addiction to Higher Taxes

Last year, the Texas Legislature approved a school finance reform package that sought to buy down local property tax rates using the new business margins tax and part of the state's $14 billion budget surplus. However, a week from tomorrow, dozens of school districts will seek voter approval of tax rates that would intercept most of the intended property tax relief.

In this week's commentary, David Guenthner, Director of Media and Government Relations for the Texas Public Policy Foundation, debunks the notion that these exorbitant rate increases are necessary and illustrates how some school districts are using these elections to contrive a new school finance "crisis" and re-open the school finance litigation several years earlier than should be necessary.

This column was originally published in the Oct. 27 San Antonio Express-News.

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Schools can’t break addiction to higher taxes

By David Guenthner

Remember the big school property tax cut you were supposed to get? Your local school district might be about to take it away.

Last year, the Legislature passed a plan that used the state’s new business tax and part of the state’s $14 billion budget surplus to buy down the property tax rates for day-to-day operations to $1.00.

But according to the San Antonio Express-News, at least 120 school districts have set elections that seek voter approval of much higher tax rates. Most of them, including five in the San Antonio area, seek authority to tax at $1.17, the maximum allowed under the new law. A Texas Education Agency spokesman predicted earlier this fall that “a large number” of school districts would tax at $1.17 within two years.

It would be one thing if the Texas economy was sinking and appraisal rolls were shrinking. But our economy remains red-hot, creating almost 800,000 new jobs in the last three years, and appraisals have skyrocketed.

And it wasn’t like the state didn’t give school districts access to additional money without a mammoth rate increase. The state gave all districts an additional $2,000 per teacher and $275 per high school student.

Additionally, as part of the new formula, the first four pennies of tax rate above $1.00 are “magic pennies.” For property rich districts, those pennies are not subject to Robin Hood. For property poor districts, the state gives them the highest guaranteed yield ever, making the revenue generated the same as if those districts were Austin ISD.

What would a $1.17 property tax rate mean for homeowners? In San Antonio’s Southside ISD, the average homeowner’s property tax cut would be whittled to a mere three dollars.

Many school districts are also using the tax cut as cover for massive school bond packages. Houston-area school districts have placed more than $3 billion in proposals on next month’s ballot. Another Southeast Texas school district proposes to increase its debt service tax rate by 17 cents.

The disingenuous part of these elections is that the school districts will try to convince you that they are cutting your taxes rather than increasing them.

In Prosper ISD, taxpayers are being told that approving the maximum tax rate would result in a tax rate 13 cents lower than last year’s. But the Legislature gave school districts enough money this year to cut property tax rates by 33 cents.

If your local school district’s proposed tax rate isn’t at least 33 cents lower than last year’s, your school district is pilfering your tax cut.

The education bureaucracy went to the Legislature in 2004 – and again in 2005 and 2006 – asking for close to $10 billion in new money with no strings attached and no increased expectations. When the Legislature finally passed a school finance reform plan last year that reduced property taxes, provided targeted funding increases, and resolved the state’s school finance lawsuits for at least the next several years, the bureaucracy suffered a rare loss.

Rather than finding operational and program improvements and working within the new law, the school bureaucracy intends to exploit its weaknesses, contrive a funding crisis, and pin the blame on the Legislature.

The faster that a large number of school districts can raise their tax rates to the new maximum, the sooner they can re-open the school finance lawsuits, force even more special sessions, and stake a claim to untold additional billions of your tax dollars.

The school bureaucracy’s disregard for the taxpayers underscores the need for the Legislature to enact a lower rollback threshold and automatic elections when school districts propose a tax rate that would increase spending above enrollment growth plus inflation.

In the meantime, the only silver lining is that taxpayers must approve all bond issues and any proposed operations rate above $1.04.

David Guenthner is Director of Media and Government Relations for the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.

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