- James Quintero Regular Contributor
Congress just passed the most sweeping tax reform package in a generation, helping unshackle the U.S. economy and ease the burden on working families. That’s nothing short of a home run — and the Texas Legislature should take note.
When state lawmakers return to Austin in 2019, there’ll be plenty of opportunities to revamp the tax code in big, bold ways — especially on property taxes. That particular system is broken in a fundamental way — and an overhaul is long overdue. A look at the data shows the extent of the problem.
In 2016, more than 4,100 local governments hit property owners with tax bills totaling $56 billion. That’s roughly a $4 billion spike compared to the previous year — and an increase of almost $16 billion over a five-year period. Those are massive totals with major implications for Texans rich and poor.
On a per capita basis, Texas’ property tax system costs every man, woman and child in the Lone Star State around $2,000 annually. For a family of four, the tab is closer to $8,000 per year. That’s a lot to ask — especially from low- and fixed-income Texans — and, sadly, it seems stuck on growing.
From 2000 to 2015, property taxes levied statewide skyrocketed by a whopping 132 percent. By comparison, traditional economic measures, like population and inflation, increased only 82 percent. This mismatch means taxes are growing much faster than they should be — a fact that casts Texas in a poor light nationally.
In comparison to other states, Texas’ property tax system is one of the worst in the nation. According to the Tax Foundation, a nonpartisan research group based in Washington D.C., Texas collects enough in property taxes to rank as the 14th toughest for taxpayers.
All of this matters because taxes matter. Sky-high property taxes affect people and their decisions in a lot of different ways. Some find it difficult to own a home. Others are disincentivized from making improvements to their property. Still, others can’t fully reinvest their earnings in their businesses and workers. Some seeking to relocate simply stay away, costing the state jobs and investment.
So, this is the problem that awaits Texas lawmakers. But, especially in light of federal tax reform, it may also be an opportunity in disguise.
Tailwinds from D.C., strong public support for legislative action, and an increasingly conservative legislature compose all of the right ingredients for serious tax reform. All that’s needed is for lawmakers to seize on the right ideas — like a property tax trigger.
Taxpayers need protection from soaring tax bills that grow incessantly on autopilot. Hence, legislation is needed to control how quickly taxes can rise before triggering a public election to let voters weigh in. If local officeholders can persuade the public that more taxes are necessary beyond a certain threshold — such as population and inflation — then they’ll win the election and get their increase. If voters disagree, then local officials will have to make ends meet, like everyone else.
Once that intermediate reform is in place, then lawmakers should set their sights on eliminating Texas’ property tax entirely. That can either be done through a wholesale tax swap or in a more incremental fashion by “buying down” certain segments of the tax — for example, the maintenance and operations portion of the school district property tax — until such a time when the entire system can be tossed out.
If a deeply-divided Congress can come together to pass a generational tax reform bill, then there’s no reason that a more like-minded Texas Legislature shouldn’t be able to come together on serious tax reform in 2019. The system is clearly broken — and the public is clamoring for change. All that’s needed now is the political willpower to get something big done.
Quintero leads Think Local Liberty.