Proposed property tax relief does not go far enough

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Our governments rely on a two-legged stool for their income: a consumption tax based on the sale price and a levy on the value of our homes and business assets. The first is simple; the latter is a nightmare.

Heads of state can promise so-called property tax relief legislation, and local officials can lower rates as much as they want. But don’t imagine for a second that you’ll pay less when the bill arrives. Until we do a complete overhaul of our taxes, they will continue to rise rapidly.

You can be forgiven for thinking that real change is coming. Gov. Greg Abbott added property tax relief to the Special Legislative Session on Wednesday. Lieutenant Governor Dan Patrick named it Senate Bill 1. City councils, country commissioners and school boards work hard to avoid angering voters.

But the problem is not the players; that’s the game.

The legislature allows local authorities to levy property taxes according to basic rules. Appraisal commissions determine the value of a property. Local officials determine the penny tax rate per $ 100 of value, and a county tax collector sends you an invoice.

Heads of state can grant exemptions to people over 65, people with disabilities, or the surviving spouse of a veteran. They also offer a homestead exemption, which limits how quickly taxes can rise.

Local officials, however, lower or increase tax rates. Some cities, like Houston, have a cap on increasing collections from year to year. But no politician can control how quickly a property’s fair value can rise, especially in a booming real estate market. And there is the catch.

Houston City Council slashed its property tax rate to fall below a voter-imposed income cap last week. But as the rate drops from 56.18 cents to 55.08 cents per $ 100, a $ 225,000 home with a standard homestead exemption would only save about $ 20.

However, most homeowners saw their appraised value increase last year, so they won’t realize any savings. More than likely, their property tax bills will rise further.

While the San Antonio City Council kept the rate at 55.8 cents per $ 100 to fund a 3% increase in city spending, the Bexar County Commissioner lowered the county’s tax rate by 30 , 1 cents to 29.99 cents. The average homeowner would save $ 4 if their property did not increase in value.

But it is almost certainly the case. The average price of homes in San Antonio rose 5 percent last year.

The Lieutenant Governor pleaded with Abbott to put property tax relief on the special session’s agenda. His big idea is a one-time $ 2 billion school district property tax buyback, as outlined in Senate Bill 1. The owner of a $ 300,000 home would see a $ 100 drop in taxes, assuming the value does not increase.

The legislature will pay for this with higher than expected sales tax revenues. Quite a Benjamin, what a relief!

The Texas property tax burden stems from assessments which increase much faster than personal income. The market value of a large town house can double every 10 to 15 years. Income is not growing as fast. Even with a homestead exemption, many families are excluded from their neighborhoods by taxes alone.

Business property taxes are even worse because there are no exemptions or limits on how quickly they increase. But the same dynamic applies. Property taxes are accelerating faster than any business can increase its income. Every year, retail and service businesses see their profits plummet.

Abbott added property tax relief to the special session because one of his fiercest rivals in the 2022 election has an even bigger idea. Former state senator Don Huffines wants to do away with property tax altogether and replace income with higher “consumption taxes”, better known as sales taxes.

Dale Craymer of the Texas Taxpayers and Research Association did the math and found that the Huffins plan wouldn’t work for many complicated reasons, not to mention the fact that we would be paying astronomically high sales tax rates. So allow me a moment of heresy.

We can significantly reduce property taxes if we impose an income tax to pay for public schools. By adding a third leg to the tax stool, like other states do, seniors can keep their homes, and Texans pay taxes based on what they earn, not what they own.

Adjusting the property tax on the edges and only for a year is not a relief. We need a complete overhaul and state leaders brave and smart enough to act.

Tomlinson writes commentary on business, economics and politics.

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