Troxclair: The time has come for real tax reform in Texas
By Ellen Troxclair, published in the Austin Statesman
The Johnson family wanted to stay in Austin. But as the Austin American-Statesman reported in 2017, the tax burden just became too great.
“The Johnsons this year would have paid nearly $9,100 in taxes, up $1,880 from five years ago,” the Statesman explained. “Instead, they uprooted their kids from their schools and moved in August to Buda, where they found a 3,300 square-foot home for less money—and the new tax bill is estimated to be at least $3,000 less.”
They’re not alone. According to a new Texas Comptroller report, property taxes imposed by cities, counties, school districts and special districts grew to a mammoth $59.4 billion in 2017. If you divide that huge tax burden by the number of households in Texas, then it’s fair to say that local governments took $6,300 out of every family budget that year.
For many Texans—particularly the elderly and those on fixed incomes—a tax bill that size is nothing short of crushing.
From 2012 to 2017, local property taxes soared by almost 40 percent across the entire state. That’s well above population growth and inflation increases, which rose just 15.3 percent.
We’ve seen the effect firsthand here in Austin, with families like the Johnsons and businesses like Threadgill’s World Headquarters. Long-time residents and iconic businesses are being pushed out, leading to gentrification and further sprawl.
To be sure, school district taxes make up a sizeable portion of your overall tax bill. But even that portion is rising—by choice—as districts add debt through general obligation bonds. And for the record, let’s set aside the myth that local school taxes are rising because the state’s portion is shrinking. That’s not how it works. According to the state’s funding formula, local taxes are counted first, then the state comes in to make up the difference. When local taxes go up, the state’s share consequently goes down. It’s not the other way around.
Something has to be done. But what?
Based on my experience serving on the Austin City Council over the last few years, I believe the answer is two-fold.
First, state lawmakers need to contain the problem. This can be accomplished by setting the rollback tax rate at 2.5 percent for cities, counties, and school districts and simply requiring voter approval for any revenue needed above that amount.
A reform like this offers both taxpayer protection and more local control.
Secondly, our school funding formulas are outdated and no longer serve us well. Lawmakers should consider a property tax plan that would limit the growth of state government spending and redirect that surplus toward tax relief.
Without getting too far down into the weeds, the plan calls for restraining state spending to 4 percent growth every biennium and using 90 percent of that extra money to buy down the school district maintenance and operations tax. As a result, you’ll begin to see tax relief almost immediately and, after about a decade, that portion of your tax bill will go away entirely.
Reducing our reliance on property taxes overall means that we move closer to Texans being able to truly own their own property, rather than continuing to “rent” from the government well after their homes have been paid off.
These are the kinds of transformative and critical initiatives that our Legislature should tackle this session. There’s a true crisis unfolding in this state right now, as Texas families like the Johnsons face hard choices and real hardships due to skyrocketing property taxes.
Troxclair is a senior fellow with the Texas Public Policy Foundation’s Think Local Liberty project.