Consider it a microcosm of how government, elected by the people for the people, works when politicians have their own agenda to satisfy: On Tuesday, Texas voters overwhelmingly approved an expansion of the state’s homestead exemption. But property owners shouldn’t expect long-lasting tax relief.
Rising government appraisals will wipe out the modest protections of Proposition 1, analysts say. According to one projection, any savings achieved by upping the homestead exemption from $15,000 to $25,000 would be lost after just one year of a 4% appraisal increase.
Taxable values across Texas have been climbing far faster than that.
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“My [home] appraisal went up 17 percent this year,” notes Dale Craymer, president of the Texas Taxpayers & Research Association. Only a state-imposed cap on taxable valuations kept the increase to 10%.
As with three property-tax cuts previously passed by the Legislature, the relentless rise in appraised values will undermine Prop. 1 and take ever-larger slices of Texans’ income, says Vance Ginn, an economist at the Texas Public Policy Foundation.
Property owners have seen their property taxes swell, on average, from 7.6% of their median income in 2000 to 9.8% in 2013. With the passage of more local bond issues and accumulation of debt — all dependent on property taxes — there is no end in sight.
“More than 4,000 localities levy property taxes, obscuring from taxpayers exactly who is responsible for raising them, how that money is spent, and whether any increase was necessary,” states a new report, “The Freedom to Own Property.”
Craymer calls Texas’ property tax regime an “insider’s game.”
“There’s growing frustration. No question that the property tax creates economic harm,” he said.
The TPPF study calls for abolishing property taxes in favor of a “reformed sales tax”:
It would make tax increases easier to identify, give taxpayers greater control over their tax exposure and finally allow property owners an opportunity to own their property instead of paying rent forever to the government.
An expanded sales tax of 7.35% — including a one-time levy on property transactions — could yield as much revenue as the current property tax, TPPF estimated.
“Even if the reformed sales tax rate was 11 percent, most property owners would come out ahead of the current tax system in just a few years,” the report concluded.
In addition to removing the subjectivity of appraisals, a user-tax system could rein in the debt-driven spending of schools and local government.
“They could still finance the debt within the revenue collected from the reformed sales tax,” Ginn told Watchdog.org. But, he added, “The cleanest way to pay for bonds would be to retire them.”
Bonded indebtedness for schools and other local government ventures now totals $338 billion — $12,250 for every man, woman and child in Texas.
Since 2000, Texas property taxes — ranked fourteenth highest in the nation by the Tax Foundation — have grown 17.3% faster than state sales tax revenue.
Read more by Kenric Ward at Watchdog.com.
