Published: 06-18-08
June is home ownership month in Texas. Home ownership is considered part of the American dream. However Texas ranks 45th in the country in home ownership. In 2006 Texans paid the highest property taxes as a percentage of home values in the country according to the American Community Survey Tax Foundation Calculation.
“We need to eliminate property taxes as a form of school finance as the system is hopelessly flawed” said Americans for Prosperity state director Peggy Venable. “We have lost all sense of local control as local officials hide behind the appraisal process and claim they haven’t raised taxes when they didn’t have to raise the rates to dig deeper into taxpayers’ pockets.”
Venable testified today before the Select Committee on Property Tax Relief and Appraisal Reform hearing in Austin. The committee was appointed by Speaker Tom Craddick. Lt Gov. David Dewhirst has also instructed the Senate Finance Committee to study the benefits and limitations of property tax appraisal caps compared to a limit on revenue a local jurisdiction can receive without the approval of voters in the locality.
“Using state budget surpluses to lower property taxes could ultimately eliminate the school maintenance and operation tax” said Venable. “But Texans need three critical taxpayer protections in place to make those savings sustainable:
• “First we need to make sure that any property tax savings delivered by the legislature isn’t devoured by local taxing entities. Local governments should only increase their spending proportionate to the growth in population and inflation with higher spending requiring taxpayer approval.
• “Second local governments’ ability to use taxpayer dollars to lobby the legislature should be prohibited. Those funds should be going to lower property taxes not to lobby for higher taxes.
• “Third we must prohibit tax dollars from being used to sue taxpayers for more of our tax dollars. Let’s remember that school districts sued the state with tax dollars demanding more tax dollars for education.
“Without these taxpayer protections Texans should not allow the state to assume a greater burden for funding schools.”
The need for property tax reform is great. According to Venable many retired citizens whose taxes are frozen and own their homes are paying property tax bills equivalent to what their mortgage payments had been.
“Seniors can defer their tax payments but that is tantamount to grave robbing when a citizen has worked hard purchased a home and when the property taxes become too burdensome they defer the tax payments only for the tax man to come calling when they move or die” said Venable. “Shouldn’t the senior citizen be able to rest assured that their homestead will be passed along to their heirs without tax liens?”
“We are leaving our children a legacy of debt as local government debt in Texas is growing five times faster than personal income” said Venable. “We should be cautious that we not also place heaver burdens on them with deferred property taxes.”
“Our property tax system is rife with inequities” said Venable. “It is often arbitrary and is taxing unrealized value. Taxing the home based on the purchase price coupled with using a consumption tax would be more simple fair and transparent.”
Shifting education funding from the local property tax to a state consumption tax would also keep school funding equity issues out of the courts.
Even before the current sub prime market problems Texas foreclosure rates were fourth highest in the country per capita with 1 in every 549 households in the process of foreclosure in January 2006.
The constitutional amendment passed in 1997 to place a 10 appraisal cap on homesteads has been woefully inadequate in keeping property tax increases in check. Appraisals continue to increase dramatically across the state and tax bills have grown 45 in five years while during that 5 year period and inflation grew less than half that increasing only 14.8. With the current 10 cap and appraisals exceeding that many homeowners are seeing their property taxes double in 7 years.
Galveston County Tax Assessor and Collector Cheryl Johnson has come up some additional sound ways to save taxpayer dollars which includes elimination of the appraisal districts which she estimates will save $321 million a year. She also advocates using acquisition value rather than market value as the basis for property taxation in Texas. In doing so property taxation would not be placing a tax on unrealized value. It would provide greater predictability to property taxation.
Rep. Phil King (R-Weatherford) has proposed modifying the sales tax to offset property taxes and eliminating the school property tax.
Other plans are being considered but AFP takes the position that any reforms must be coupled with taxpayer protections so property taxpayers can be assured that the savings they are provided will not be devoured by local taxing entities either through rate or appraisal increases.
Local governments can retain control over their spending by providing voters with the opportunity to approve or reject spending above the increase in population and inflation.
“Local officials should want to seek voter approval before digging deeper into constituents’ pockets” said Venable.
Americans for Prosperity (AFP) is a nationwide organization of citizen leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best safeguard to ensuring individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth and returning government to its constitutional limits. For more information visit www.americansforprosperity.org
