The Property-Tax Problem
Mon March 31, 2014 2:36 pm

Glenn Hegar, the Republican nominee for comptroller, wants to eliminate property taxes. He is among a number of Republicans who have sounded an alarm about the subject, and called for them to be reduced if not eliminated. The main argument is that Texas’s average property tax burden is too high. But it also has an ideological dimension: If a homeowner has to pay property taxes, does he or she really own his own home? I don’t have any problem saying yes, but apparently others do.

Is eliminating property taxes a good idea? The general theory of taxation is that it should be a three-legged stool, encompassing income taxes, sales taxes, and property taxes. As it stands, Texas doesn’t have a personal income tax, and the majority of the state’s general revenue comes from sales tax receipts. The problem with eliminating the leg of the stool that represents property taxes is that property taxes are the primary source of income for local governments – school districts and municipalities. Take away property taxes, in other words, and you leave a gaping hole for the funding of local government. Where are municipalities going to find the revenue to build local infrastructure, or to fund critical services such as fire and police? That’s the issue. 

Mike Collier, the Democratic nominee for comptroller, has come out swinging at Hegar over this, arguing that if Texas eliminates property taxes, it would have to make up the revenue by hiking sales taxes to 20% or more. The state sales taxes would be counted as state revenue, meaning that the Lege would have to distribute the money back to local governments. Texas’s average property taxes are quite high. But if we want to eliminate them and don’t want to make drastic cuts to state and local spending, we would have to make up the difference by dramatically raising the sales tax. That would, in theory, give Texas taxpayers the highest consumption tax of any state. Taxpayers wouldn’t enjoy that either.

( AP Image by Eric Gay )

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