Texas Taxes: A Win–Win Opportunity or a Friendly Fire Disaster?
by Mark Ramsey on May 4, 2015 at 8:35 AM
The Senate has passed a property tax cut. The House has passed a sales tax cut. The Senate, led by Lt. Governor Dan Patrick, followed the clear will of the people and delivered on their promise to reduce property taxes and continue elimination of the franchise tax. The House took a different approach.
While the GOP stands for tax cuts of all flavors, while living within the constraints of a balanced budget (and hence the net result should be the reduction in the size of government), recent party platform and legislative priority identifications make it crystal clear that in the ongoing tax wars, a consumption tax (i.e. sales tax) is the preferred and fairest of necessary evils we call taxes. Not income taxes. Not property taxes. Not European style value added taxes. Sales taxes. There are numerous reasons to come to that conclusion that are well-discussed elsewhere, such as it is an efficiently collected tax, it is broad-based (applying to everyone equally, regardless of their status—citizenship, residence, sex, color, religion, source of income…including illegally earned income, is difficult to evade, is not subject to local manipulation, is not subjective, etc.). It is also the most transparent of all—you see the tax on your receipt every time something is purchased—and many more.
Hence we should be REDUCING or ELIMINATING property taxes and moving toward government being funded by a sales tax. Sales taxes are the broadest (a good thing for everyone, including visitors, drug cartels, underground economy participants, etc. to share in taxes). Sales taxes are paid once. In stark contrast, property taxes are hidden from the view of many (renters often think they don’t even pay them even though they do through higher rents), are manipulated locally, are raised willy-nilly through “principal’s office” elections, and importantly, NEVER END. If you think you own property, just wait and see what happens if you don’t pay property taxes.
Additionally, the effective tax rate on property taxes in Texas is well OVER 100%. Why? Because you must continue to pay, say 3% of market value, forever. In about 30 years, you have paid 100% in taxes. Except it is really worse than that. Due to escalating property values and rate increases (they are always approved by voters if the politicos say it’s “for the children” rather than telling the truth, that debt is stealing “from the children”), the 100% rate is actually reached in far less than 30 years—perhaps 15-20 years. In our neighborhood, homes that sold for $30k 30 years ago now pay over $3k in taxes EVERY year.
In contrast to working to reduce this massive, inequitable, and I think immoral property tax, the House sales tax reduction would reduce taxes to those who don’t even live here, or work in criminal enterprises like drug cartels and trafficking. One calculation has it that the average Texan would only save $36 per year with the House 0.3% reduction from 6.25% to 5.95%. It’s so small that if you were buying $1 of goods now it would cost you $1.06, and after their “better” plan was enacted that same $1 of goods will cost you…drum roll…$1.06. ($1.08 for most metro areas that tack on an extra 2%).
Legislators, what do voters of both parties want?
For clues, as recently as last June, the Texas GOP clearly stated on page 28 of the platform1 in the “Tax Burden” section that:
“…the most equitable system of taxation is one based on consumption, and wish to see reforms towards that end at all levels of government…”
That section of the platform goes on to also say that:
“We support the abolishment of property taxes, but in the interim, property taxes should be paid on the price of the property when it was initially purchased.”
Further, SREC 1, the very first Resolution passed by the voice of the Republican grassroots—the State Republican Executive Committee (SREC)—clearly stated as one of only eight legislative priorities2 that there should be:
“…No new taxes or unnecessary spending, property tax reduction for all homeowners and businesses, elimination of the business franchise tax or extending the deduction to $10,000,000, and the elimination of toll roads once paid…”
Nowhere in either the Platform or the SREC 1 is there a call for lower sales taxes or preservation of property taxes. Neither can I find where anyone in either party campaigned on a cut in sales tax, though several campaigned very successfully on cutting property taxes.
Further, this appears to be something that all Texans, Republican and Democrat alike, can agree on. From the 2014 Democratic Party Platform3:
“…Texas Democrats support policies to restore responsible state fiscal policy, including…property tax relief to benefit all homeowners fairly and prevent families from being taxed out of their homes… “
Since this issue has been started, I have asked many people—rank and file taxpayers—what they thought as well. None thought the House approach was the best. Zero. Nada. All wanted property tax relief. The ONLY ONES I’ve hear supporting the House version are House members! (However, I have also heard that some business interests with well-heeled lobbyists prefer the sales tax reduction since they pay more in sales tax than in property tax.)
Last, when Texas' independence was declared in 1836, the opening paragraph is:
"When a government has ceased to protect the lives, liberty and property of the people, from whom its legitimate powers are derived, and for the advancement of whose happiness it was instituted, and so far from being a guarantee for the enjoyment of those inestimable and inalienable rights, becomes an instrument in the hands of evil rulers for their oppression."
Please consider what your constituents have clearly and repeatedly indicated is their preference here.
The Win-Win: TWO ways
There are at least two ways out of this that are good outcomes.
Best way: To satisfy business and taxpayer stakeholders, BOTH the property tax reduction of the Senate AND the sales tax reduction of the he House be adopted!
Good way: Adopt both with a wrinkle…the .3% reduction in sales tax would be changed to give that .3% to the counties, (who argue they need the money for growing county infrastructure, etc.). The county argument is debatable in many counties, but replacing property tax savings with sales tax is still better.
Bad ways: The House side wins and the Senate loses or vice versa. (If the House wins then voters voice loses to lobbyists. Austin takes a step toward Washington.) The other bad way is that neither tax cut is adopted. All of Texas loses while lobbyists and Austin “big government” wins.
Having a stalemate over who gets to brag about a tax cut is not good for Texas.
Tax Burden- We in the Republican Party of Texas believe in the principals of constitutionally limited government based on Federalist principles. To this end we encourage our elected officials at all levels of government to work to reverse the current trend of expanding government and the growing tax and debt burdens this places on we the people. We believe the most equitable system of taxation is one based on consumption, and wish to see reforms towards that end at all levels of government, furthermore, we believe that the borrower truly is a slave to the lender, and so long as we continue to increase our tax and debt burdens we will never be a truly free people. Towards these ends, we support the following: Reformation of the current systems of taxation at all levels of government; federal, state and local. Examples of these reforms include the following:
- The “Fair Tax” system
- A Flat Tax
- The 1-2-3 No Federal Tax
- We support the abolishment of property taxes, but in the interim, property taxes should be paid on the price of the property when it was initially purchased.
- Abolishment of estate taxes or the “Death Tax” as it’s more commonly known
- Abolishment of capital gains taxes
- Abolishment of franchise and business income taxes
- Abolishment of the gift tax.
- Discontinuation revenue generating licensing fee
- Exemption of inventories from property taxes
BE IT RESOLVED, That in addition to ongoing Republican efforts to extend protections to innocent human life, championing traditional marriage and family values, and reducing the size and cost of government, the State Republican Executive Committee of Texas has identified the following eight legislative priorities:
- Reduce the Rose Bush Blocker rule in the Texas Senate to a 60% threshold, as utilized in the US Senate;
- Border security and continued funding of “surge” operations by Texas Military Forces including the DPS and National Guard;
- Second Amendment issues, including Constitutional carry and eliminating so-called “gun-free zones”
- Making statewide school choice a reality;
- No new taxes or unnecessary spending, property tax reduction for all homeowners and businesses, elimination of the business franchise tax or extending the deduction to $10,000,000, and the elimination of toll roads once paid;
- Ending the Affordable Care Act and protecting freedom of choice, including natural and alternative medicines/treatments, and not expanding Medicaid;
- Transferring jurisdiction of the Travis County Public Integrity Unit to an impartial statewide entity; [and]
- Protect our constitutional freedoms; …