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Monday, April 13, 2009

HB 4184/HJR 133: One-Legged Stool

posted by Susan Peterson at 08:11 AM

Rep. Wayne Christian’s intent in House Bill 4184 is noble: provide adequate funding for public education. It’s his way of going about it that’s all wrong.

Passage of the bill and its accompanying constitutional amendment, House Joint Resolution 133, would spawn a voter referendum on abolishing all property taxes in Texas effective Jan. 1, 2014. Property taxes are levied locally to fund public education, police and fire services, road maintenance, hospitals. How’s it going to help to take their funding source away? By abolishing property taxes, Christian says his bill would make legislators come up with better ways of funding schools by the 2014 deadline.

“The state would never consider a tax bill—a real tax bill—until they were forced to,” Christian says.

True enough. And Texas schools are certainly in crisis. But abolishing property taxes, which make up 45 percent of total Texas tax revenue, would trigger serious economic volatility and make it impossible for communities to manage budgets and services. Texas already lacks the income tax that most states have—and Christian says that creating one is a no-go. “Because of the will of the citizens of Texas,” he says, “I think politically it’s not a possible scenario.”

What’s left? Without a property tax, the state would have to rely on the sales tax, says Dick Lavine, senior fiscal analyst at the Center for Public Policy Priorities. “You’d have to have a sales tax that is roughly two-and-a-half times as big—call it 16 percent. Plus, of course, with a high sales tax, people will be buying less. You’re talking about a 20 percent sales tax,” Lavine says. “It would shut down consumption.”

Christian’s bill also seems to violate a fundamental social conservative value: local control. Efforts to cap or abolish property taxes in other states have met significant opposition. Local entities argue that state control over property taxes erodes communities’ ability to determine what services are best—and levy taxes to pay for them.

Lavine says the “best practice” for states is a three-pronged approach to raising revenue: A sales tax, a property tax, and an income tax. Texas is one of seven states without an income tax. Knocking out the property tax would be taking Texas exceptionalism to the extreme, leaving us with, as Lavine puts it, a “one-legged stool.”

 

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