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  • Jeff Younger for Texas

How Texas Can Eliminate the Property Tax



Texans deserve to own their homes, not rent them from the government. Texas has some of the highest property taxes in the United States. Property values have skyrocketed and sent taxes up with them.

My goal is to eliminate property taxes entirely.

  • Vote on a constitutional amendment to put property taxes on a path to $0.

  • Place stronger caps on government spending.

  • Ensure that the tax swaps are gradual as property taxes are phased out.

  • Ensure public schools are fully funded during the transition.

  • Keep income taxes off the table.

How We Can Eliminate Property Taxes

There are two basic strategies to accomplish property tax reform. Let's define some terms before we describe the options.

  • Sales Tax - a tax on final sales of a good or service.

  • Value Added Tax (VAT) - a tax levied at every stage of the supply chain when a product or service gains value.

  • General Revenue-Related Funds (GRR) - the budget account for general revenue expenses, including budget Articles I through X. The largest share of GRR spending is on: Article II, Health and Human Service at 28.7%, Article III Education at 53.9%.

  • M&O Expenses - funding for maintenance and operation of schools.

Option 1: Redesign the Texas Sales Tax System to Immediately Eliminate Property Taxes

This option would expand Texas' sales tax base to pay school M&O expenses. Precedent and support for this approach are evident in bills proposed in the last session: HB59 and HJR154. HJR154, in particular, would create a constitutional amendment that would block schools from reimposing school taxes on property.

These bills would raise sales taxes to rates competitive with nearby states: Louisiana 9.52%, Arkansas 9.51%, Oklahoma 8.95%, New Mexico 7.83%.

Option 1 does not establish a VAT. It would tax only end-use sales of goods and services.

Benefits of Option 1

  • It's conservative. Sales taxes grow at a lower rate than property taxes, resulting in lower overall taxation.

  • Taxpayers get better transparency. For example, renters know exactly what they are paying in taxes because it's not hidden behind property costs.

  • It is a permanent replacement for school M&O expenses.

Disadvantages of Option 1

  • Double taxation is a real threat. For example, eliminating food and drugs from the tax will require doubling the sales tax on manufactured goods. Option 1 is therefore very sensitive how the tax is levied. In fact, it's more sensitive to the levy scheme than to the tax rate!

  • The political implications of taxing food and over-the-counter drugs (not prescription drugs), could make Option 1 harder to pass the Legislature.

  • County and municipal governments are afraid of the revenue losses that can come from moving to a pure consumption tax scheme. This could make it harder to pass the Legislature.

Option 2: Buy Down Property Taxes With Surplus GRR Funds

Texas runs a budget surplus in the GRR fund. This option would:

  • Limit the increases in the GRR fund to less than population growth and inflation.

  • Use the surplus funds above the limit to buy down property taxes over twenty years.

Benefits of Option 2

  • It is conservative. It limits growth in government spending in the GRR fund.

  • It produces a gradual buy-down of property taxes over twenty years. This would smooth the transition for business and individual tax-payers. It would also give the Legislature time to make adjustments, if needed.

Disadvantages of Option 2

  • While it does impose immediate caps on government spending, Option 2 does not provide an immediate replacement for property taxes. They are eliminated gradually over a twenty year period.

Conclusion

I hope this helps you understand how we can eliminate property taxes in Texas. If elected I fully support eliminating property taxes. For details, see the Texas Policy Foundation's white paper Lower Taxes, Better Taxes: Eliminating Property Taxes.

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