April 10, 2006
Who gets the tax break?
Vince points to this El Paso Times story, which notes that the same flaw exists in the TTRC plan as was in the previous tax-swap plan, albeit to a lesser degree: Most people won't get much of a tax reduction, if they get one at all.
An analysis by the bipartisan Legislative Budget Board shows that households with annual income less than $54,000 would receive, at most, a .1 percent tax reduction under the plan.
About 75 percent of El Paso families make $50,000 or less per year, according to census data.
Households with annual income of more than $104,000 would receive at least a 3 percent tax cut.
No surprise, right? You could, of course, make this plan a lot more equitable to the multitudes who have more modestly-priced houses by increasing the homestead exemption instead of mandating a lower tax rate. For those of you tuning in late, that would be the Hochberg Plan, which is still the only school finance-related plan to actually pass the State House. I fully expect we'll see a replay of that debate in this session.
One thing we apparently won't see this time around (not that I'm complaining, mind you) is another tedious debate about a property tax appraisal cap, as Governor Perry says it will not be a part of the special session call, at least at first. Cue the whiners:
"I think that appraisal caps are part and parcel to solving the school finance problem," said state Rep. Dwayne Bohac, R-Houston, who plans to file legislation similar to what was defeated in the Texas House last year.
"The buy-down isn't enough," Harris County Tax Assessor-Collector Paul Bettencourt said of the governor's proposal to raise state taxes to help pay for reductions of about one-third in school operating taxes.
"The real policy issue is how fast the (school) taxes are going up."
Bettencourt said rising property values accounted for 85 percent of the increase in the average Harris County homeowner's school tax bill between 2000 and 2005. Annual school tax bills, on average, jumped from $987 to $1,585 in the county during those five years, he said.
Bohac, you may recall, earned his way
onto the Texas Monthly Ten Worst Legislators list for 2005 because of his inability to pass a tax appraisal cap despite support from the Governor and the Speaker, and having a solid Republican majority in the House. Bettencourt makes this same argument every time the subject comes up, and every time I have the same question for him, which as far as I can tell he's never been publicly asked: If the actual value of your house went up that much in the specified time period, why shouldn't the property taxes paid be commesurate? What, exactly, does he have against the free market?
Anyway. As Greg says, now that this is off the table again, ol' Dan Patrick is going to have to keep aiming his venom at his fellow Republicans, which ought to have a certain entertainment factor about it. Perhaps he should have run for Governor instead of limiting himself in the Senate. Why don't you see what your new pals the lobbyists think about that for next time, Danno?
Posted by Charles Kuffner on April 10, 2006 to Budget ballyhoo
Is anyone surprised that a tax plan devised by Rick Perry and the current state leadership turns out to be -- imagine! -- a boon for their cronies in the insurance and alcohol industries?
If the actual value of your house went up that much in the specified time period, why shouldn't the property taxes paid be commesurate? What, exactly, does he have against the free market?
That's a ridiculously easy question to answer. Because most people don't nearly have their incomes keep up with property values (and therefore property taxes). Many people have had little or no raises in the last five years and their property taxes have risen 50% or more.
Personally I think property taxes are rising way too quickly and need to be reined in. I don't think a cap is the right way, though. Having lived in California almost all my life until 2003, I saw how Proposition 13 had some young, new homeowners (who usually had a lower income and/or net worth) paying 10 times as much as their neighbors in property taxes on essentially the same home.
That's wrong, too.
But how about property tax relief which doesn't distort market values, but which limits property tax receipts to an increase of (say) 5% per year adjusted for population?
If someone paid $2000 in property taxes, they'd not pay more than $2100 the next year in theory. How do you do that? By making the taxing authorities adjust their RATE, not the assessed value, downward if the home value rose by more than 5%.
Capping assessments has the effect of creating haves and have nots based on when they bought the property, which sucks. Two people who own comparable properties should pay the same amount whether they bought in 1965 or 2005. Caps fail that test, and the status quo is crippling homeowners.
It's ridiculous that people can pay 70-80% more now than they did about seven or eight years ago. Inflation is nowhere near that and people SHOULD be outraged about it.
Tim, I say if you're going to make that kind of argument, then this is the way to go. I do not expect Paul Bettencourt to agree to this any time in my lifespan.
You could, of course, make this plan a lot more equitable to the multitudes who have more modestly-priced houses by increasing the homestead exemption instead of mandating a lower tax rate.
That's a great idea. The only problem is that it doesn't fulfill the Supreme Court's mandate, at least as I understand it.
Remember, the goal isn't merely to cut property taxes. It's to allow localities the option to cut, or not cut, their own local taxes. Unfortunately, increasing the homestead exemption moves things in the wrong direction, so that idea, as good as it is in principle, is probably DOA.
As for caps, Kuff's argument is wrong, for the reasons Tim stated. You just can't let a housing bubble price people out of their homes. But Tim (and Gov. Perry) are wrong too! We already have reasonable caps on increases in property appraisals: no more than 10% per year, and no more than 30% for as long as you own (and don't substantially improve) the property. I see no need for additional caps.
One idea I would like to see is shifting property taxes more to land and away from structures. The current tax structure discourages improvements and encourages sprawl-inducing luxuries like 10-acre lots. Another idea is, rather than a flat homestead exemption and a flat (for each locality) property tax rate, allowing for a progressive property tax, with 2 or 3 increasing brackets (similar to the way an income tax is typically structured). But my ideas have even less chance of consideration than Hochberg's.