The New Property Tax Revolt in Texas
- Dan Rene
- 1 day ago
- 2 min read
Texas citizens have launched a new property tax revolt not unlike that launched by Prop 13 in California in the 1970s. Governor Abbot recently called a special session of the Texas legislature to enact property tax reforms. This year Texas citizens have used the initiative process to propose seventeen new amendments to the constitution, some of which are designed to provide tax relief.
It is not hard to understand why Texas homeowners are revolting against property tax burdens. Texas ranks 6th in the nation in effective property tax rates per home. The median real estate taxes paid by Texas homeowners was $3520, compared to the national median rate of $2690. Property tax burdens in Texas continue to outpace that in other states, and inflation in recent years has widened that gap.
The fundamental problem for homeowners in Texas and other states is inflation. In recent years we have experienced double-digit increases in inflation, comparable to that in the 1970s. Indeed, the assed value of homes has outpaced increase in inflation in recent years. Some homeowners are being priced out of their homes because they can’t afford to pay the higher property taxes. Potential homeowners are
priced out of the market by higher interest rates as well as higher home prices. Homeowners ask why they should bear higher property taxes simply because of inflation.
Local governments in Texas are the major beneficiaries of inflation, capturing a windfall of revenue when inflation increases property taxes. But Texas homeowners ask the obvious question, why should local governments capture a windfall of revenue simply because the federal government fails to stabilize prices. The answer of course is that they shouldn’t.
Economists often defend property taxes by pointing to the benefits of property taxes compared to other taxes. For example, the Tax Foundation recently published a study showing that decreasing property taxes with offsetting increases in other taxes, including income and sales taxes, results in a less efficient tax system.
There is a fatal flaw in the Tax Foundation analysis. The study assumes that local government revenues and spending are at an optimum level. But when local governments capture a windfall of revenue due to inflation, revenue and spending exceed optimum levels by definition. The challenge for local governments in this situation is to reduce property taxes to offset inflationary increases in assessed
values. Some local jurisdictions in Texas do in fact offset increases in assessed values with deceases in the mileage rate, but these are the exceptions. Most local governments spend the windfall in revenue in response to pressure from special interests. Keep reading the white paper - Click to download:
