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Tag: Texas Public Policy Foundation

To Keep Property Taxes Low, Texas Will Need to Reform Education

According to a recent University of Texas/Texas Tribune poll, voters in the Lone Star State believe that property taxes are too high and the state is not spending enough on public education. Texas taxes education reform The majority of Texas voters are of the opinion that they pay too much in property taxes. Only 5 percent said they pay too little, and 26 percent said the property tax burden is just right. Among Democrats, 45 percent believe they pay too much. Sixty-three percent of independents and 59 percent of Republicans also believe property taxes are too high. On the question of public education, 50 percent of Texans think the state spends too little. Property taxes are one of the principal ways public education is funded in Texas. This was a major point of contention during the 2019 session of the Texas Legislature. The concerns of Texas taxpayers are warranted. Texas has made a name for itself by having no income tax, which has been a major selling point that policymakers have used to attract business and new residents. Nevertheless, the lack of an income tax has not fully contained politicians’ desire to raise tax revenues in other ways. According to Ross Kecseg of the conservative website Texas Scorecard, Texan households must shoulder, on average, a tax burden that is sixty percent higher than that of other states without income taxes. On the property tax front, the picture looks bleaker when comparing Texas to other states with no or very low income taxes. Texas households pay 83 percent higher property taxes than households in Washington, 102 percent higher taxes than in Nevada, 213 percent higher than in Wyoming, and more than 230 percent higher than taxpayers in Tennessee. Rising property taxes have been a feature in Texas politics over the past decade. James Quintero of the Texas Public Policy Foundation pointed this out when he revealed that statewide property taxes have climbed by 60 percent in the last decade. Texas’ rising property tax rates have clearly outstripped the population growth, which was 19 percent in the observed period. To get to the bottom of the property tax burden problem, Texas will have to address education spending. Education researchers Vance Ginn and Trey Berthelot of the Texas Public Policy Foundation discovered that education spending has increased by 7.6 percent from 2004 to 2016. Further, as spending has increased in the education sector, bureaucratic bloat has inevitably followed. From the fiscal year of 1993 to the fiscal year of 2015, student enrollment at public schools in Texas grew by 48 percent while non-teaching staff swelled by 66 percent and teachers grew by only 56 percent. In that time, there has not been an observable increase in the quality of education. Texas should start considering other options such as school choice and measures that begin to insert market dynamics into the education sector. Ideally, there would be a steady transition towards a private education model. By going the private route, children will not only have more educational options in front of them, but education reform will also save taxpayers a considerable amount of money. There are many elderly homeowners who have no kids and people without a personal connection to public education who are effectively subsidizing the education of others. Education reform is not only a question of expanding options for students but also of promoting social equity.
states

Blue States Have Only Themselves to Blame for People Moving Out

A few months ago, the Wall Street Journal reported that Trump’s tax reforms are starting to impact some high-tax states like California. As a result of the Trump administration’s tax reforms, citizens in high-tax, high-cost of living states like California cannot reduce their tax liabilities by deducting from their federal income taxes for state and local taxes. The state and local tax deduction (SALT) was capped at $10,000. For new home buyers, there was a reduction in the size of mortgages for which they can deduct — it went from $1 million to $750,000. According to Attom Data Solutions, the average property tax burden in America was approximately $3,500 in 2018. However, The Wall Street Journal noted that “many residents in New York, New Jersey, Connecticut, and California had been deducting well over $10,000 a year.” High earners in high-tax states tend to be the most impacted by the 2017 tax reforms, but their white-collar professions do afford them some flexibility in moving out. Some are business owners, remote workers, or on the verge of retirement. Given the new fiscal realities, people from states such as California, New York, and New Jersey are now packing up and buying new homes in the much more affordable Sun Belt. In light of these circumstances, politicians in blue states have been blaming President Trump’s tax reforms for their declining tax revenues. New York Governor Andrew Cuomo criticized the tax cuts, declaring in 2018, “It has redistributed wealth in this nation from Democratic states—we’re also called blue states—to red states.” Not only have tax coffers been hit hard, Chuck DeVore, Vice President of National Initiatives at the Texas Public Policy Foundation, contends that 400,000 private sector jobs may have shifted from high-tax states to low-tax states. Additionally, private-sector job expansion is growing 80% faster in the low-tax states as of 2019. Does Cuomo have a point? At first glance, it is true that the SALT limits have effectively hamstrung people’s ability to deduct their taxes in blue states. There is some validity to the concerns of blue-state taxpayers, who live in states that are less dependent on federal government funding and effectively subsidize other states by paying the bulk of federal taxes. Some of these states that are least dependent on the federal government include California, Illinois, and New Jersey. However, the eroding tax base and job displacement occurring in blue states are still the faults of the state governments. The policies that constrict their economic freedom and make their states unaffordable for people of all backgrounds to live in are the primary cause. That said, SALT shows why the federal tax system needs to be completely overhauled, if not abolished. The simpler the tax system, the better. We wouldn’t have these debates about SALT, other deductions, and tax loopholes if the income tax was scrapped. However, state governments should still take ownership and clean up their fiscal backyards. When more state governments are able to fix their fiscal situation, potential changes at the federal level could actually become feasible. Engaging in petty political blame games won’t bring any kind of reform though.