Last Wednesday, the Texas Senate passed Lt. Gov. Dan Patrick’s agenda to significantly lower property taxes for homeowners and business owners using tax dollars from this year’s historic $33 billion state surplus.
Consisting of three priority bills, Patrick’s $16.5 billion plan would pour billions into public school districts, requiring them to lower their property taxes by 7%. Approved unanimously by Republicans and Democrats, opponents of the bill argue that despite its current popularity with the public, the major deficit in property taxes could spell future disaster at the next economic downturn.
“The only reason we have a lot of this revenue right now is because of inflation and its impact on tax collections,” said Chandra Villanueva, director of policy and advocacy for the progressive think tank Every Texan in an interview with Texas Tribune. “It’s not something that we can be guaranteed to grow and be sustainable. What we’re doing is setting up our schools for future cuts.”
Ed Ramos, Austin ISD chief financial officer, echoed to Texas Tribune that while the package will greatly help the district’s current efforts, his concern lies with the long-term effect of the bills. With such a major portion of the surplus spent on lowering property taxes, Ramos wonders how the state will increase its annual district funds – an allotment Ramos says is desperately needed following the pandemic and rising inflation, and that hasn’t seen an increase since 2019.
Texas’ current property taxes certainly aren’t cheap or even average – sitting at 6th highest in the country in a recent report from WalletHub. According to the report, the average Texan pays around $3,520 annually in property taxes – around $830 above the national average.
With its 1.74% tax rate, Texans pay significantly higher property taxes in comparison to states like Hawaii (0.29%), Alabama (0.41%) and Colorado (0.51%). However, although these states benefit from lower property taxes, each of them enforce a state income tax, while Texas has none. Alabama’s income tax sits at up to 5%, Colorado’s at 4.4%, and Hawaii’s income tax, famously, averages at a whopping 11.67% – with residents paying an average of $12,921 annually in income taxes.
When asked by WalletHub whether or not consumers should consider property taxes when deciding where to buy a home, Assistant Professor at University of Maine School of Law, Timothy M. Harris suggested that lower taxes don’t always equal higher quality of life. “If higher taxes are coincident with better government services, property values are generally higher and communities are more livable,” said Harris. “People considering relocating should consider whether lower taxes mean fewer transportation options and reduced government services.”
With the new initiative moving swiftly through the state legislature, Texans are likely to receive a nice surprise this fall in their mailboxes just in time for the holidays. Only time will tell whether this bill will be the gift that keeps on giving or Pandora’s Box.