Why SB 2 & HB 2 Are the Wrong Approach to the Property Tax Puzzle

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The Texas Senate may soon vote on SB 2, a misguided proposal that would limit the ability of cities and counties to decide how much to devote to police, fire, paramedics, and other local services. Special areas like community colleges and hospital districts would suffer similar restrictions on their ability to support services. The bill also contains “placeholder” language that indicates lawmakers could bring school districts under new limits later in the legislative process. Limiting school districts’ ability to raise funds to educate the 5.4 million Texas public school students would completely undercut state leaders’ commitment to remodeling our school finance system.

When our state is growing and the cost of providing services is rising, cutting local governments’ ability to meet the needs of their residents is illogical, especially with the unpredictability of state and federal funding.

A recycled idea that failed to pass in the 2017 Legislative Session, the “property tax cap” would force cities, counties, community colleges and hospital districts to hold an election any time they wanted to raise property taxes by more than 2.5 percent above the previous year’s revenue. The 2.5 percent cap is even more severe than the four, five and six percent caps unsuccessfully floated in 2017.

Under current law, local governments can choose to increase their property-tax revenue (not including taxes from new construction) by up to eight percent a year. They may act, for example, in response to demands by residents for better or expanded services. If local leaders propose a tax increase larger than eight percent, then voters may petition for a “rollback election” that would “roll back” the proposed tax increase to the eight percent ceiling.

The proposed versions of SB 2 and HB 2 would slash the cap to 2.5 percent and require a special election, without a petition, for any tax increase over that level. Senate Bill 2 applies to counties with tax revenue over $15 million, but smaller cities, counties, and other taxing units may voluntarily accept these limits.

When we vote locally for city, county, and other local officials, we are choosing by extension how much we want to pay for schools, public safety and other services we value. If we disagree with the decisions of our local elected officials, we can choose to vote them out in the next election. This legislation suggests that state leaders don’t trust Texans to make the best decisions for our own communities. 

Dick Lavine focuses on building state and local revenue systems that meet Texans' needs. Before coming to the Center in 1994, he was a Senior Researcher at the House Research Organization of the Texas House of Representatives for ten years. He is a Chartered Financial Analyst and served for many years as a member and chairman of the Board of Directors of the Travis Central Appraisal District. He is also a member of the Executive Board of AFSCME Texas Retirees, the statewide union local of retired public employees. The Equity Center named him the 2011 Champion for Equity for his work to reform our tax system to ensure it can adequately support public education and other public services. He earned a Bachelor of Arts in Economics, magna cum laude, from Harvard College in 1969, and a Doctor of Jurisprudence, cum laude, from the University of Pennsylvania in 1975.

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