Analysis: A Big Idea That Comes With a Big Price Tag
Texas voters don't like property taxes, and Republican Glenn Hegar has said he favors eliminating them. His opponent in the comptroller's race, Mike Collier, is talking up the likely result: a huge increase in sales tax.
Property taxes are easy to hate, and Texas property taxes are high enough to turn this civic irritation into a full-blown political issue.
So it makes news when a candidate for comptroller of public accounts — the state’s tax collector, treasurer and all-around ace of finance — is running around saying he would like to get rid of property taxes. Glenn Hegar, a state senator who won the Republican nomination for comptroller in this month’s primary, was unequivocal in his remarks about the fairness of those taxes at a Tea Party forum in February, as reported by the Killeen Daily Herald: “As long as we pay taxes we have to ask, do we really own our property?”
His opponent, Mike Collier, a Democrat, is trying to turn a 26-second video snippet of Hegar suggesting an end to property taxes into a fundraising and vote-getting machine. He contends that the Republican is proposing a sharp increase in sales taxes to offset the elimination of property taxes.
Hegar, who has been in the Legislature since 2003, is not running away, other than to say he might phase out the tax instead of ditching it all at once. “I have said since I first ran that I preferred a consumption tax,” he said this week. “I have not backtracked in any way from any statement.”
The idea of eliminating property taxes falls nicely in line with some of the original leanings of the Tea Party, which began with concerns about government spending, debt and taxation. It rolls easily from a political tongue: Kill property taxes and rely instead on consumption taxes, which taxpayers control by simply controlling their spending.
And it is not a fringe idea, unless you consider the Republican Party of Texas part of the fringe. “Abolishing property taxes” and “shifting the state tax burden to a consumption-based tax” are the first two items listed under the “State Tax Reform” heading in the party’s current platform. There’s a line at the bottom of that list to prevent the state’s real estate agents from jumping out of their seats, proclaiming the party’s opposition to “all professional licensing fees and real estate and similar transaction fees or taxes.” The party is also against the creation of a state property tax (current property taxes are local) or a state income tax.
That hides a math problem, in the same way that an animated discussion about ice cream sundaes ignores the future diets and gym memberships that might result.
Dumping property taxes would force the state to more than double its sales taxes or to shed services that voters say they want, like schools, roads, prisons and health and human services. That’s the focus of Collier’s attack. If it sticks, he will have Hegar on the run. If it goes nowhere, he can always try something else.
Texas does not have an income tax. According to the Tax Foundation, it has the 14th-highest state and local property taxes and the 11th-highest state and local sales taxes.
Assuming for the sake of conversation that this is a straight tax swap, the results would be drastic — too drastic, maybe, to make for good politics.
Property taxes would go away — good news for property owners, and potentially for renters if the markets eventually force landlords to pass along some savings.
In return, consumers would pay an extra 20 to 25 percent on top of the price for taxable goods, according to a study done in 2012 for a group called Texas Tax Truth.
“If you’re buying a $30,000 car, a 20 percent sales tax is kind of a big deal,” said Dale Craymer, president of the Texas Taxpayers and Research Association. The state’s current sales tax is 6.25 percent, and most local governments add another two cents.
The idea also poses practical problems, like whether the new sales tax would be collected by localities — like the property tax — or by the state. A local version would make shopping meccas rich and leave rural areas out. A state version would smooth out those local differences but would make state politicians entirely accountable for all taxation that is currently blamed on local officials. Troublesome details prompt policymakers, even some of the tax haters, to pause.
And comptrollers and other tax collectors do not write tax laws. That is left to legislators, who are wary of significant changes because the politics are risky. Killing property taxes is a safe idea so long as nobody takes it seriously. If lawmakers create a 20-cent sales tax, the benefits of the tax cut might be lost, and Collier’s gang might take away their ice cream truck.
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