Since beginning his campaign for lieutenant governor, state Sen. Dan Patrick, R-Houston, has made clear that he wants to lower property taxes. What he has left unclear — both to voters and to prominent business groups that have endorsed him — is how exactly he would pull that off.
Patrick has long advocated for reducing the state’s dependence on property taxes to fund public schools and has called for an increased reliance on the state’s sales tax instead. In recent weeks, he has shed light on his plan, indicating he would reduce property taxes by modifying the formulas used to calculate them, and then increase the state's sales tax rate by “a penny or two” to make up for some of this loss in revenue.
“We have about 4 and a half million homeowners in Texas, and they’re carrying the burden of the entire state on their back,” Patrick said during his single debate with his Democratic opponent, state Sen. Leticia Van de Putte. “And as lieutenant governor, I’m going to give you real property tax relief.”
Patrick has yet to provide details about how his tax proposal would work. The Texas Constitution prohibits a statewide property tax and empowers local governments and schools and special districts to levy those taxes. To determine a property owner's tax, officials use a simple formula: Set a tax rate that — given the total value of property in their jurisdiction — will raise the amount of money they need. Patrick has suggested that the state could cap annual increases in those tax rates at no more than population growth plus inflation — a move he says would give the Legislature room to increase the state's sales tax to “help reduce property taxes even more.”
But without an explicit proposal in front of them, Texas business groups that support Patrick himself have stopped short of endorsing his tax plan.
“We just need more details from the senator,” said Bill Hammond, CEO of the Texas Association of Business. “We look forward to working with him, but we’re not ready to take a position.”
With Texas businesses paying 56 percent of all sales taxes, Hammond said the organization would be interested in “taking a hard look” at the impact Patrick’s proposal would have on the state’s tax structure, but added that he hadn’t seen a “concrete proposal.”
The state’s current sales tax is 6.25 percent, with most local governments adding another 2 cents — the maximum allowed.
Will Newton, executive director of the Texas chapter of the National Federation of Independent Business, said small-business owners would like to see a cap on how much local entities can increase property taxes. But he added that the organization had not received any details about Patrick's plan; without that, his members can't vote on whether to support or oppose it.
“Generally as a rule, small-business owners have said consumption-based taxes are more favorable, so there is merit. But of course, the devil is in the details always,” Newton said.
Asked specific questions about how Patrick's plan would be implemented, campaign spokesman Alejandro Garcia issued a written statement saying Patrick is "committed to reducing property taxes" to make owning a home more affordable and allow businesses to "continue to prosper."
"As Lieutenant Governor, Sen. Patrick will work with all members of the Senate and carefully consider all options to accomplish this goal," Garcia said in the statement.
Van de Putte has said the plan would be detrimental to local control over property taxes, and she has also steadfastly opposed raising the sales tax.
“In your scheme of swaps and taxes and raising sales tax, lowering the property taxes, would firefighters lose their jobs? Would police officers lose their jobs?” she asked Patrick during their debate. “It’s the cities and counties that would be affected.”
Patrick shot back, saying his plan is intended to help people who are paying unaffordable property taxes stay in their homes.
“Would you rather pay an extra $50 a year in sales tax and save $1,000 on your property taxes?” Patrick said.
Dale Craymer, president of the nonpartisan Texas Taxpayers and Research Association, said Patrick’s plan was more of a “general concept” that left unanswered questions about what mechanism the state would use to mandate caps on property tax increases, which are under local jurisdiction.
Additionally, he said lawmakers could run into trouble in determining what benchmark would be used under Patrick’s plan to calculate population growth and inflation, because some taxing entities don’t calculate population changes on an annual basis.
Most property tax revenue goes to public schools, and the state has previously attempted to ease pressure on higher local property tax rates by increasing what it spends on education. But the state cannot set the local rates because of the constitutional ban on state property taxes, and other local taxing entities, including counties and cities, also collect property taxes.
“Depending on how you dot the I’s and cross the T’s is going to play a huge role in how it impacts the tax community,” Craymer said. “Conceptually there’s things to like, conceptually there’s things to dislike. Absent a specific proposal, it’s hard to assess.”
Disclosure: The Texas Association of Business is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.