NCPA - National Center for Policy Analysis

City Gives Back Tax Money As Dividend

September 24, 1999

While Washington politicians bicker about what to do with the budget surplus, a Texas town has hit on a solution. The Dallas suburb of Farmers Branch, like many other towns, has experienced a surge in growth and an upswing in property tax revenue. Those factors have resulted in a budget surplus.

City officials seemed to have two choice: cut taxes, or find new ways to spend the money. They rejected the latter. As for a tax cut, they worried that basing it on a one-time surplus might imperil long range planning and commitments. So they came up with a solution that has been copied by cities around the country: property tax payers receive an end-of-the-year dividend check. Here's how it works:

  • An audit of the fiscal year is completed.
  • If the audit determines there is a surplus, a dividend is declared.
  • The dividend is paid out of the general fund and distributed to all taxpayers in proportion to the taxes each paid during that year.
  • In the two years since Farmers Branch adopted the dividend concept, the city has returned more than $1.25 million to taxpayers.

City officials report that the program has enhanced the sense of community spirit. Some individuals have even given the money back for city programs and agencies they believe need extra funding.

Source: Sean Tuffnell (NCPA), "Town Provides Many Happy Returns," Dallas Morning News, September 24, 1999.


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