NCPA - National Center for Policy Analysis


April 6, 2006

Texas is one of at least 20 states -- including Arizona, Idaho, New Hampshire, Nevada and South Carolina -- where homeowners are rebelling against soaring assessments that can tax people out of their homes, says the Wall Street Journal:

  • In 2005, the Texas Supreme Court ordered the legislature to cut the state's school property tax -- which reaches as high as $1.50 for every $100 of value -- and come up with a new way to fund the state's public schools.
  • In response, Gov. Rick Perry (R) embraced a tax plan to cut the property tax by one-third and eliminate the state's business franchise tax; however, his proposal shifted the burden of paying for schools from homeowners to employers.

But in Texas, as in other states, there's a better way to cut property taxes, says the Journal:

  • Rather than allowing revenue surpluses to get spent, politicians could claim them to finance installment reductions in property taxes.
  • Texas already has a $4 billion surplus and if that money were used to buy down property taxes, the rate could be cut by an estimated 25 cents per $100 valuation.
  • Moreover, if Texas were to adopt a tax limitation law capping taxes at population growth plus inflation, another 20 cents could be trimmed from property tax assessments within two to five years.

Furthermore, critics claim that using surpluses to cut taxes is fiscally shortsighted, but returning surpluses to taxpayers is the only way to ensure that they don't get spent on new or expanded government programs, says the Journal.

Source: Editorial, "Texas-Sized Tax Revolt," Wall Street Journal, April 4, 2006.

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