TTARA Report Outlines Issues with a State Property Tax

July 10, 2012 - PRLog -- Austin, Texas (myPressManager.com) July 10, 2012
A state property tax may not be the end-all solution to the latest round of lawsuits challenging the current school finance system according to a July newsletter, A State Property Tax for Schools—Fix or Nix, by the Texas Taxpayers and Research Association.

Five plaintiffs have filed suit against the current school finance system on a number of issues, including whether the current system violates the constitutional prohibition against a state property tax, adequacy of funding, equity, efficiency, equal protection and whether taxes are equal and uniform. The case is currently before Travis County District Court Judge John Dietz, who is expected to issue a ruling near the end of the year.

“If lawmakers passed, and voters approved, a constitutional amendment authorizing a state property tax, that by itself would not bring an end to the litigation,” said TTARA’s school finance expert Sheryl Pace. “The state property tax is only one of several issues in the lawsuits, and the others would still remain.”

A state property tax would bring equity as to how a large portion of school funds are raised, but would not impact how equitably the money is distributed—a key issue in the lawsuits. Fixing that would require a change in current formulas, not a state property tax.

Over the years many elected officials have proposed a state property tax for school maintenance and operations, most recently at a rate of $1.00 per $100 of taxable value. “Current local tax rates vary across districts—many above $1.00, but some below. Local option exemptions vary as well,” Pace noted. “Imposing a uniform state property tax will most assuredly create winners and losers. Taxpayers in districts with lower tax rates and broader optional exemptions would likely end up paying higher taxes, while others in districts with high tax rates and few exemptions might see their taxes go down.”

And any tax relief could be fleeting, Pace noted. State property tax proposals are typically coupled with provisions allowing school districts to levy a local option tax for “enrichment,” in order to preserve some degree of local control. Over time, those enrichment taxes could creep upwards, potentially creating yet another round of lawsuits over funding equity and equality and uniformity of taxation.

Convincing voters to allow the state to tax their homes may be a tough sell, so many proposals are often coupled with “sweeteners” such as limits on the growth in the taxable value of homes, or increases in the current $15,000 state-mandated homestead exemption. “These provisions benefit one group of taxpayers but come at the expense of others. While some homeowners might see a dip in their taxes, renters and businesses would end up carrying a heavier load.”

“A state property tax may eventually be a valid part of the school finance discussion,” Pace said, “but it is important to understand that it does not solve all of today’s school finance issues. In addition, it brings its own unique set of problems that lawmakers will have to address.”

The Texas Taxpayers and Research Association (TTARA) is a non-profit, non-partisan membership-supported organization of businesses and individuals interested in state and local fiscal policies in Texas and the way those policies impact our economy. TTARA members operate in every part of Texas; they employ and provide incomes to thousands of Texans; they produce or provide every type of good or service Texans consume; and, they provide a huge portion of the revenue that supports public services at every level of government. TTARA has been recognized as the state’s leading organization specializing in tax and fiscal policy for more than 50 years.

A link to the Newsletter can be found here: http://ttara.org/files/document/file-4ffae5f462956.pdf