Rising property values push property taxes higher, putting squeeze on homeowners
Top Texas Republicans are touting a way to lower skyrocketing property taxes across the state: Raise the sales tax instead.
Their tax-swap proposal — which would boost the statewide sales tax by 1 percent, from 6.25 percent to 7.25 percent — would have to be approved both by the Legislature and by Texas voters later this year before it could go into effect.
“Texans are fed up with skyrocketing property taxes,” according to a joint statement released Wednesday by Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen. “Today we are introducing a sales tax proposal to buy down property tax rates for all Texas homeowners and businesses, once Senate Bill 2 or House Bill 2 is agreed to and passed by both Chambers.
“If the one-cent increase in the sales tax passes, it will result in billions of dollars in revenue to help drive down property taxes in the short and long term.”
While the state sales tax is 6.25 percent, cities, counties and other jurisdictions can add to that, making the overall sales tax rate as much as 8.25 percent in some communities.
A one-cent boost in the state’s sales tax would generate an extra $4.9 billion the first full fiscal year and $5.15 billion in the second, said Kevin Lyons, a spokesman for the Texas Comptroller’s office. In 2017, Texans paid $59.4 billion in property taxes, up from $40.3 billion in 2010 and $22.5 billion in 2000, state records show.
If the Republican-led Legislature — and Texans — approve the tax trade-off plan, it could go into effect by January 2020.
This proposal comes as the Texas House is scheduled to discuss and vote on a property tax plan on Thursday.
Rising property values have led to large increases in tax bills, so much that some Texans fear being taxed out of their homes.
A once-cent hike in Texas’s sales tax would tie the Lone Star State with California for the highest state sales tax rate in the country.
The Republican proposal drew sharp criticism from those concerned about boosting the sales tax, which some fear could hurt those who can least afford it.
“Our state’s tax system is already upside down, asking the most from low-income families,” according to a statement from Ann Beeson, CEO of the Center for Public Policy Priorities. “Our sales tax in particular falls more heavily on low and moderate-income families because these households usually spend most of their income providing for their families.
“Wealthier families can afford to set aside savings or spend money on non-taxable services like lawyers or accountants,” she wrote.
Texas Democratic Party Chairman Gilberto Hinojosa sent an email to supporters Wednesday afternoon noting that “raising the sales tax is dead wrong.”
“Republicans want to raise taxes on families who are struggling to afford their groceries and clothes for their growing children. All in the name of tax cuts for the rich,” Hinojosa wrote. “Make no mistake about it: We will fight tooth and nail against any Republican attempts to raise the sales tax.”
But the plan was cheered on by the Texas Public Policy Foundation.
“Texans demanded bold reform for real property tax cuts and it appears Gov. Abbott, Lt. Gov. Patrick, and Speaker Bonnen have crafted a proposal that could achieve this result,” Kevin Roberts, the group’s executive director, wrote in a statement. “We are pleased to hear the plan will dedicate all new sales tax revenue to property tax cuts and takes a strong step toward delivering on their promises.”
Regarding property tax reform, neither chamber has passed SB 2 or HB 2, which limits property tax revenue growth at 2.5 percent a year, something that has caused local officials to express concern because the cap would limit the ability of cities, counties and school districts to meet their obligations.
Texas lawmakers have until the end of their legislative session, May 27, to pass laws.