Texas property tax cuts are great, but we better make sure schools don’t pay later | Opinion
It’s no secret that property taxes have been on the rise, increasing more than 20% from 2017 to 2021. Texans need relief, but there is a way to provide it without jeopardizing school funding through aggressive reduction of local districts’ tax rates — a key component of the relief package recently signed by Gov. Greg Abbott.
The Legislature debated several relief methods this year. Ultimately two bills became law, both of which I voted for. I vote to represent my district, and my constituents wanted property tax relief. This package was the only opportunity this biennium to provide them with such relief, despite its flaws.
The bills will increase the homestead exemption, accelerate school district tax “compression,” cap appraisal rates for certain residential and commercial properties, and exempt more small businesses from the franchise tax. Although landlords could stand to benefit from several relief methods outlined in the bills, renters, who make up nearly 40% of the state, were excluded from the package.
Democrats have long fought to increase the homestead exemption. Texans will see $100,000 taken off their home’s taxable value, or an average of $1,200 a year. It is one of the most equitable ways to provide tax relief, giving the biggest boost to middle and lower-income homeowners.
Reducing tax rates through compression, on the other hand, is less equitable and puts future school funding for five million Texas students at risk. The Legislature passed mandatory annual compression in 2019 with House Bill 3. This year’s property tax relief package bolsters this ongoing compression.
The idea is to force down property tax rates as property values go up. As the local share of school district funding decreases, the state share increases to make up the difference. But what happens when the state can’t make up the difference? Or when the Republican-controlled Legislature chooses not to? We risk teacher layoffs, larger class sizes, fewer services for kids and lower-quality schools.
We have seen an example of this in recent history. In 2006, the Legislature compressed school taxes and created a business tax to make up the shortfall to schools. However, the business tax did not collect sufficient funds to cover the cost of compression, falling about $5 billion short and leading to crippling school funding cuts starting in 2011.
It wasn’t until 2016 that legislators restored funding to pre-cut levels. Given the surplus funds currently available, additional compression may not pose an immediate threat, but future hard times could pose a serious challenge to the state.
Furthermore, because compression can only cause tax rates to go down, it could eventually lead to the complete elimination of school taxes. Without a sustainable funding stream to replace the loss in revenue, that could amount to the defunding of our public schools.
If our state leaders plan to commit to compression as a property tax relief method, then Texas will need to be prepared to fully fund our schools in times of economic scarcity. In the long run, we must find a sustainable funding source to support our schools — otherwise, the state will always be scrambling to find enough money just to break even, much less increase education funding to keep up with inflation.
