Would you may higher sales taxes in exchange for a cut in property taxes?
News Radio 1200 WOAI reports a radical solution to deal with the decades-long problem of school finance is included in a series of tasks, known as 'interim charges' which were assigned to the Texas State Senate by Lt. Gov. Dan Patrick.
"Study the feasibility of replacing the property tax with sales tax or other consumption tax revenue, with emphasis on school maintenance and operations tax," reads the charge for the Senate Select Committee on Property Tax Reform. "Evaluate whether some local property taxes lend themselves to a swap more than others. Quantify the short-term and long-term economic effects of a tax swap. Identify a target property tax rate and evaluate how to reach that target with a consumption tax swap."
The interim charge is designed to deal with two serious problems with the state's finances, one decades old, and the other relatively new.Lawmakers have been peppered with demands from cities who have been squeezed by skyrocketing property taxes to take action to cut their tax burden. A measure that would have restricted the ability of cities to raise property taxes failed in both the regular and special sessions in 2017.
But the real culprit in rising property tax raises is school funding.
Ever since the Legislature made major cuts in state aid to education funding in the 'recession session' of 2011, local property taxes have gone up as school districts have increasingly turned to local property owners to make up that difference. The share of school funding that comes from the state has fallen from more than 60% in 2007 to less than 35% today.
A sales tax solution would also help settle the decades old problem of inequality in school funding. Because by their very nature, wealthy school districts have a greater property resource to milk for school revenues, ever since the landmark Edgewood decision in 1987, Texas has been struggling to come up with a way to fund school districts equally, as required by law.
The so called 'Robin Hood' system of shifting funding from property rich to property poor districts did not achieve the goal, and, since the Texas Constitution prohibits the levying of a 'state property tax,' a statewide solution is difficult.
Moving to a 'consumption tax' to fund public education could solve both of those problems.
The Senate Committee will explore whether a sales tax increase is feasible, whether some other consumption tax should be imposed, and exactly how a system of using sales tax revenue to pay for education would be implemented.
The Committee is expected to release it's report next year, ahead of the 2019 Legislative Session.