A new report applauds the Texas Legislature for cutting taxes, but local governments and schools are wiping out the reductions with increased spending and debt.
“The 2015 session of the Legislature passed a significant package of tax reforms,” the American Legislative Exchange Council reported Wednesday. Among them:
- $3.8 billion in tax cuts, including a reduction in the business franchise tax or “Margins Tax.”
- Professional fees were eliminated for more than 600,000 Texas workers, saving the taxpayers more than $125 million.
- Other fees were reduced or killed, including fees on delivery of some petroleum products and a diesel surcharge on the lease or sale of certain machinery.
“These served mostly to raise general revenue and created a barrier to entry in these professions,” the ALEC study stated.
Meantime, co-author Jonathan Williams said cities, counties, schools and special local taxing districts are headed in the opposite direction.
“There’s a disconnect — aggressive tax cuts at the state level, with out-of-control spending at the local level,” Williams told Watchdog.org in an interview.
Last November, Texas voters ratified a Legislature-approved expansion of the state’s homestead exemption. But the $10,000 increase provides little shelter from rapidly escalating local property taxes, among the highest in the nation.
In Dallas, city tax collections increased 38 percent over the past decade – nearly 10 times faster than its population. The operating budget has risen 25 percent during the past three years.
In Austin, the median property tax bill jumped 50 percent since 2009.
San Antonio’s property tax burden is the second highest among Texas’ big cities, behind Austin, when measured as a percentage of median family income. Last year, 90,000 San Antonio area residents formally protested their tax bills.
It’s not just big cities. Southlake, population 28,234, collects the most property tax revenue per resident in North Texas.
“They’ve accomplished this by raising taxes without raising tax rates, by refusing to cut taxes as property values and the size of the tax base rapidly rose,” says Ross Kecseg, a researcher with the nonpartisan Empower Texans.
“It’s becoming clear that many politicians base their tax rates on whatever they can get away with, rather than what they actually need for services,” Kecseg said.
While Williams says Texas is on “extremely sound [financial] footing at the state level,” local officials assert that Austin is shortchanging them. If higher taxes do not fill the bill, they float bond issues and rack up more debt.
Texas taxpayers shoulder the second-highest local debt, on a per-capita basis, among the nation’s 10 largest states. Roughly two-thirds of Texas’ $330 billion local debt load comes from school districts.
Last year, Houston’s public pension debt surpassed Detroit’s – a city that has declared bankruptcy.
Dale Craymer, president of the Texas Taxpayers & Research Association, says more reforms are needed to rein in government spending.
“Over the past several years, local taxing authorities have been able to raise more revenue by riding the wave of rising appraisals,” Craymer says.
He proposes reducing the statutory rate cap on tax increases — currently set at 8 percent — and requiring public referendums when a local government or school board votes to exceed it.
Sen. Paul Bettencourt, R-Houston, introduced a bill to do just that last session. It died in committee.
Kenric Ward writes for the Texas Bureau of Watchdog.org. Contact him at [email protected] and @Kenricward.