Would You Trade Lower Property Taxes for Higher Sales Taxes? Fort Worth Lawmaker Pushing That Plan

AUSTIN -- A Fort Worth lawmaker has a plan to reduce local property tax bills across much of Texas by letting local governments swap property taxes for increased sales taxes. And local government leaders are warm to the idea. Rep. Charlie Geren, R-Fort Worth, presented his bill to the House Ways and Means Committee Wednesday morning. The meeting was packed with people who were mostly in attendance to discuss a more prominent tax bill on the agenda: House Bill 2, the companion bill to Senate Bill 2, which would cap property tax revenue growth for local cities, counties, school districts and special taxing districts at 2.5 percent per year. Voters would have to approve exceeding the cap. The current cap is 8 percent growth per year for local governments. Geren said his bill delivers actual, tangible property tax relief, because bills would go down. The property tax cap bills, which are favored by GOP leadership including Ways and Means chairman Rep. Dustin Burrows, Gov. Greg Abbott, and Lt. Gov. Dan Patrick, would slow property tax growth but not make bills smaller. Local government leaders have rallied in opposition to proposals to cap their property tax revenue, but several spoke in favor of Geren's bill, because they said it gives local governments a choice to opt in, and because it doesn't cut their revenue because it replaces it with sales taxes. "This will actually provide tax relief and a reduction in bills for our county tax payers," said Tarrant County Judge Glen Whitley, who has been a vocal critic of proposals to cap local property taxes. Bennett Sandlin, executive director of the Texas Municipal League, said he also supports Geren's bill because cities would have the choice and allow their budgets to remain intact, while caps would limit their revenue-raising ability.Currently, Texas has a state sales tax of 6.25 percent and allows local governments to impose up to an additional 2 percent. So, typically Texans pay about 8.25 percent in sales taxes. Geren said he'd like to offer cities and counties the opportunity to increase those taxes by 2 more pennies, but only if that increase in sales tax would completely replace their property tax revenue stream for government operations. Voters would ultimately have the final say on whether they wanted to swap out property taxes for higher sales taxes. Most cities and counties would be ineligible for the proposed tax swap, Geren acknowledged, because the sales tax increase could not completely cover their property tax revenue. About 50 of Texas's 254 counties would be eligible, county leaders testified. But those counties would encompass the most populous regions of the state. Smaller, rural jurisdictions would potentially be left out because they have less retail. Rep. Ryan Guillen, D-Rio Grande City, said people living in areas excluded from the bill would be hurt twice. First, when they travel to another larger city with retail to shop, they'd be subject to higher sales taxes. And then they'd still go home to a district where their own property taxes are high. Dick Lavine, fiscal analyst for the left-leaning Center for Public Policy Priorities, noted that sales taxes are regressive, and disproportionately hurt poor people. He estimated that 80 percent of Texas households would end up paying more money under higher sales taxes. He also stressed the volatility of sales taxes, which endanger local government budgets in years when sales are down.  Continue reading...

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