By Walt Gardner
The survey of registered voters in Texas conducted by the University of Houston Hobby School of Public Affairs revealed marked ambivalence about school finance and personal taxes. Although most want public education to be a priority, they don’t want to pay higher sales or property taxes.
Before jumping to the conclusion that Texans can’t have it both ways, however, lawmakers need to look to California. That’s because Texas now finds itself in the same dilemma as California once did. Until 1978 when Proposition 13 passed, local property taxes constituted the bulk of support for California public schools. That’s true in Texas today. The Texas Constitution says only that taxation be equal and uniform.
As property values rose in California, owners were being forced to sell because they couldn’t afford the property taxes. So in 1978, Proposition 13 rolled back assessments for homes and businesses to 1976 levels and postponed any new assessments until the property was sold. Property tax increases were capped at 2 percent per year. As a result, financial support for education moved to the state.
Yet inequities remained. Since only a sale triggers a new assessment, there was growing disparity between what new homeowners pay in property taxes and what owners who’ve held their property for many years were paying. That’s why a split-roll is growing in popularity in California. Some 850,000 signatures have been collected in support of an initiative that would increase property taxes by 2020 for commercial and industrial properties by assessing their property based on their current market value but leave untouched residential properties. Small businesses with 50 or fewer employees and agricultural land would not be affected. The California Legislative Analyst forecasts that a split-roll tax would generate $10 billion annually in net additional taxes.
Critics of asplit-roll are quick to assert that corporations will close or relocate to other states. That argument is not likely to apply to Texas, however, because it is far friendlier to corporations than California. Moreover, any displaced employees will be more inclined to move to Texas since there is no state income tax. That trend has already begun, as the cost of housing continues to skyrocket in California. Surveys of those who have moved to Texas regularly cite the lower cost of living, with particular emphasis on affordable rents.
As the University of Houston survey underscored, Texans feel property taxes are already too high. That’s why considering a parcel tax, as Los Angeles did last year but wisely decided against, is not an option. It would be a regressive tax costing each property owner anywhere from $330 to $610 a year, with senior citizens and low-income owners exempt.
Whether a split-roll mirroring the California initiative will gain traction in Texas is unclear. Politicians know that taxes of any kind are the third rail. That’s why talk about raising the state sales tax is already generating pushback. But confronted with the undeniable desire by most Texans to make education the No. 1 priority, something has to give.
Gardner blogs about education at theedhed.com.