Monday, April 04, 2005

House Tax Bill Would Help Some More Than Others


Property tax relief would vary widely across state, with most going to wealthier counties.
By Bill Bishop
Monday, April 04, 2005

Residents of suburban Dallas should be more than three times happier than those of San Angelo about the massive tax bill passed by the state House of Representatives in mid-March.

Though residents of Collin County would see their property taxes go down an average of $408 under the bill, those living in Tom Green County would realize only a $120 average drop.

Speaker Tom Craddick, R-Midland, hailed the measure as going "miles toward bringing the type of property tax relief that Texans have asked for," but that relief varies dramatically across the state, benefiting residents in some places far more than others. The tax bill would reduce the overall school property tax levy 30 percent. But because of wildly different property values across the state, a 30 percent decrease means more in some counties than in others.

Counties with small populations but extensive oil and gas properties would see net decreases in their school property tax levy of more than $1,000 per resident. Other counties would see decreases that average less than the cost of a single night at an interstate motel.

Struggling to bring down property taxes by about one-third and still fund its version of education reform, the House also wants to increase the general state sales tax by 1 cent. Its bill would boost taxes on cigarettes and a variety of consumer items, such as bottled water and snack food, and impose new taxes on business.

The House bill has gone to the Senate, which has said it will retain the same level of property tax reductions but wants to tinker with the rest of the package, possibly opting for a smaller increase in sales taxes and a bigger boost to business taxes.

With general agreement on a property tax cut, the Austin American-Statesman analyzed how the benefits of House Bill 3 would be distributed geographically. Individuals in every county would benefit from the property tax decrease just as they would pay more in sales tax.

This analysis captures both business and individual property tax reductions; both are included in the per capita comparisons. Counties with extensive industrial sites, such as Galveston and Jefferson, show large property tax reductions as a result. The American-Statesman used tax collections from 2003 for this comparison.

Taking just the state's 50 most populous counties, a predictable pattern emerges in winners and losers: Counties in fast-growing urban centers scored the biggest savings; counties with low property values in rural Texas or on the border with Mexico had the least savings.

"I'd be shocked if it worked any other way," said Lori Taylor, a Texas A&M University economist who worked with the Joint Committee on Public School Finance, a committee of senators and representatives who dealt with this issue between legislative sessions. Places with low property values — slow-growing cities and poor counties in the Valley — will derive the fewest benefits from the House bill.

Rice University economist George Zodrow said this was the aim of the tax changes. "The driving force (behind the House bill) was the huge increase in property tax burdens" in fast-growing urban counties, Zodrow said.

Currently, Zodrow said, the school finance system depends on transferring money from a small number of districts with extremely high property values to poorer regions.

"What we're moving to is a system where the state as a whole takes responsibility for financing those redistributive expenditures," Zodrow said. "So it's just inevitable that you are going to have redistribution across geographic regions. That's really, in a sense, what you are trying to do."

The redistribution, at least in the House bill, works two ways. First, according to a Legislative Budget Board analysis of the House bill in early March, total overall taxes on 80 percent of Texas families would increase. They would decrease only for the 20 percent of families with the highest incomes. These richer families would see a net decrease of about $440 million in the first year of the plan.

The Statesman analysis shows that there would be a geographic shift in tax burden, too. Richer, faster-growing regions around Austin, Dallas and Houston would receive per capita benefits from the property tax reduction that swamp those reductions in areas along the border with Mexico and in more rural regions.

That relationship doesn't change when the 1 percent sales tax increase is included in the analysis. When the sales tax increase and property tax decrease are combined, the average resident of Lubbock County would see a $70 overall tax decrease, while each person in Williamson County would save $282.

Rep. Scott Campbell, a Republican from San Angelo, said rural representatives "spoke our piece behind closed doors" about the disproportionate benefits of the House bill.

"But the wealthy districts have a right to be wealthy districts," Campbell said. "We live in the country by choice, because we love it. . . . And property tax reduction was a big deal for my constituents, too."

"It gives us very little relief in terms of property taxes," said Rep. Stephen Frost, a Democrat who represents Bowie County. The average property tax savings for a resident of the county that includes Texarkana is $152, compared with an average savings of $328 in Travis County.

"Overall my district loses, and that's why I voted against it," Frost said. "It's not tax relief. It's a tax shift."


County (major city)Tax savings

Collin (Dallas) $408.44

Williamson (Austin) $395.85

Galveston (Houston) $385.69

Travis (Austin) $328.33

Comal (San Antonio) $327.73

Denton (Dallas) $291.62

Brazoria (Houston) $289.55

Dallas (Dallas) $287.58

Hays (Austin) $274.46

Jefferson (Beaumont) $267.10


County (major city) Tax savings

Coryell (Gatesville) $70.09

Walker (Huntsville) $98.83

Hidalgo (Edinburg) $111.71

Cameron (Brownsville) $112.41

Tom Green (San Angelo) $120.47

El Paso (El Paso) $125.40

Hunt (Greenville) $131.35

Bell (Belton) $142.32

Taylor (Abilene) $148.73

Webb (Laredo) $151.87

Source: Comptroller's office

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