Under the current system of ad valorem taxation, homeowners ultimately rent their property from the government. Article 16, Section 50 of the Texas Constitution allows for the seizure of homes for non-payment of taxes, though those taxes are perpetual and always rising. Property taxes are rigged against homeowners and businesses. The current system allows local officials to undercut substantive and lasting property tax relief.

In 2007, the Legislature voted to devote more than $14 billion to property tax rate relief over two years. This followed on the heels of the action taken in the third special session of the 79th Legislature, in which a one-third reduction of school district property tax rates by 2008 was ensured through the creation of the Property Tax Relief Fund.

Despite the work of state legislators, the hard-won property tax rate relief will be effectively wiped out for many home and business owners because of local increases in rates, appraisals, and debt. Allowing local school district officials to wipe out this tax relief is unacceptable. As a result, the state should begin to consider eliminating the tax altogether to provide genuine and long-lasting tax relief for property owners.

The imperative for reform

In addition to the enormous financial burden that it places on homeowners and businesses, there are a number of other fundamental problems with the school district property tax that mean it should be eliminated:

• • The property tax, unlike any other form of taxation, goes on in perpetuity regardless of the property owner's ability to pay the tax, undermining private property rights;
  • A large and costly bureaucracy exists to appraise the taxable value of properties and oversee the payment of taxes by each property owner;
  • The property tax will keep the state perpetually in court because the system of school finance lacks the meaningful local discretion that is required by the Texas Constitution;
  • The property tax has so many exemptions and loopholes that the businesses and homeowners who do not qualify for any of the exemptions bear an excessive and undue portion of the total burden; and,
  • Property tax rate cuts by the Legislature can be undermined by appraisal increases or school district tax rate elections.

Finding a fairer way to fund public education

State legislators have made repeated attempts to reform the tax over a number of years. Efforts have been made to reform the appraisal process, lower the appraisal cap, lower the maximum allowable tax rate, improve the accountability and transparency of school districts, and increase public participation in school district decisions. While some of these efforts have been successful, the system is structured in a way that will always work against property owners.

All of these factors point to the same conclusion: the school district maintenance and operations property tax must be replaced with a more equitable way of funding our public schools.

The public education system needs a fairer, less-contentious source of funding. While local school officials continue to impose ever-larger tax burdens on home owners, despite huge increases in state appropriations to public education, the state is consistently generating enough revenue to eliminate
school district property taxes. The state should dedicate these surplus revenues to reducing school district property taxes until they are completely eliminated.

In addition to using budget surpluses to incrementally reduce property taxes, legislators should also consider closing certain exemptions to the state Sales and Use Tax and raising the rate of the Sales and Use tax in order to establish the permanent, reliable, broad-based source of revenue that the public education system needs.

Members of the Texas Conservative Coalition are working to formulate a detailed plan for the elimination of school district Maintenance & Operations property taxes. Elimination of the tax, however, may take more than one Legislative session. Members, therefore, are also considering other property tax relief measures to limit the burdens on home and business owners until the ultimate goal of elimination is realized.