Keith Strahan and Ernest Bailes, the two remaining republican candidates in the runoff election for Texas House District 18, are calling for the abolishment of the current property tax. Texas is one of a handful of American states which have no income tax and rely mostly on sales and property taxes. But with no state income tax, some experts argue such a move would be infeasible.
Although Bailes supports the repeal of property taxes, he warned that any proposed alternative tax system “should be fully considered and vetted” to make certain public schools in Texas remain adequately funded.
According to Strahan, the property tax system is a “fundamentally immoral, regressive tax” that hurts the poor and forces property owners to essentially pay rent to the government. Strahan said he supports a consumption tax to take its place because it is a “fair system that also encourages savings.”
Sam Houston State University economics professor Bill Green claims otherwise. He said consumption taxes are typically regressive and hurt the poor, not property taxes.
“The problem with any consumption tax – for example, a sales tax – is that it tends to be very regressive because the people with higher incomes don’t have to spend all of their money…lower income people tend to spend a larger percentage of their incomes so they get taxed more,” Green said.
In other words, lower income families don’t have the ability to save their money, according to Dick Lavine, a Senior Fiscal Analyst at the Center for Public Policy Priorities.
“Lower income families spend everything they’ve got just to keep themselves going and upper income families either don’t need all that money and they have savings and investments, or they spend their money on things that aren’t even taxed by the sales tax like lawyers and accountants and stock brokers,” Lavine said.
In addition to being regressive, replacing the property tax with expanded sales taxes and not underfund public schools would require such a dramatic tax rate increase it would likely harm Texas commerce, according to Lavine.
“The problem is, the property tax is really big and in order to bring in the same amount of money you are going to need a sales tax…that would be closer to 20 percent instead of the eight and a quarter it is now,” he said.
Political Activists divided
Adequate funding notwithstanding, Bailes agreed that an income tax should not be taken into consideration.
“No matter our tax structure, I will always uphold our constitution and…ensure that our K-12 public schools are not underfunded,” Bailes said.
According to Lavine, the income tax would actually address the key concerns of property tax opponents.
“If one of the big problems with the property tax is that your property tax goes up even if your paycheck hasn’t, then you need a tax that’s better linked to your ability to pay, which is an income tax,” Lavine said.
Furthermore, Lavine does not understand why opponents would be so weary of a state income tax.
“43 states I think have an income tax, a lot of them are doing just fine you know,” Lavine said. “And it is more fair because people that can afford to pay more, do pay more.”
By excluding the alternative of an income tax, advocates for repealing the property tax are essentially calling for a consumption tax to take its place, according to Luke Bowen of the Texas Patriots PAC.
“We believe that property taxes have a much more negative impact on taxpayers’ lives – they distort the market and essentially turn property owners into property renters,” Bowen said.
The impact on SHSU
Many of the children attending public schools in Walker County have parents who are employed by either SHSU or the Texas Department of Criminal Justice, but these large government entities do not pay the property taxes that help fund the schools the children attend, according to Green.
“Here at the university you’ve got hundreds of millions of dollars’ worth of property here that there is no tax on, so that means that the other residents and businesses have to pick up that burden, which is difficult,” Green said.
Bailes said he was not in favor of a property tax on government organizations like SHSU.
“It would be counterproductive to tax our schools and this could lead to taxing our churches and other non-profit organizations,” he said.
Strahan agreed that governmental ownership could potentially be problematic.
“Governmental entities taking over and purchasing property that could otherwise be privately developed and help spur economic growth is indeed problematic,” Strahan said.
However, he stopped short of supporting a possible property tax on these entities because it would essentially be the government paying itself.
Instead, Strahan argued that prohibiting the government from purchasing and holding land would have a greater impact on relieving the tax burden.
“If the government is going to buy land it needs to at least develop it within a certain amount of time,” Strahan said. “It can’t just hold real estate to the detriment of the local people who have to then carry the tax burden because the state’s not paying its share.”