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Commentary: The Governor Sees the Problem

By Jerry Lee Phillips, KERA 90.1 commentator

Dallas, TX –

In a recent commentary, we heard how the Governor has an unfair plan to lower property taxes by increasing sales taxes, a regressive scheme by most standards. However, legislators are unimpressed with the governor's leadership and have minds of heir own. Well, this life-long Democrat applauds Govermor Perry as he asks the legislature to tackle our state's over reliance on property tax.

Maybe 'over reliance' doesn't cut it. Our current tax system is distorted beyond reason by placing a backbreaking burden on a few and preventing businesses from relocating to our state.

At a recent convention I fell into a conversation about real estate. What became apparent was most of the country has experienced rates of appreciation Texans can only dream of. In fact, a Pew Research Center study shows the Metroplex and Atlanta have been the national laggards in increases. The conventioneers recoiled in horror as they heard how high Texas property taxes are. For similarly valued properties, owners in Washington D.C. pay an amount one-third of what we pay. In Los Angeles: less than half. And the comparison went on and on.

Another consequence of the current system is the suppression of property values. For the past decade low interest rates have increased the number of potential homebuyers and pushed home prices higher. A drastic decrease in property taxes would have the same effect. When calculating what a potential buyer can afford, mortgage lenders estimate the monthly costs of property taxes into a mortgage payment. Decrease the amount set aside for taxes and home affordability goes up. It's supply and demand. More qualified buyers mean better prices. High property taxes depress your home's value and cost you real dollars.

Property taxes also impact small investors who are not privy to the homestead exemption, the generous ag exemption nor various abatements and special deals big operators get. These landlords, devoid of influence with local government, pay through the nose to keep the balance sheet from running in the red at city hall, the county courthouse and for hospital and school districts.

An old adage is that landlords can simply add the extra cost of increased property taxes to the rent. But it doesn't work that way. Rental property rates are determined solely by supply and demand. What's paid for taxes, insurance and maintenance is totally irrelevant in setting rental rates. Increased taxes cannot be passed on.

A local realtor states taxes for property is so high that when she talks with potential out-of-state buyers, before she has shown them a single property, she delivers an explanation of how, without the willingness to raise taxes by other means, Texas property owners carry the burden. Oh, and she reports some of those out-of-state buyers go elsewhere.

This is what has Gov. Perry's attention. The tax system is so out of kilter that many people - and many small and mid-sized corporations- are shy to move to Texas.

So the Governor sees the problem and the legislature, controlled by his own party, is slow to take his leadership. As a Democrat I don't expect this governor to necessarily want to reshape the tax system to my liking. But at least he understands the problem and is calling for change.

 

Listener Jerry Lee Phillips responding to a recent commentary from Stephen Whitley on the Governor's proposal for school finance reform. If you have opinions, questions, or rebuttals about this commentary, call (214) 740-9338 or email us.