Amid a time with one of the highest unemployment rates in the U.S. since the Great Depression, some local Texas entities are trying to raise property taxes. This would be especially detrimental to low-income households, which are disproportionately affected by the COVID-19 pandemic.

A Problem with Property Taxes

Taxes on property are not connected to homeowners’ ability to pay. That means your property tax bill can go up even if your income decreases or doesn’t change. This especially puts low- and moderate-income Texans at risk of not being able to afford their own home.

For example, Texan homeowners making less than about $38,000 annually are estimated to pay 6.4% of their income in school property taxes in fiscal year 2021—more than double any other income group.

Solutions to This Problem

Local taxing entities can alleviate the rising property tax burden by across-the-board reductions in taxes (like cutting tax rates or increasing homestead exemptions) or income-based targeted relief, commonly called “circuit breakers.”

The idea of property tax circuit breakers, much like an electrical breaker preventing overload, is simple and appealing: when property taxes take up “too much” of a household’s income, the breaker kicks in and reduces or removes any additional property taxes—through a tax credit or rebate.

A Circuit Breaker Would Be Bad for Texans

The reality of a Texas circuit breaker is less enticing than the idea. Circuit breakers must be complex, with many moving parts, to avoid creating perverse incentives and to be effective at alleviating tax burdens while maintaining local governments’ desired tax receipts.

It’s a bad idea to add more complexity to the tax code. But more importantly, circuit breaker policies come with a host of problems that would likely inhibit them from benefiting the very people they are intended to help.

Texas has more than 4,100 overlapping local taxing entities. Given that some parts of Texas are property-poor and others property-rich, and that intersecting tax groups are a logistical and bureaucratic mess, the circuit breaker would have to be implemented and funded by the state government to effectively reduce low-income property owners’ tax burdens.

What would this cost and how would taxpayers fund it?

Requiring local taxing authorities to remit some amount of their tax receipts to the state puts pressure on local budgets and creates another “Robin Hood” problem. The state could fund the program by raising other taxes—such as on purchases or businesses—but these come at a cost to consumers and workers.

For circuit breakers to help low-income Texans while not breaking government budgets, property taxes must be increased on higher-income taxpayers. One consequence could be that rental property owners pass on some of the cost of higher taxes by raising rents, which would disproportionately impact low-income households.

Additionally, Texas would likely need a new governmental division to handle the circuit breaker program. Payments would require an application accompanied by certified proofs of income. Auditing and fraud prevention services would be necessary to reduce abuses of the system. Continual, costly outreach to help low-income households apply for the tax relief would be crucial. These bureaucratic expenses pile up quickly.

A Better Solution

Other states have used circuit breakers in some form for more than 40 years, but there remains little consensus on best practices—or even whether they’re effective. Instead of creating a new, complex system with massive bureaucratic costs and uncertain benefits, we should cut property taxes for everyone and find places to decrease government spending. This straightforward solution allows Texas’ low-income households to keep more of their money and saves taxpayer funds from being spent on administration that adds little value to Texans.