With some $4 billion in surplus revenues available, lawmakers have the solution to the state’s school finance problem staring them in the face. Let’s hope they recognize it.
Texas’ Supreme Court has given the governor and legislators until June 1 to fix the constitutional problems with the property tax, or face a court-ordered shutdown of the schools. In effect, the state has an unconstitutional statewide property tax; school districts lack meaningful discretion at setting their tax rate as they approach the $1.50 cap on tax rates, the ruling found.
Two options are available: increase the cap, or buy-down the rate. The first option is a bad one; it would simply encourage local school boards to push their taxes to a new cap and again claim the existence of an unconstitutional tax. The second option is preferred, but fraught with danger.
Enter the guys wearing white hats and brandishing calculators. The Office of the Comptroller of Public Accounts has stated that the state has a $4.3 billion surplus. That’s significant.
All the talk in Austin has of late centered round “tax swaps”-fancy language for switching the pockets from which your money is taken. The ideas range from the economically treasonous (like the income tax) to the disastrous (hiding the taxes by placing them on “business”).
In fact, a tax swap is hard to swallow. The political rhetoric is appealing: tax business for a property tax cut. After all, most of us don’t own businesses, so sure, tax them. But wait, “taxing business” has the effect of reducing jobs and lowering economic growth.
Businesses do not pay taxes, people do-it’s a question of visibility. When a business is taxed, the cost is passed on in the form of reduced wages for employees, lost profits for the owners, higher costs for consumers, and lost opportunities for those seeking employment.
And Texas currently has the 7th highest business tax burden in the nation. Do we want to make that worse? Moving the burden of visible property taxes to hidden business taxes, as some are proposing, will only make matters worse.
If anything, we should be shifting taxes from dark, hidden places into sunlight, making greater use of fair, economically-sound, consumption-based taxes. We should seek to lower the business taxes.
But before they do anything else, lawmakers can first use the surplus to the benefit of taxpayers. Think of it in crass government terms: lowering local school property taxes by 10 cents will “cost” the state a bit over $1 billion. So $4.3 billion provides about 35 cents in property tax reduction.
That’s a school finance success for which Texans can be proud.
Additionally, lowering the local school taxes gives back the “meaningful discretion” important to the courts. But it requires many officeholders not do the one thing they like doing best of all: spend money. And $4.3 billion is a tempting purse.
Remember: this is a surplus, funds taken from you and your fellow Texans above and beyond what was budgeted. By rights, those funds belong in your pocket, not the state’s bureaucratic coffers.
Evidence abounds that more money is not needed in our schools, but that the current dollars need to be spent more efficiently and effectively. With barely half of each dollar going directly to instruction, and the mushrooming of administrative-level staffing, our schools should focus resources on the classroom and teachers.
Equally abounding is the evidence that all of Texas’ taxpayers deserve a break.
After two years of standoffs and stalemates, a growing Texas economy has provided legislators an easy way to painlessly cut our taxes. Now they just have to do it.
Michael Quinn Sullivan is the vice president of the Texas Public Policy Foundation, a non-profit, non-partisan research institute based in Austin (www.TexasPolicy.com).