Politicians Can't Stop Spending Our Money

"Nor shall [a ruler] acquire for himself excessive silver and gold." - Deuteronomy 17:17

Yesterday, the Texans for Fiscal Responsibility team, Andrew McVeigh, Vance Ginn, and myself, testified during the Texas Senate Finance Committee’s hearing of property taxes. I want to discuss some interesting points worth noting from the hearing.

Before I get to the hearing, let me point out one thing that underlies the discussions that took place yesterday: politicians cannot stop spending our money. Resistance to lowering property taxes comes from politicians who would rather spend our money on something else than giving it back to us.

As you can see in the above table, appropriations by 2023 Texas Legislature increased by $69 billion over what they did in 2021. Yet only $12.7 billion of that went to property tax relief. Texas’ political leaders were so desperate to spend our money last year—without us knowing what they were doing—that they busted the state’s constitutional spending limit by putting $13.8 billion of spending on the constitutional amendment ballot rather than taking the vote themselves to exceed the limit by $12.2 billion.

Generally, Texas politicians are not obeying Deuteronomy 17:17: "Nor shall [a ruler] acquire for himself excessive silver and gold." While $100 billion plus dollars of our money taken from us each year does not go directly into the pockets of our political leaders, by spending it to benefit their political constituencies in the Austin lobby, the corporate world, and state bureaucrats, our leaders are often able to stay longer in office and gain more power, which provides them with access to income opportunities that are not available to most of us. I doubt most of them think of it in this way or do this intentionally, but it is what happens.

Back to the hearing. The first item of interest is that Texas Sen. Paul Bettencourt seemed very anxious to make sure that what Texas political leaders loudly proclaimed as “the largest property tax cut in Texas history” actually cut property taxes. He tangled with Ginn during the hearing when Ginn said otherwise.

Ginn used data from the Comptroller’s office that showed property taxes actually increased this year by about $165 million dollars despite the $12.7 billion the Texas Legislature devoted to property tax relief. One can see why Bettencourt—and other state and legislative leaders—might not like that public becoming aware of that news; it might be a threat to their job security.

As the Comptroller’s office admitted during the hearing, their data is incomplete. When the final data does become available, the one sure thing is that property taxes will have actually increased or decreased only slightly. The $12.7 billion of taxpayer money bought very little property tax relief for Texans, unless one agrees with the Legislature’s definition of it: “slowing the growth of taxes enough that politicians can claim they cut taxes and/or did something to make housing more affordable.”

Next, Bettencourt also took issue with something included in my written testimony: “Even last session’s $12.7 billion only reduced school property taxes by $4.1 billion.” Bettencourt, after my microphone had been turned off, claimed my statement was inaccurate because the $12.7 billion figure referred to the amount the Legislature dedicated to tax relief over the two-year fiscal biennium while the $4.1 billion referred to the reduction in school property taxes in one year. Bettencourt is half right here, but the main thing is his statement exposed how he and many other politicians had been doing the exact same thing he accused me off.

Before we get to that, we should note that Bettencourt and most other Texas politicians have been falsely claiming they provided $18 billion in tax relief, not $12.7 billion. Sen. Joan Huffman and Bettencourt tried to make the case for this at a March 15 Finance Committee hearing last year (starting at 22:09). Their point was is that if Texans really understood the complexity of the state budget they would see that the politicians in 2023 should get credit for paying for tax relief given to Texans back in 2019 and 2021. By that logic, they should also be getting credit for tax relief efforts dating back to 1997, long before either was in the Legislature—though they didn’t take it that far. The $18 billion was created using smoke and mirrors. Of perhaps we should use another metaphor: it was an attempt to pull the wool over taxpayers’ eyes. Either way, the number is $12.7 billion.

Getting back to my statement, it is true and does not misrepresent anything. Yes, the $12.7 billion is for a biennium. Yet, as I told Bettencourt in a friendly conversation after the hearing, he and others had been using the $12.7 billion the same way, not telling taxpayers that it would at most reduce their school property taxes by only $6.35 billion, not $12.7 billion—since property taxes are paid annually. The other $6.35 billion would simply pay for that initial reduction in the second year of the biennium, not bringing any addition reductions. Yet they never bothered to explain the biennial/annual difference until it became a threat rather than a benefit.

Here is the main point, though. The Texas Legislature spent $6.35 billion of our money this year to reduce our school property taxes. Yet school property taxes only dropped $4.1 billion, while property taxes overall remained essentially level. Why is that?

It is because the Texas Legislature did nothing last session, and has done little since property taxes became a political issue in 1997, to stop the massive tax increases imposes by schools and local governments on taxpayers to pay for their runaway spending. As a result, most our money spent on property tax relief was gobbled up by school districts and local governments. Yes, some homeowners did get tax cuts this year, and we should be appreciative. But in many cases their taxes will be higher next year than they were last year; in my case, my $900 tax cut this year will be gobbled up by an $1,100 increase next year. Meanwhile, taxes on businesses and apartments when up this year and will do so again next year.

Next, Sen. Charles Perry made the point that if folks come to them saying that property taxes should be cut, we should also come to them with ideas of where local governments could cut spending. Besides the fact that I and many other liberty-minded folks have been doing this for years, I mentioned to Perry (in another friendly post-hearing conversation) that the conversation of where spending can be restrained or cut to provide property tax relief or cuts should actually be taking place between local taxpayers and local politicians. We on the TFR team have provided recommendations that would make that happen: freezing school district property taxes and requiring local governments to ask voter permission to increase their property tax revenue by any amount. That way, if local politicians think they need more money from taxpayers they can make that case. If the politicians fail to persuade the taxpayers, then they can discuss what spending can be cut to ensure that priorities are taken care of.

Finally, many times at the hearing members brought up the fact that it would cost $81 billion to eliminate all property taxes and point to the problems of coming up with that amount of money and what would happen to local infrastructure projects if we didn’t fully replace the property tax funding.

In many ways, this is a strawman argument. The most popular proposals for property tax relief are to buy down school property taxes over about 10 years by restraining spending at the state and local level. Using this method, it doesn’t really cost anything to eliminate school taxes. We would use money that would have otherwise been spent elsewhere to buy down the taxes, while the tax burden is greatly reduced from what it would have been otherwise. But by focusing on the $81 billion needed to eliminate all property taxes at once, legislators can take attention away from the common sense, practical buy down solution funded by spending restraint—something which is anathema to most of them.

Unfortunately, the politicians are aided in this by some advocates who want to eliminate all property taxes at once by increasing other taxes. Some have called for increasing the sales tax to cover this. Discussion at the hearing yesterday suggested out sales tax rate might have to be 21% to cover this. Another group similarly calls for a consumption tax.

I believe it is a serious mistake for anyone to be taking this approach. First, because it provides politicians with political cover for not making serious efforts to provide property tax relief. Second, because eliminating all property taxes will almost certainly require the imposition of some other tax—swapping one tax for another is not tax relief. It will also create a huge, centralized bureaucracy and put the state of Texas in charge of all local finances; if you think Robin Hood property taxes and the state takeover of Texas local school districts has been a mess, you ought to be wary of this.

Instead, we should eliminate the school M&O property tax, freeze all property taxes, allow some limited increases only with voter permission, put strict limits on state and local spending growth, and remove the automatic loss of property for not paying taxes. Taken together, Texans property tax burden will be greatly reduced, the size and scope of government with be reduced, and Texans will once again own their property.