Despite its unpopularity among Texans, property tax collections might bring more economic advantages than once thought. While Texas property owners argue that an expanded sales tax would have a more positive impact on economic growth, many studies have found otherwise.
According to an article from Tierra Grande Magazine entitled “In Defense of the Property Tax,” it is commonly believed that property taxes are a burden to Texas citizens and a major hindrance to the economy. However, research indicates that the benefits far outweigh the perceived setbacks. If Texas were to move to a consumption-based tax, nearly all current exemptions and exclusions from the sales tax would potentially be eliminated for the extended tax base, including real estate. In fact, research indicates that a 25 percent sales tax rate would be required to uphold current revenues without such expansions. This change is so high-risk that the effects of such an increased sales tax would offset any property tax savings.
Possibly the biggest factor in favor of property taxation over an expanded sales tax is stability. According to the article, one study found that year-to-year variation in sales tax was more than 40 percent higher than property tax collections between 2000 and 2011. If the change were made, local governments would likely suffer from or unstable revenue streams.
To read the full article from Tierra Grande Magazine, click here.