On October 20, early voting begins for the state constitutional amendment election as well as for local government elections throughout the state, including the election to elect Stephenville’s next mayor. Of particular interest are 5 propositions on the ballot which, if passed, will lower property taxes for the foreseeable future. No doubt these propositions will pass, but voters should still consider the potential effects, both good and bad, of their adoption.
The five tax-cutting propositions on the ballot include, according to campaign materials and the Texas Tribune:
- “Prop 9: Reduces the tax burden on small businesses,” by exempting “up to $`25,000 of businesses’s inventory or equipment from being taxed” by local governments.
- “Prop 10: Protects Homeowners whose property is destroyed by fire” by temporarily “lower[ing] property taxes on homes destroyed by fire.”
- “Prop 11: Increases the homestead exemption for seniors and disabled Texans” to $60,000 for calculating school taxes.
- “Prop 13: Increases the homestead exemption” to $140,000 for calculating school taxes.
- “Prop 17: Provides a tax exemption for border security improvements.”
There can be little doubt that these tax-cutting amendments will pass overwhelmingly. Yet skeptics nonetheless have questions about their long-run impact, if passed, on the fiscal conditions which may confront our state and local governments.
To date, Texas’s budget surpluses, as well as federal stimulus money during the COVID-19 pandemic, have been used to help finance property tax cuts. And supporters of these propositions predict that future tax cuts, according to the Texas Tribune, “will maintain Texas as a competitive, business-friendly state and contribute to economic growth.” Economic growth produced by cuts in tax rates may increase tax revenues. Or so one can hope, which is why, as a small-government conservative, I’ll vote for these propositions.
But if economic growth can’t produce enough additional revenue to make up for the revenue lost through lower rates? Then what? Must local governments then cut back on services, given the statutory and constitutional requirement that state and local governments must balance their budgets? If so, where? Or must the state, if it can afford to do so, step in with more state aid?
These questions are especially relevant to issues concerning local school district finance. After all, these propositions, especially Props. 11 and 13 increasing homestead exemptions, will have an especially great impact on the production of school district revenue. If Props. 11 and 13 pass, will school district revenue decrease? And if so, will schools have to cut existing programs? Or will the state have to step in with more financial aid? And will doing so increase state power over local school districts at the expense of locally-elected school boards? Should local governments, especially school districts, encounter financial difficulties resulting from the passage of these propositions, those of us who support these propositions must be prepared to either support cuts in programs or else restore taxes and spending, to maintain essential functions. Small-government conservatism must not be carried to the point where we deprive ourselves of necessary services and the revenue to pay for them.
Too often more attention is devoted to cutting taxes than to cutting spending. One can hope that the tax cuts, if passed as they almost certainly will be, will stimulate enough economic growth to avoid the issue of spending cuts to accommodate less revenue. Nonetheless, these propositions could raise as many issues as they settle. In a free society, We the People should have the right to make our own public policy decisions, but with that right comes the obligation to accept the consequences of our choices.
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