The State of Texas currently earns revenue from several separate taxes. The two that most Texan's see the most are from sales tax and property tax. The sales tax is a straightforward simple tax. No matter what you are buying the state sales tax is a straight 6.25% with a local option of an additional 2%. Property taxes may seem straightforward as well however it is not based on a concrete value. Counties use different methods to determine what a property is worth typically using real estate transactions as a reference. In recent years we have seen a drastic drop in real estate prices, home builders and banks are closing their doors, and property owners associations are finding it difficult to collect their homeowner's dues. Even though we are in a tough economic climate for the housing market several Texas counties are still increasing the value of homes. Even if a county could determine what the exact value of a property is, it raises the question -
"Does your ability to own a home mean that you can afford to pay taxes on that home"?
What if you were to inherent a nice home? What happens when you retire? Most people in these scenarios would be forced to sell the homes and downgrade to something with a lower tax liability.
Another point to consider is the cost of a property tax. Property taxes require local tax appraisal districts, appraisal boards, and various other bureaucratic entities. It also requires property owners to take the time to research their value to determine how accurate it is and appear before a board to plead your case. Determining your taxes can be like buying a new car, the best negotiator often wins. It also discourages investment and improvement to the property. Sales tax is very transparent. You control how much you pay in taxes by determining how much you spend. You can keep track of your taxes paid by simply reading your receipts. While property taxes are slow to adjust to slumping property values, "the sales tax has done a good job keeping up with the Texas economy" according to The Texas Public Policy Foundation report titled The Case for Converting from Property Taxes to Sales Taxes. The elimination of property taxes would be a great boost to our lagging housing market. In addition it would encourage people and business to save and invest in their homes or businesses.
We all heard when then Senator Obama spoke to "Joe The Plumber" saying "When you spread the wealth around, it's good for everybody". We believe that when you spread the tax around it's good for everybody! By taking the burden away from only property owners you reduce the individuals liability. We are still looking for concrete estimates on this scenario.
But Isn't Sales Tax Revenue Down This Year?
According to the Houston Chronicle the sales tax collected in June 2009 (for sales in May of 2009) has dropped 11.2% from last year ($1.77 billion in 2008 and 11.2 billion in 2009). There are several items that are not discussed. In 2008 as a whole the sales tax was up 6.6% (2008 State of Texas Annual Cash Report). We do not have the total broken down by month but look at what has happened since then. Gas prices were much higher in June 2009 then June 2008 (Higher prices mean more tax collected, On 7/13/09 http://www.houstongasprices.com reported the average local price for gas a year ago was $3.927 and today is $2.326), the credit markets have frozen, auto sales have dropped, and the stock market has fallen. Besides the reasons for lower income, we also know that June of 2008 almost every American received checks from the Government, so the taxes collected may have been higher then average. Also if we rely only on sales tax, because it is basically instant collection, the state can change spending habits easier and quicker to accommodate lower collection totals. Knowing that the economy has slowed and that revenue would be down, in 2009 the Texas legislature also passed a reduced the state budget to accommodate the lower collection.