01 FEB 2019 – We are not handing a problem to the Legislature telling them, “Go fix it!”
We’re presenting a solution. It’s the only comprehensive solution ever proposed to the Legislature. And it’s a solution that secures both our liberty and our property while still helping Texas to prosper.
In 2013, George Lavender sponsored HB3742, a 224-page bill that resulted from a detailed, 159-page fiscal analysis that Economist/Attorney Rick Cunningham did in 2010. Harvey Hilderbran, Chair of the Ways & Means committee sent HB3742 to the Legislative Budget Board and Legislative Counsel for review. Unfortunately, time ran out, the 83rd session ended, and we saw it shelved with no one returning to carry it forward.
Here is its simplest distillation.
“Abolish 60+ taxes (including property tax) and replace them all with a 7% consumption tax.”
This is not adding “another new tax.” Nor is it attempting a temporary workaround that like every past reform for the last 80+ years, would fail. Instead, it restructures the Texas tax system into a simple and efficient, consumption-based tax.
On the simplest, macro-level, here’s how it works.
We need $80B to replace all revenue that HB3742 would abolish. Texas GDP is $1.6T. A tax rate of 7% on the whole economy would capture $112B. We assume up to 25% would be exempt, the net is the $84B, and that’s more than sufficient.
We’re advocating HB3742 because Property Tax Relief and Reform schemes have always failed. They’ve been tried over and over and over.
During the nationwide property tax revolt of the “Great Depression” politicians created the Homestead Exemption to provide relief. They implemented Sales Tax to provide reform and halt rising property taxes.
Did that stop property taxes from rising?
In more recent times, there have been three major attempts. 20 years ago, the Homestead Exemption was increased but school district property taxes continued to rise. Ten years ago, a new tax, called the Business Franchise Tax swap was supposed to bring reform. Instead, it brought Texans an increase in both local property and state taxes. Three years ago, the Homestead Exemption increased again.
Did that stop property taxes from rising?
We’ve been trying this for the last 80 years. Yet Governor Abbot’s proposal is like an Oncology Doctor telling us, “We’re only going to slow the growth of that tumor that’s killing you.”
You know trying the same thing over and over is futile. You know it will never produce a different result. But here’s the most important reasons why we must Eliminate Property Tax.
– Because private property ownership is central to a free society.
– Because property taxed is not owned at all.
– Because no tax should have the power to leave us homeless.
Did our founders pledge their “lives, fortunes and sacred honor” to secure their rights to roads, schools, and public services?
You know they didn’t. Our founders considered property ownership an inalienable right, just like life and liberty.
“Among the natural rights of the colonists are these: first, a right to life; second, to liberty; third, to property; together with the right to support and defend them in the best manner they can…” – Sam Adams, “The Rights of the Colonists” November 20, 1772
“Property is surely a right of mankind as real as liberty.”- John Adams, “Discourses on Davila”
Property must be secured or liberty cannot exist. – John Adams, “Discourses on Davila”
“Now what liberty can there be where property is taken away without consent?” – Sam Adams, “The Rights of the Colonists”
Our founders believed that if government can take it away “without consent” then we don’t own either our property or our liberty.
That’s why in the 2018 Spring primary, voters passed Proposition One to “replace the property tax system with an appropriate consumption tax equivalent.”
That’s why that same summer 94% of the 8,000 Texas Republican Party convention delegates voted to Abolish Property Tax.
That’s why, for the last 10 years, the Republican Party of Texas Platform has resolved to “replace the property tax system….”
So, why aren’t we talking about how we can Eliminate Property Tax?
Here are a few pragmatic objections and resolutions.
1. “Not happening without major new revenue source and the infrastructure ready to take it.”
In Rick’s research, he found nothing “that looked in detail at every taxing jurisdiction of the state” (and there are thousands). So he did his own study to find out “what does the picture look like if you tried to tinker with sales tax?” He concluded that by using sales tax, “there was no way… to do a wholesale replacement of the property tax.”
That led Rick to ask, “What would happen if instead of looking at what we have and trying to figure out how we fix it, suppose we didn’t have anything?”
Using that approach, he started with three key objectives.
A. Generate sufficient revenues to fund the government the electorate has chosen.
B. Distribute taxes equitably so all taxpayers bear a reasonable, fair share.
C. Create an efficient and transparent collection process.
He concluded that a value-added tax would best meet all the criteria (at an acceptable rate of 7%).
HB3742 replaces the revenue from the taxes it eliminates. As for infrastructure, it’s already there in the collection of sales tax and distribution of revenues by the state.
2. “How will you fund counties cities, school bonds, and public services?”
Once Rick had completed his analysis down to every taxing jurisdiction he found HB3742 would fully fund 95% of the counties in Texas. The remaining 5% still have their school maintenance and operations funded. So, worse case, you have a very small percentage of services left to be funded by additional means.
3. “How many legislators have actually said they support it?”
Only half a dozen that I know. So, do we have to replace 5 or 6 dozen of them to make this happen? Or could enough Texans who start demanding they Eliminate Property Tax change their minds?
How long did it take our abolitionists to eliminate slavery? How long did it take William Wilberforce to abolish the slave trade in England? It didn’t take years, it took DECADES.
Every time they got close, governments maneuvered in some underhanded way to defeat the cause of right. But that evil was overthrown. And it wasn’t gradually or incrementally through “relief and reform.” Yet isn’t this what we’ve kept trying (and expecting a different result) with property tax for the last 80 years?
George Washington delivered the following message to the Continental Army. While looking out into New York Harbor, they saw, forming against them, the largest British expeditionary force in that nation’s history until the First World War.
“The time is now near at hand which must probably determine whether Americans are to be freemen or slaves; whether they are to have any property they can call their own; whether their houses and farms are to be pillaged and destroyed, and themselves consigned to a state of wretchedness from which no human efforts will deliver them.
The fate of unborn millions will now depend, under God, on the courage and conduct of this army. Our cruel and unrelenting enemy leaves us only the choice of brave resistance or the most abject submission.
We have, therefore, to resolve to conquer or die.” – Battle of Long Island 27 Aug 1776
No Relief. No Reform. #EliminatePropertyTax