Texas Capitol
Photo credit: John Maffei
Taxpayers in states across the country envy Texas and its lack of a state income tax along with its relatively low overall tax burden. But governors and legislatures in other red states have made progress recently in bringing their state income tax rates down towards zero.
In the last two years, every red state except Alabama has voted to reduce its personal income tax rates. Arizona lawmakers brought their income tax rate rate down from 4.5% to a flat 2.5% and are already advancing a new bill to install revenue triggers that would completely phase out the state income tax over time. Iowa is dropping their top rate from 6.8% to 3.99%. Lawmakers in West Virginia and Kentucky have voted to phase their income taxes to zero over time. North Carolina lawmakers have cut their income tax rate down from 7.75% to 4.75% and the state senate recently passed a new budget taking the rate down to 2.49%. The tortoises are catching up with the hare.
That is why Governor Greg Abbott’s plan to eliminate more than 40% of Texans’ property tax bills by phasing out the the school maintenance & operations property tax is so exciting. The race is on and Texas can pick up the pace and maintain—maybe extend– its lead. Tennessee Governor Bill Lee (R) and Florida Governor Ron DeSantis (R) have signed tax cuts this year. If Governor Greg Abbott’s property tax relief proposal becomes law, Texas would also demonstrate for the rest of the country how even leaders of no-income-tax states are not resting on their laurels and are continuing to find ways to provide tax relief.
Thus far, 2023 has been challenging for Texas taxpayers who, in addition to seeing state spending grow much more than desired, watched the House once again fail to enact a Senate-passed bill that would ban taxpayer-funded lobbying. While members of the Texas statehouse were neglecting to take up that measure, taxpayer-funded lobbyists were busy working to defeat school choice legislation. Nearly 20 states have enacted Education Savings Account and voucher programs. In the past two years alone, universal ESAs have been enacted in seven states. Though not yet Texas.
There is still time, however, for Texas lawmakers to end the year with a strong finish that entails property tax relief and school choice, but that depends on the outcomes of the current and subsequent special sessions. With the nation’s sixth highest average property tax burden, Governor Abbott, Lt. Governor Dan Patrick, and Speaker Dade Phelan have rightly made property tax relief the top fiscal priority this year.
The reduction in the property tax rollback rate that Texas lawmakers approved in 2019, which prevents local revenue from growing in excess of 3.5%, has already saved Texans billions of dollars. Yet Governor Abbott and lawmakers in both chambers of the Legislature recognize further reform is required to achieve needed property tax relief. The Governor’s proposal to fully phase out the largest piece of Texans’ property tax bills in the coming years would provide significant relief to millions of households and employers, and I am urging lawmakers to send such a package to the Governor’s desk.
Passage of property tax relief and school choice in Texas would stand in stark contrast to the dysfunction and profligacy in Washington, Sacramento, Springfield, and Albany. Further, it would demonstrate to all Americans that there is a superior approach to governance on offer.