Monday, October 31, 2005

The Chronicle on Taxes

I was skimming through the Sunday Houston Chronicle, having just finished the funnies and working quickly toward the sports section, when my attention was caught by a section column headline: "Republican retiree favors income tax." Curious, I had to stop and see what this was all about.

Chronicle columnist Rick Casey provides two "case studies" on the current tax situation in Texas. Setting up case study #1:
A friend of mine is a Republican precinct chairman and a skilled engineer who retired as a high-level executive with one of the big oil companies.

He is a very smart man with a very sharp analysis of his tax situation.

Like the rest of us, he has watched taxes on his home rise at a rate higher than inflation, and certainly higher than his income from pensions, Social Security and investments.

Waitaminit! I had to reread that passage a few times to make sure my eyes were not deceiving me. Did a Chronicle regular actually just admit that property taxes are rising?!? This is getting interesting...
Yet he knows that the appraisals of his home that lead to the higher taxes are accurate. Houses in his neighborhood keep selling for more and more.

He could sell his house and net a nice profit. But it's his neighborhood, his home, with room for his children and grandchildren when they come to town for happy visits.

So he won't cash in. He just gets taxed as though he did.

"They're taxing me on my unrealized capital gains," he says of the property tax.

Okay, so I'm still in shock over the admission of the tax increase by way of rising, compounding property appraisals. But I think I know where this is heading. State income tax. Let's move on to case study #2, which involves Houston City Councilman Mark Ellis, who is now running for state Senate.
With his candidacy in mind, he negotiated and won from Mayor Bill White an amendment this week to an ordinance setting the tax rate.

...Ellis' amendment lowered the rate by a token quarter of a cent, resulting in about a $2 annual savings on a $100,000 home, which fell well short of making up for the higher appraisals.

In a press release taking credit for the rate reduction, Ellis expressed sympathy for "the frustration taxpayers face with rising property values and skyrocketing property taxes."

Both Ellis and the Republican precinct chairman have solutions.

According to Mr. Casey, Mark Ellis' solution is a convoluted one involving adding restrictions on large commercial property owners (most especially oil refineries) and increasing the homestead exemption. Then this Republican friend of Casey's put forth a different and, in Casey's estimate, better solution...
...a solution that actually would work.

You guessed it, the dreaded state income tax.

Now, I do not claim to be a tax expert by any means. And I cannot honestly say that I am utterly opposed to a state income tax. I simply do not know the answer. But the only way it could possibly work (that is, help all of us who are not-so-slowly being taxed out of our homes) is if it completely replaces the current residential property tax system. Unfortunately, most often any mention of imposing a Texas state income tax involves some sort of "compromise" or mix of the two, which will never work! Once the state legislature has the ability to use both means, not a single citizen will be safe from their reaches.

But of course, the biggest problem with this entire article is that it misses the best and most obvious solution to the tax issue, and that is not surprising at all. With his analyses of the various legislative options for offering relief to homeowners, Mr. Casey never once calls on the Texas state legislatures to REFORM THE BUDGET. As with most fiscal liberals and (apparently) all current politicians, Democrat and Republican alike, Casey merely seeks a way to shift the current taxes around.

It's a shell game. The ball goes under the shell, gets shuffled around a few times as the taxpayers' attention is cleverly averted, and suddenly it appears the problem has vanished. No more ball. No more high taxes. And yet state and local budgets continue to rise steadily, year after year.
What we need is true tax AND BUDGET reform. Yes, lower the cap on residential property tax appraisals. Yes, lower the current tax rate. But let's get the shears out and do a little job on the budget while we are at it! Cut some of that pork, and maybe we can feed our families again on the trimmings.


Anonymous Anonymous said...

But the only way it could possibly work (that is, help all of us who are not-so-slowly being taxed out of our homes) is if it completely replaces the current residential property tax system.

I hate to be a cynic, but I don't believe there has ever been a temporary tax. Once taxing authorities get a taste of that revenue, there's no turning back. I'm not a tax expert by any stretch of the imagination myself, but I know what I've seen.

The strategy of fighting the residential property tax rise still seems to be the best one here, because a state income tax will happen eventually anyway... and I agree with you that a mix of the two will be a disaster for the everyday Joes like us.

11/01/2005 7:51 AM  

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