Of late, the Foundation’s property tax reform plan has been enjoying quite a bit of exposure in the media-though not always in the most positive light. Because issues can sometimes get distorted in the media, it may be helpful to recap the problem and explain how the Foundation’s plan would benefit Texas.

By comparison, Texas’ current property tax system is relatively punitive to homeowners and businesses. According to the Tax Foundation, per capita property tax collections in Texas ranked as the 17th highest in the nation during FY 2008.

But not only are property taxes taking their toll on taxpayers’ wallets, they are also discouraging investments, costing more to administer than other taxes, and preventing property owners from ever truly owning their own homes and businesses.

There is a better way. Rather than taxing property-which is just a method to raise revenue-a more sensible approach is to eliminate property taxes altogether and replace the existing revenue with a broad-based sales tax.

Under this scenario, Texas could increase personal income in the state between $3.1 billion to $3.3 billion over one year and between $21.3 billion to $52.1 billion over five years. Additionally, over a five-year horizon, the state’s economy could create between 127,000 and 312,700 new jobs as a result of the increase in personal income.

In order to make this kind of swap in revenue-neutral manner, the sales tax rate and base would have to be adjusted accordingly:

– 14.5 percent if the current sales tax base is used;- 12.5 percent if the current sales tax base is used and includes property sales; – 9 percent if all services that are taxed in at least one state are taxed in Texas;- 6.5 percent if the sales tax base is the total value of goods and services in Texas’ economy, with adjustments to remove non-taxable items.

I don’t know about you, but this is the kind of plan that makes sense to me-promotes growth, creates jobs, and protects property rights.

– Jon CzasIntern, Center for Fiscal Policy