The legislative session has started, giving state lawmakers a chance to tackle both property tax relief and property tax reform. “Relief” refers to lowering tax bills while “reform” speaks to keeping them down.
This write-up concerns itself with the latter, tax reform, and offers ideas on better protecting future tax relief from opportunistic local governments.
When considering tax reform, there are 3 major areas to take into account. The first is the maintenance and operations (M&O) tax, which, as the name suggests, is “used primarily to pay for the day-to-day functions of government.” This most often funds things like salaries, supplies, and services. Second, there is the interest and sinking (I&S) tax, which is used “to pay bonds, including interest, to finance capital projects such as buildings, facilities or other infrastructure.” Think government debt. Lastly, there is a category of indirect reforms that, if implemented, could have a profound impact on the property tax system as a whole, as one might imagine were a local expenditure limit ever implemented. The M&O-related and indirect tax reforms will be discussed elsewhere.
This brief commentary is concerned with I&S-related reforms and offers 15 separate suggestions to fortify the current system, which is trending in a poor direction. The reforms are divided into 3 groupings, i.e. those related to communications, those connected to bond elections, and those that bear some relationship to the bond formation and post-approval process.
Reforms of this type are critical to controlling the rising tide of red ink and ensuring that voters are well-informed about the measures they are deciding.
Austin Prochko
January 25, 2025
texaspolicy.com