Wednesday, February 20, 2019

#TXLEGE: "Rollback" rates, Inflation, and Historical Accident

"Your gold and silver are corroded, and their corrosion will be a witness against you and will eat your flesh like fire. You have heaped up treasure in the last days."
James 5:3

From TPPF:
AUSTIN— Today, the Texas Public Policy Foundation published the policy brief, The Rollback Rate: Legislative Intent & Inflation.

“Local government budgets shouldn’t grow faster than the taxpayer’s ability to keep up with them,” said Mikael Garcia, director of Public Affairs at the Texas Public Policy Foundation. “That’s why the rollback rate was created in the first place—to be a ‘moderating influence’ on big property tax hikes. Lowering the rate closer to inflation follows legislative intent and guarantees that budgets won’t grow faster than do taxpayers’ wallets.”

Identical bills have been filed in the Texas House and Senate that seek to achieve meaningful property tax reform. A major component of both introduced bills— Senate Bill 2 (Bettencourt et. al) and House Bill 2 (Burrows)—is a lowering of the rollback tax rate from 8 percent to 2.5 percent. This downward adjustment is highly significant as the rollback rate was established in 1979 at 5 percent, increased in 1981 to 8 percent, and has not been modified since that time.

“It’s time to modernize the rollback rate from 8 percent to 2.5 percent,” said James Quintero, director of the Texas Public Policy Foundation’s Think Local Liberty project. “Updating this important safeguard will better protect taxpayers from local largesse and keep the Texas economy the envy of the nation.”

Key Points:
  • In 1979, state lawmakers created a rollback tax rate to help moderate tax levy growth. The rate was set at 5 percent. 
  • In 1981, state lawmakers raised the rollback rate from 5 percent to 8 percent on the grounds that inflation was high. It was high, but it also soon fell. 
  • Over the last 25 years, inflation has never risen above 4 percent. Over the last 12 months, inflation increased less than 2 percent. Yet the rollback rate remains at 8 percent.
Bottom Line: Even setting aside the other godawful consequences of how Texas levies property taxes, a system designed to reflect the economy of the 1970's is simply obsolete.


Full paper:

TPPF Rollback Rate by on Scribd

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