Photo: Brandon Bell
As Houston struggles to balance its books, new research reveals city residents aren’t taxed “too little.”
“We tend to look for one golden solution to everything, and that’s rarely the way anything works,” sighed Bill King, a finance fellow at Rice University's Baker Institute for Public Policy.
City leaders continue to try to dig out of a projected $300 million shortfall. The struggle frequently brings complaints that the 2003 measure that limits property tax hikes prevents the city from raising sufficient revenue, giving city residents substantially lower tax rates among Texas cities.
But a new study by the Baker Institute reveals that, when controlled for assessments, and for income, Houston homeowners pay only slightly less than homeowners in comparable metro areas.
“Could property taxes be raised some? Sure, they could be raised some. But it’s not nearly enough,” King explained.
Houston’s money crunch, he says, comes far more from costly spending, and financial commitments that have accumulated over decades.
“We’ve made choices along the way to do various things that have gotten us into this financial bind which has not allowed us to invest in infrastructure, hiring more police officers, having decent garbage pickup, all the services that you would like to have.”
As examples of long term, big ticket liabilities, employee pensions are still a “defined benefit” system, a model which businesses have overwhelmingly abandoned in favor of savings plans like 401(k)s, sucking half a billion dollars a year from the budget.
King also points to the city’s heavy commitment of sales taxes to public transit. If that were not draining funds , King says, the city wouldn’t be in its current hole.
He also suggests it’s time to phase out the city’s TIRZ special low-tax districts which were meant to develop blighted communities but instead benefit neighborhoods that are affluent already.
The answer, he says, will have to be a “smorgasbord” of adjustments to financial drains like those.
King warns that a fixation on taxes is simply the wrong idea. “If you want to cover the budget shortfall with an increase in property taxes, you’re talking about raising property taxes 30 or 40 percent,” he said. “That would send everybody running for the exits in the city of Houston.”