Let's talk property taxes. Nathan Johnson is the Democratic State Senator from Dallas (Texas Senate District 16). Our emails are the best way to make sure you stay updated on what Nathan's working on at the State Legislature and how we're building a future that all Texans can be proud of, but if you’d no longer like to hear from us, please click the “unsubscribe” link below. John – Relief from high property taxes is, well, a relief. And an $18B tax cut is pretty exciting. But at that scale, it’s also pretty reckless, and pretty disconnected from legislative process and policy analysis. Fact is, the state committed to a massive recurring tax cut without a plan for how to pay for it in the future. We’re paying for it this cycle with federal money – leftover COVID stimulus funds. But we won’t have that money next time. We’re also paying for the tax cut, in effect, by not funding our schools at the level we committed to fund them in the recent past, and by not investing sufficiently in the state’s lagging social and physical infrastructure – things like water, healthcare, transportation, and basic state services. How did we wind up with too much of a good thing? Politics over policy. If Texas lawmakers want to prepare our state for the best future possible, they must make legislative decisions guided by more than just politics. Policy matters. Please read the op-ed that I wrote last Sunday for The Dallas Morning News. Thanks very much. Texas’ oversize property tax cut now will mean a big bill in the future Politics dictated surplus spending, and we will pay in the long run. Nathan Johnson Aug 21, 2023 Presented with an extra $32 billion of spending money this session, legislators spent more than half of it — $18 billion — on property tax reduction. Jubilation and self-congratulation followed. When the noise dies down, we’re left with a few questions: Should it have been more? Or less? How did we get to the number $18 billion anyway? Most importantly, given that we’ve created a permanent obligation to buy down future taxes, how are we going to pay for it when there isn’t a massive surplus? Texas property taxes are high, and in recent years steep increases have created real financial strain for many residents and troubling incentives for others. Some level of property tax reduction was in order. And though it took two contentious special sessions to get there, the final tax reduction package is well conceived: It raises the personal homestead exemption by 150%, compresses local school tax rates, temporarily caps dramatic spikes in commercial appraisal values, and in a related bill, exempts thousands of small businesses from the cost and nuisance of the dreaded margins tax. (Interesting note: The margins tax was created to pay for the last big property tax cut.) These are major changes that will result in significant tax savings for homeowners and small businesses. That’s good, as far as it goes. Unfortunately, it’s also reckless. You might even say it’s unconservative. Dubbed “the largest tax cut in Texas history” (it actually is not, but never mind), it’s being funded this session by “the largest surplus in Texas history” (it actually is — but please read on). Large surpluses are not routine. We shouldn’t expect to have anything like this surplus in the future. Consider why we had a $32 billion surplus this session. It’s mostly one-time money, with the rest owing to unsustainable deferral of expenses. More than $14 billion comes from various federal COVID funds, while another nearly $7 billion comes from inflation-inflated sales tax revenue. Meanwhile, funding public education in real dollars at 2019 levels would have cost an additional $15 billion. If you’re adding, that’s pretty much the entire “surplus.” We’re not going to get another flood of unattached money from the federal government. We don’t want high inflation. Pretty soon we will have to fund our public schools like we said we would. We must ask also about the consequences of not investing some of that $18 billion in other essential state responsibilities — one-shot investments like water infrastructure, affordable housing (renters were largely left out of the discussion, save for the disingenuous hope that landlords might pass on the tax savings they realize), and prison system upgrades; and recurring investments like education and health care. Investments like these produce economic (and social) returns in both the short and the long run. So exactly how did we wind up at $18 billion? Why not $11 billion, or $13 billion, or $20 billion? The truth is uninspiring: It’s political. The number $18 billion did not come from a fiscal analysis aimed at determining the most beneficial and responsible way to spend the surplus, that is, as between tax reduction for the half of Texans who own homes, and investments in Texas’ lagging physical and social infrastructure. It was, for the most part, little more than an exciting and predictably effective campaign promise from the top. Another case of politics over policy. Until the public demands more from government leaders, this is how policy will be made. In the meantime, we have to deal with the consequences. I expect we’ll do just fine for a while. The Texas economy is marvelously strong, to some extent because of, and to some extent in spite of, our politics. But one day, maybe because of and maybe irrespective of our politics, instead of a surplus we will face a deficit. What then? Will we fire school teachers to pay for property tax reductions for homeowners? Fortunately and wisely we maintain a sizable Economic Stabilization Fund, better known as the Rainy Day Fund. We should not hesitate to draw upon it — heavily if necessary — to meet our responsibilities to the public. Perhaps that gets us past any shortfall. If not, legislators will have a difficult time cleaning up after the big tax reduction party of 2023, and the voters will not be happy when they see the mess. Nathan Johnson is a Democrat representing Dallas in the Texas Senate. He wrote this column for The Dallas Morning News.   As you know, Senator Nathan Johnson is leading the effort in the Texas State Senate to pass legislation that will address the needs of Texas working families and prepare this state for our brightest future — legislation on the electric grid, healthcare, criminal justice, and plain old good government. But he can't do it alone, which is why it's important for all of us to stay involved. 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