In 2015, two bills were proposed in Texas’ 84th Legislative Session that would reduce the property tax revenue cap in Texas. Using identical language, House Bill 365 and Senate Bill 182 sought to reduce the property tax revenue cap from 8% down to 4%. The proposed legislation would impede the ability of local governments in Texas to collect tax revenues by reducing property tax revenues that fund the General Revenues Fund. In turn, the ability of local governments to provide infrastructure and services would be limited.
The Texas Municipal League (TML) hired AngelouEconomics (AE) to determine the economic impact of such revisions to public policy. The negative impacts stem from two primary factors:
1. Reduced Public Sector Spending – The effect from decreased government spending on business sectors throughout the economy. Less revenue means fewer expenditures on goods and services that support local economies.
2. Reduced Private Sector Spending – The reduction of revenues will lead to fewer government employees. The lost wages of those employees create voids of economic activity where those wages used to be spent.
AE modeled the total economic impact of the proposed policies using two scenarios: a reduction of the property tax revenue cap down to 6%, and a reduction of the cap down to 4%. Over two years, the proposed policies would negatively impact the Texas economy within the range of $225 million to $333 million.
Economic impact figures are not the only considerations for policies such as House Bill 365 and Senate Bill 182. AE also analyzed factors such as:
- Policing & Public Safety
- Economic Development
- Chapter 380 Grants
- Tax Climate
- Loss of Local Control
- Lack of Fiscal Stability
- Reduced Quality of Life
Despite having strong lobbying support from groups in favor of the revenue cap, both bills were ultimately withdrawn from the legislative schedule. The economic impact report was able to add critical information as to the potential negative effects of the proposed legislation.
Economic impact of proposed legislation that would reduce the property tax revenue cap in Texas.