Tuesday, June 9, 2009

A Tax Haven in Texas

As a part of my platform for "virtual" mayor of Houston, I previously proposed that the city cut property taxes. I called for an initial reduction of 10% in the first month, and a reduction of 50% over six years. These reductions would be financially prudent if the city got out of the sanitation and water business, sold assets, and repealed regulations that violate individual rights.

I am sure that some find such proposals impractical--how could a city as large as Houston possibly balance its budget and reduce property taxes by half? As I have said many times, if the city government were limited to its proper functions--the police and the courts--its financial requirements would be a small fraction of what they are today. Reduced taxes would also improve the economy by allowing tax payers to keep more of their money.

An article in Monday's Chronicle provides evidence that such policies actually work when applied. Stafford--a suburb of Houston--has not levied property taxes since 1995. The city of 20,000 people relies on sales and franchise taxes (these too should be reduced, but that is a different issue). While other cities are struggling financially, Stafford has managed to reduce its debt and accumulate a cash reserve of $10 million.

The absence of property taxes provides tangible benefits to property owners. Home owners have lower mortgage payments. Business owners have more money to re-invest in their business. As a result, the city is attracting new businesses and recently placed number 36 on Fortune magazine's best places to launch a business.

While Stafford is exhibiting financial prudence, Houston city council members are gorging at the public trough. A Chronicle editorial reports that council members have increased their own budgets by 3.6% for the 2010 fiscal year. This has occurred despite Mayor White's insistence that the city make "difficult choices" and re-examine all spending.

In the past, council members have often approached the end of the fiscal year with money left in their budget. Last year several council members went on shopping sprees--two took staff members to Galveston, several bought new office furniture, and a total of 22 television sets were purchased. When Mayor White spoke of "difficult choices" I doubt he meant choosing between LCD and plasma.

In the context of the city's $4 billion budget, the additional $13,331 per council member is a drop in the bucket. But the issue is not the number of dollars--council members are forcibly taking money from Houstonians so that their staff members can watch Rachel Ray and Oprah. They have no problem dictating to the citizenry how we live our lives, but they cannot exercise even a modicum of self-restraint.

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