There are two major parts of the tax proposal that will effect Texans. One is obvious, and the other is far from obvious, and as is usually the case, the one that is far from obvious could have much more significant impact on the everyday Texan. But first, the obvious…..
The GOP tax proposal would limit the deduction for state property taxes at $10,000. With 254 counties in Texas, and hundreds of different taxing jurisdictions it is simply impossible to boil this down to a simple mathematical calculation as to how much this will cost each Texas homeowner. But assuming a 2.5 percent tax rate, your home would need to be appraised at more than $400,000 for this to affect your bottom line financially. And while this seems quite high for most counties, Dallas county and Travis county have seen their median home price soar to around $420,000 and $440,000 respectively so this isn’t just something that affects only the upper 1%.
But there is something else in this proposal that we at RealValueIQ believe should be of more concern for the average Texan in this proposed tax plan, and that is the elimination of the deduction for state and local taxes. And while you might be thinking, why would this affect Texans as we have no state income tax, that is not taking into account the bigger picture and the current trends.
Eliminating this deduction will have the most effect on the usual suspects, New York and the state which has provided Texas with more new Texans in the past 5 years….California. We all know that Texas has no state income tax, and that California does, but do we really have a true idea of how much this is affecting Texans in our economy? No we do not. But when 3.4 million people move to Texas in the past 5 years, and stay, we can assure you that has an effect on Texans. Furthermore we can assume that most of these people are moving into the metro areas or Texas. And lastly, RealValueIQ can assure you that these new Texans are handling their property taxes proactively and aggressively no matter how much or how little they seem to be compared to the owners overall wealth.
Why is this so? We don’t know exactly, but we can only assume there is good reason for it and that all Texans should be as proactive about their property tax burden as these new out of state residents are being. The point is this: don’t just evaluate the GOP tax proposal in its actual effect on your bottom line, but also ask yourself if it is going to cause more Texas immigrants, and if you personally find that to be beneficial to your bottom line not just this year, but in five years, or ten years. Because if you don’t , it might be too late when you do, and you might be the one moving to a new state by that time because you cannot afford the property taxes in Texas ten years from now!
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