Another Way to Live
[Guest post by DRJ]
Stafford, Texas, is a 7 square mile community located near Houston that is home to 20,000 residents. Stafford residents pay county and school taxes but they haven’t paid property taxes in 14 years. Instead, city services are funded by an 8.25% sales tax:
“Relying on sales tax revenue alone, Stafford has managed to pay for city services, lower its debt, accumulate a reserve of about $10 million, construct a new convention center and build a police and fire complex in the past six years.”
Stafford benefits from its proximity to Houston and careful management from leaders like Mayor Leonard Scarcella, who has served as mayor for 39 years:
“Many residents credit Scarcella for the city’s prudent fiscal management. He was a law student when the city hired him to help establish its property tax system in 1965. He became mayor four years later and eventually helped to eliminate the tax system.
Councilman Cecil Willis says the mayor watches every penny. It’s not unusual for a city employee to wear several hats or for council to debate the purchase of pencils and light bulbs, he said. The city also has adopted a pay-as-you-go philosophy for projects to avoid debt, he said.
“We’re just living within our means like most families,” Willis said. “We don’t buy extravagant things, and the staff has bought into that and so have residents. It’s a partnership.”
It seems one of the biggest problems Stafford has is too many tax-exempt churches. Refreshing, isn’t it?
— DRJ
I’m not sure of this would work, especially because I don’t know a lot about property tax law, but how about this:
Reinstate the property tax for non-residential property (or perhaps all zoned non-residential property) but all sales tax revenue generated from that property would count as a credit against the property tax.
So if you have a business bringing in $10k of sales tax to the government, sitting on land with $8k of property tax, the business pays no property tax.
But if you have a church on land that would have to pay $8k in property tax (and the church isn’t collecting sale tax) then the church would have to kick in $8k of property taxes.
That’s facially neutral when it comes to religion, and it means all non-residential property would generate some income for the city, even if it’s a church.
I don’t think it would get rid of the churches, but it would not encourage them so much, and all of the non-residential land would bring in some money, so the city would be able to support them.
Daryl Herbert (a32d30) — 6/8/2009 @ 8:04 am“Joe Rome, owner of Stafford Auto, a 39-year-old family business, said he sees about $700 a year in tax savings, which can make a big difference during a recession.”
Well that’s cutting it pretty close, eh? $700 makes that much difference to a business? That’s about how much the city would add to my taxes when my property is annexed. If that were wiped out, I’d still have the state and county prop tax I pay now.
cassandra (5a5d33) — 6/8/2009 @ 8:20 amThis would work fine in a relatively small community where income levels are roughly the same, or are within a certain range. But a sales tax is one of the most regressive taxes out there and so disproportionately punishes people who make low (or no) wages. It places a heavy burden on the working poor to the advantage of people who contain plenty of wealth in their land and homes.
I do like when communities seek out individual solutions to their own economic issues, and this seems to be working well for Stafford. It’s a reminder that there is not a one-size-fits all tax solution.
Myron (98529a) — 6/8/2009 @ 8:43 amWent to a tax site, and was told this:
“…Texas cities, counties, transit authorities and special purpose districts have the option of imposing an additional local sales tax for a combined total of state and local taxes of 8 1/4% (.0825)…”
So, it seems, that Stafford is able to completely finance itself on a 2% increment in the Sales Tax (since the basic state tax is 6.25%) foregoing an imposition of a City Property Tax.
AD - RtR/OS! (10cc06) — 6/8/2009 @ 8:57 amOf course, residents do pay Property Taxes for the financing of County Gov’t and Schools, but it would seem that the City has instituted a model of governmental organization that should be applauded, if not emulated.
Uh, am I missing something here?
mdgiles (fd7652) — 6/8/2009 @ 9:11 amAccording to Patterico’s article, the town is doing just fine, even has a surplus. They just watch what they spend. It’s only in the LA Times article (like we expected anything different?) that the non taxable churches becomes a “problem”.
I love it when everyone paying the exact same percentage of taxes becomes “regressive”.
JD (460b5f) — 6/8/2009 @ 9:13 amThat may or may not be true, depending on how the tax is structured. In many states, there’s no sales tax on food (unprepared food, that is). I’m assuming there’s no sales tax on apartment rental; there might be, I just don’t know of any.
Since low or no wage people spend a much higher percentage of their income on food and shelter, they pay relatively less tax on their total consumption.
Steverino (69d941) — 6/8/2009 @ 9:23 amIt is nice that Myron admits that taxes punish people. That is a good first step.
JD (d467d3) — 6/8/2009 @ 9:26 amDRJ…Does TX tax the sales of groceries or services, or just manufactured goods?
AD - RtR/OS! (10cc06) — 6/8/2009 @ 9:52 amTX does not tax food groceries, but does tax items like soap, paper towels, beer&wine, DRANO, etc.
And darn those tax-exempt churches anyway, this is surely going to increase hostility to them in suburban TX bedroom communities.
Even if everyone pays the same sales tax rate, that tax is still regressive when dividing the tax dollars paid by income. Poorer people pay a higher percentage of their income on taxable staples (gasoline, Huggies, beer&wine, cigarettes [well, staples for me]) than do richer people.
furious (a74982) — 6/8/2009 @ 11:29 amIf you think State Sales Taxes are regressive, wait until the BHO administration gets through pushing a V.A.T. through Congress – on top of the existing Income Tax!
AD - RtR/OS! (10cc06) — 6/8/2009 @ 11:32 amBottom-up ala’ Stafford, or top-down, ala’ Austin, prudent budgeting practices seem to be the rule here.
Maybe Cali could try the ‘part-time’ legislature option in Sacto.
furious (a74982) — 6/8/2009 @ 11:33 amIt’s hard to think of beer, wine and cigarettes as necessities. Take those out.
If you look at total tax paid on all consumption (not income, since sales tax is a consumption tax), those in a position to consume more will pay a higher percentage of tax on their consumption.
Steverino (69d941) — 6/8/2009 @ 11:46 amControlling government expenses is not rocket science. The United States is filled with municipalities that have been able to do this for decades.
SPQR (72771e) — 6/8/2009 @ 12:20 pmThe gas taxes in IL are not only regressive, but outrageous in their breadth and scope – and if you want to know how VAT works, just head on up to the free – healthcare Valhalla that is Canada.
Dmac (f7884d) — 6/8/2009 @ 12:53 pmIn CA, Sales Tax is levied on Gasoline, after the Federal & State Petroleum Taxes are added in –
AD - RtR/OS! (29fea3) — 6/8/2009 @ 5:19 pmyou end up paying a tax on a tax.
Hey, Anyone note that this small town built a Civic center and a police and fire department complex while accumulating a $10Million dollar reserve?
That is an awesome accomplishment that LIBERALS could never duplicate.
DRJ, I have to disagree with you about too many churches. This town is blessed and NOT HURTING FOR MONEY.
PCD (02f8c1) — 6/9/2009 @ 11:24 amPCD,
As the link explains, the mayor and other leaders think it has too many tax-exempt churches, not me:
DRJ (180b67) — 6/9/2009 @ 11:29 amApparently parishioners from other towns are building churches in Stafford to take advantage of no property taxes, even if no Stafford residents attend.
DRJ (180b67) — 6/9/2009 @ 11:32 amIsn’t church property that is dedicated to the church mission, and doesn’t generate taxable revenue, exempt from property taxation?
AD - RtR/OS! (de37bf) — 6/9/2009 @ 11:57 amI think this is what the Mayor is upset about:
Land that is on the tax rolls, once it is purchased for the purpose of the construction of a church, is taken off of those tax rolls; but, since the town doesn’t levy a municipal property tax, what he is actually worried about is the potential loss of commercial developement, and the subsequent enlargement of the Sales Tax base within the community.
Well, if he is such an effective manager, he needs to tailor his management of the City to the existing environement, instead of changing the environement to conform to whatever dreams he might have for his little empire at City Hall.
DRJ,
What we have here is another KELO brewing. The powers that be are tired of living on the shoe string and want to start feasting at a full trough of tax revenue.
Those 300 acres aren’t generating much tax now, but if a shopping mall or even a strip club opened up, there be revenue to spend for the town officials. There would be perks and subordinates. Government would grow for a change instead of living on change.
PCD (02f8c1) — 6/9/2009 @ 12:42 pmAD and PCD,
I agree they are concerned about lost commercial revenue but I don’t see this as a Kelo situation. The city isn’t trying to get rid of existing churches but it wants to avoid adding new ones.
In contrast, Houston doesn’t have zoning and while I think that works for Houston, it has room for growth. Stafford doesn’t have room so it needs to consider whether 51 of anything is too much for 7 square miles.
DRJ (180b67) — 6/9/2009 @ 1:07 pm“With some 300 undeveloped, potentially revenue-producing acres left in Stafford,”
I take it Stafford isn’t able to annex undeveloped land, or even unincorporated subdivisions? If they can’t, Stafford better be prepared for high-density residential and commercial properties in their city limits.
Brad S (9f6740) — 6/9/2009 @ 1:21 pmCalifornia state took the property taxes away from the local cities and counties in the wake of Prop 13. They also took the lion’s share of sales tax but rebated some sales tax back to cities. That resulted in cities becoming dependent on sales tax. I sat on the planning commission in Mission Viejo for a few years. It is a middle class city of 100,000. Since incorporation about 20 years ago, the city has gotten delusions of grandeur and built a beautiful city hall and library appropriate for a city twice the size. It now has 152 employees while Rancho Santa Margarita, a similar sized city next to MV has 25.
The city with the frugal mayor is luckier than any of its residents will ever realize. fifteen years ago, Mission Viejo had reserves of $25 million. If you ask the city council, they still claim those reserves but they are all encumbered and only about $500,000 is still available if needed.
I doubt if 10% of the residents know these facts so it is hard to resist the temptations as they come along.
Mike K (2cf494) — 6/9/2009 @ 1:27 pm