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SB 15 would entitle the surviving spouse of a first responder who is killed or fatally injured in the line of duty to an exemption from taxation of the total appraised value of the surviving spouse’s residence homestead if the surviving spouse is determined to be eligible by the Employees Retirement System and if the spouse has not re-married.
Specialized tax exemptions designed to benefit one preferred class of people to the exclusion of others is a violation of limited government. Such exemptions, each of which may only benefit a small number of people, have the cumulative effect of diminishing the tax base, making it more difficult to achieve fair taxes for everyone, and places the tax burden on an ever-shrinking number of people.
This is not merely a rhetorical or theoretical claim. The Comptroller is statutorily required to report on "the value of each exemption, exclusion, discount, deduction, special accounting method, credit, refund and special appraisal available to payers of Texas’ sales, franchise, motor vehicle sales and gasoline taxes, as well as property taxes levied by Texas school districts." As of this February, the comptroller estimates that in 2017 "aggregate exemptions for these revenue sources will total an estimated $55.5 billion. Of this amount, the exemptions related to the state taxes included in this report will account for $43.7 billion; school property tax exemptions will account for the remaining $11.8 billion."
Little by little these exemptions pile one upon another leaving fewer people carrying the full freight of the cost of government and in some cases crashing local government budgets which has led to requests for the legislature to back-fill those budgets.
To more fully understand the unintended consequences that result from special tax exemptions, consider the example of SB 1368 from the 84th Legislature. To describe the situation, here is the bill author's statement of intent:
"The State of Texas enacted property tax exemptions for fully disabled veterans (H.B. 3613, 81st Legislature, Regular Session, 2009) and subsequently their surviving spouse (S.B. 516, 82nd Legislature, Regular Session, 2011) on property claimed as their homestead. The legislation had unintended consequences for cities and counties located near or around major military installations in the form of major revenue losses. These communities and counties are unique in that they have traditionally had concentrated numbers of disabled veterans make these areas their home after separating from the military. The final result of the revenue shortfalls experienced by the affected local governments has been a reduction in overall services and elimination of personnel."
The lesson here is clear; crafting public policy, especially tax policy, that creates special benefits for a sympathetic class of people leads to foreseeable and undesirable unintended consequences. It may feel good to pass bills that appeal to our compassion for a sympathetic class but the larger public policy impacts are not worth the momentary good feelings created by passing such bills.
We support a tax system that is low rate, broad based, and treats everyone equally. For these reasons we oppose SB 15.