Running head: PROPERTY TAX 1 Property Tax Student’s Name Institutional Affiliation PROPERTY TAX 2 Budget Increase or Decrease Executive Summary Local or city budgets are created every fiscal year to project the revenues and expenditures for the municipality. From time to time, changes are made in the budget of the county or municipality. These changes are aimed at generating more revenues and investing expenditures in projects that are supposed to create enhanced welfare for the people. Most of the projects are infrastructural in nature, although some of the expenditures are used to address the needs of the people and avert any disasters or emergency events that may take place. The report is written to the County Executive of Travis County. Travis County is a county in Texas that has an estimated population of just over one million people the seat of the county is in Austin which also happens to be the biggest city in the state of Texas. The report is addressed to Loretta Farb, who is one of the main financial executives in the county. Several aspects of the budget of Travis County can be modified to change the revenue collection or change the level of expenditure that is on the current budget. The item that I identified that could be changed is the property tax. Property tax refers to a type of tax that is leveled on real-estate properties (Howell, 2017). Normally, the tax is considered to be a regressive tax with cheaper real estate properties being taxed at a higher rate in comparison with bigger and more expensive real-estate properties. Currently, the property tax rate in Travis County is 3.37 percent more than the effective tax rate, which is applicable. Comparing the tax rate with other counties across the country reveals that real estate properties in the county are taxed at a lower rate compared to other properties in the country. The need for increasing the property tax in Travis is not only to make it be at par with other counties but also to generate more revenues for the county. Property tax is calculated on PROPERTY TAX 3 the value of the property that has been constructed, including the land. An increase in the property tax in the county would be aimed at increasing the revenue collection since the county has in the past had a deficit in its budget. Such an increase in the property tax is also appropriate since the value of property in the county is estimated to increase from $171 billion to $189 billion in 2019 (Buchanan, 2019). This is an increase of more than $18 billion that has previously not been subjected to taxation. Taxing such properties would see an increase in the revenue collection, which could help meet the ever-increasing expenditure needs of the county. The proposed property tax change could have significant effects or implications. First, such a change may not be welcome by many real estate investors and other stakeholders within the real estate industry. This is mainly because it could push the cost of real-estate properties and this could reduce the demand for housing and other real-estate needs in the county. They could also oppose the move since it would seem unfair by the county to only increase property taxes and not consider increasing other taxes across various industries in the region. Another impact of the increased property tax is that housing could become more expensive. When real-estate properties are taxed at a higher rate, residents may find it difficult to afford proper housing. As earlier mentioned, property tax is a regressive tax meaning that poor could find it difficult to afford housing the county. Despite the cons associated with the change in the property tax, there could be huge benefits that could be received by the locality. First, more revenues would be raised by the county government. Increased revenues for any level of government is desirable since it offers an indication that government projects can be pursued using the funds that have been collected. There are many welfare projects that could benefit from the increased revenues from taxation, meaning that people living impoverished lives in the locality would benefit from a great deal. PROPERTY TAX 4 Creating or enhancing the welfare of the people in society is a major goal for the county, and thereby the proposed increase in property tax should be pursued by the county as it would create the greatest benefits for all the stakeholders who are involved. The proposed change also has several short-term and long-term impacts. One of the short-term impacts is that there could be a lot of criticism that could be direct to the executive committee of the county, which has come up with the change. Such criticism may even appear in the media with stakeholders in the real estate industry, suggesting that the proposal would affect the cost of housing and that of doing business for many companies in the region. Businesses rent premises and thereby are bound to be affected by the property tax since real-estate developers could increase the cost of land rates and rent. Another short-term effect is that there would be an increase in the revenues that are collected from property taxes. Such an increase is welcome and could offer an indication of the increased value of properties in the county. A recommendation that could be sought in light of the issues that could be observed in the short-term and long-term is to ensure that the property tax increase is not applied for realestate properties that are meant for low-income households. Whenever there is a proposal to increase the taxes in a community, it is always advisable to consider lenient measures in regards to taxation for low-income households. If the property tax is applied even on houses and properties that are meant for this population, the level of poverty in the county will increase, and this is not tenable for any community. As a result, the executive committee in the county must be careful when implementing the new change. If such a consideration is not made, there is a great likelihood that homelessness could increase in the county due to inability by low-income households to afford housing within the region. An increase in homelessness is not desirable since this could have a negative impact on the health and welfare of the people across the county. PROPERTY TAX 5 Long-term effects could also be observed due to the proposed change in property taxes. First, there would be an increase in the cost of real estate properties in the country. Such an increase would happen since real-estate developers would push the cost of the increased taxation to the final consumers who purchase different properties. Secondly, the county could have more revenue collections from taxes. These revenues could be used in various projects at the community level. Some of the projects that could benefit are welfare projects and cheaper housing projects that are being pursued by the county. Housing has been a huge issue, and thereby, these funds could be used to create better housing for people living impoverished lives in the county. Other welfare projects could also benefit through the increase in revenues that will be collected by the local authorities. These funds could also be used to improve other infrastructural resources such as roads and improving the security in neighborhoods. These factors would enhance the welfare of the people. PROPERTY TAX 6 References Buchanan, T. J. (2019, August 9. $1.07 billion Travis County budget draft for FY 2018-19 discussed at public hearing Thursday. Retrieved from https://communityimpact.com/guides/austin/southwest-austin/news/citycounty/2018/08/09/1-07-billion-travis-county-budget-draft-for-fy-2018-19-discussed-atpublic-hearing-thursday/ Howell, J. D. (2017). Property taxes. St. Paul, Minnesota: West Group.
Purchase answer to see full attachment