Real Property Tax and Education Reform

I believe I have received more feedback to last week's update about the need for property tax reform than I have ever received for any other update.

I wrote that high property taxes discourage home owners to keep smaller houses and not buy or build new houses. However, I received feedback which was quick to point out that this tax also serves to disincentivize homeowners from improving their current homes.

Reducing the property tax assessment cap from 5% to 3% or 1% would be a common sense reform which should occur sooner than later. However, in order to realize true property tax reform and provide Oklahoma students with better education opportunities, Oklahoma policy makers must take aggressive action to reform a system that has not worked well for many years.

Each year, approximately 85% of property tax revenue goes to common and career tech educational entities. This is in addition to the billions of dollars that are either appropriated by the state or supplied by federal or dedicated revenue funds each year. In fact, the Oklahoma Council of Public affairs has indicated that Oklahomans spend over 10 thousand dollars each year per student. However, despite the billions of dollars spent each year, the test scores of Oklahoma public education students have failed to improve in any significant manner.

One of the respondents to last week's update told me that she lives in a house which she built with her dad. The house took them several years to build but they built it without going into debt. She is now paying hundreds of dollars each year in property taxes, so that she does not want to make improvements to the site for fear of increased property tax premiums. But she does not want to move out of the house for sentimental reasons.

This person is a homeschooler and because she wants to focus on her children's education, she chooses not to work outside the home. She states that the property tax is a killer on their one-income budget. For each child that is being homeschooled, taxpayers are probably being saved about $10K per year.

Her story demonstrates the need for true reform. Here is how it would work. The public education system could realize massive cost savings if state government would encourage people to participate in private and homeschool education through the provision of a property tax refund which is often proposed at $4,000 per year. As more and more people participated in these educational alternatives, the thousands of dollars of net cost savings to the government could be applied to property tax reform for everyone and may even be significant enough to allow for true reforms, such as restructuring the property tax so that it would apply only when a property is sold.

The impact on the public education system would be tremendous because a good deal of the work load and pressure would be taken off the public school system. And this new system would encourage market forces to provide educational solutions because any number of private entities would be forced to compete for education dollars. This would be possible because the citizens would now be empowered to control their own money instead of turning it over to the government each year.