Taxing Credibility

We have had a lot of discussion about our tax rates recently. Most of us have either seen or heard about this sign. We know we have a high tax rate, but how much impact does that really have?

When the San Angelo city government wants to get a feel for where it fits in, it normally uses a set of benchmark cities. They do this when comparing wages, recreation facilities, housing, unemployment, etc. so it is only fair we use these benchmark cities to compare city taxes. These cities are usually Abilene, Midland, Odessa, and Wichita Falls. You can find their tax rates (and utility rates) on the Texas Municipal League site. If you look at the numbers you will see we are significantly higher than any of our benchmark cities. (A comparison from high to low for cities over 50k is here.)

The closest benchmark city to us tax wise is Odessa at $.679 per $100.00 which is $.176 (20%) lower than our rate of $.855. Midland is $.213 lower. Abilene is $.2195 lower. Wichita Falls is $.2654 lower, a difference of just over 30%. There are differences such as the amount of taxable valuation of each city, but that doesn't explain all of the differences. It doesn't explain how Odessa, with a slightly larger population and slightly less taxable property can have a tax rate that is 20% less than San Angelo.

Tax rates do affect the decisions of businesses that want to locate here. If a company wants to build a $10 million facility, you can be sure that taxes will be factored in as an operational cost. Everything else being equal (which it never is) a company can save $17,600.00 per year by building in Odessa instead of here. They could save $26,254.00 by building in Wichita falls. They save even more ($56,788.00) by locating in Amarillo or at the extreme, they could save $61,662.50 by locating in Tyler, the lowest property taxed city in Texas. Those savings are the equivalent of 1 to 2 jobs.

The point is that we really must figure out why our taxes are so high, and how to lower them. When a major company locates here, our taxes cost them the equivalent of at least 1 job. Incentives can help for the short term, but if the company is here for the long haul our taxes will hurt their ability to add jobs.