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Proposition 2: Property Tax Exemption for Child-Care Facilities

Proposition 2 would authorize counties and cities to grant a partial or 100 percent property tax exemption for child-care facilities.

A 2021 report by the U.S. Chamber of Commerce Foundation looked at child-care in Texas found that the average Texas family paying for child-care pays $611 a month, although prices vary greatly depending on variables such as geographic area. According to the report, worker absenteeism caused by the lack of affordable child-care and associated inefficiencies cost the state an estimated $4.7 billion per year, although the COVID-19 pandemic may have exacerbated that. The report stated:

Texas is one of the fastest growing states in the nation and among the Best States for Job Opportunities according to US News. Having a dynamic and competitive labor force increases the incentive to focus on supporting childcare efforts in the state. As the population increases, finding and affording childcare will become an even larger issue for parents that are eager to enter the workforce. Without suitable childcare options, many Texans will be forced to exit the workforce, which has negative financial impacts on their household and limits the talent pool available to businesses in an already competitive labor environment.iii

The state should always be looking to lower its relatively high property tax burden, even though it has made significant strides on that subject since 2019. The method for delivering that relief, however, matters a great deal. Ideally, property tax relief should be broad-based. Often, property tax relief will understandably be afforded to a small population with unique circumstances (e.g., totally disabled veterans). But exempting an entire industry from property taxes and mandating that those savings be passed through to renters (as provided by the enabling legislation) is questionable policy. There is no shortage of industries that have been hurt by changing economic conditions (whether related to COVID-19 or not), and they cannot all be exempted from property taxes.

Additionally, research has continually found that burdensome and unnecessary regulations drive up the cost of childcare.iv v As recently as 2019 Texas enacted SB 568 (86R) into law which imposed new regulatory requirements on child-care providers. While this legislation was well-intended and aimed at protecting the safety of children, it undoubtedly contained provisions that increase costs for child-care providers. The state should study regulatory mandates that could be rolled back and provide these recommendations to state policymakers. It is possible that repealing regulatory requirements would decrease costs and increase the availability of childcare. This would be a preferable approach to simply exempting the entire child-care industry from property taxation and thereby shifting more of the property tax burden onto homeowners and other businesses.

Consider, for example, a family who chooses to have one parent stay at home with their pre-school children. If they own their home, they will pay property taxes on that home, while families who choose to send their children to child-care will benefit, albeit indirectly, from the total property tax exemption that Proposition 3 would provide. The Cato Institute expounds on this argument:

Why should government act to incentivize greater parental attachment to the labor market through child‐​care subsidies but not, say, incentivize French teachers to train to work on Wall Street or as engineers? If failing to reach your labor market potential is a cause for intervention, then what about subsidies to other groups, such able‐​bodied retirees or non‐​working partners in single parent households with no children? If child‐​care costs are too high to allow parents to be as productive as possible, then what about out‐​of‐​pocket housing, transport or training costs that prevent other people from working where they would be most productive? Once you think about it, the idea that the role of government is to maximize labor force attachment and recorded productivity is bizarre – with huge implications that justify a whole host of new interventions.

While property tax relief is a worthy goal, Proposition 2 errs in conferring relief narrowly on child-care providers. Proposition 4, which is also on the ballot, provides broad property tax relief to homeowners and businesses, and is the superior approach.


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