The three key players in the Texas property tax system include the appraisal districts, tax entities, and politicians in the legislature. Rising property taxes have been a source of frustration and discomfort to many Texas businesses and homeowners. However, each of the parties in the process assigns blame to others for rising property taxes.
Property taxes are basically calculated by multiplying the market value set by the appraisal district times the tax rate. The calculation is slightly more complicated because of exemptions, particularly for homeowners.
Texas legislators take the position that they had no control over the tax assessment set by the appraisal district or the tax rate set by the tax entities. While this is strictly correct, the Texas legislator in the Texas Comptroller had been responsible for encouraging Texas appraisal districts to increase property tax values over the last 20 years. In practice, members of the legislature blame the appraisal districts and the tax entities for the tax increases.
When property tax assessments increase more than the combination of population growth and inflation, it seems appropriate that tax entities would reduce the tax rate so that the growth in taxes does not exceed the combination of population growth and inflation. However, the reality is that tax entities leave the tax values flat during times when the level of assessments are growing rapidly. This is one of the key factors that leads to substantial growth in Texas property taxes. In practice, the tax entities have more control with regard to limiting the growth in property taxes that you have the Texas legislature or the tax appraisal districts.
Texas appraisal districts take the position that they are simply accurately valuing property and equitably spreading the tax roll. This is the role they had been assigned by the Texas Legislature. While the Texas Comptroller’s ratio study supports the position that they are consistently valuing both commercial and residential property, the reality is that commercial properties are assessed at about 60 to 70 percent of market value and single-family homes are assessed at approximately 100 perent of market value. This creates a substantial disparity between the level of taxation for commercial property owners and homeowners. In fact, it also leads to homeowners subsidizing taxation of commercial property owners.
In summary, the Texas legislature has given assigned responsibilities to both the tax entities and to the appraisal districts. However the tax entities typically elect the option which maximizes tax revenues and the appraisal district elects an option which minimizes their workload by reducing the intensity of protests by commercial property owners. In fairness to the appraisal districts, it is also easier to accurately assess homogeneous homes than it is to accurately assess commercial properties which have substantial differences from property to property.