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Property Tax Shell Game, Affect Local Property Taxes

Texas is the most populous state in both area and population. One of the most fundamental rationale why businesses and folks are encouraged to move to Texas is our low taxes and, of course, no income tax. Even though the overall tax burden is low in Texas, there may be one tax that has normally drawn probably the most complaints from Texans: the property tax.

An investigation on Texas Taxes:

A statewide ballot of last year found the property tax was the most unpopular of the predominant state and local taxes with 54 percent announcing they had been “dissatisfied” with the amount of property taxes Texans pay.

Last year, Dan Patrick, Lieutenant Governor of Texas, appointed a special Senate committee to examine property taxes in Texas and make recommendations for reforming and reducing property taxes. The committee has spent majority of this year holding proceedings in cities all across the state.

According to State Comptroller, about 55 percent of income from property charges goes to school districts. Cities only collect about 16 percent of property taxes.

But the United States Senate committee has refused to consider or even discuss ways to reduce property taxes and they have pretty much ignored the quickest growing category of property fees, which is taxes raised by the more than 2,000 special purpose taxing districts created by the legislature.

Rather focusing on the real causes of increase in Texas taxes, Patrick and the chair of the Senate committee, Sen. Paul Bettencourt of Houston, have made it clear they want to enforce statewide restrictions on city property charges and effectively put a state cap on the total annual budgets of all Texas cities.

Because their suggested solution does not address the real cause of property tax increases, it will not furnish a support on property tax reductions. The average property tax owner in San Antonio would have seen a reduction in city taxes of only $44 per year – or $3.67 per month, if a 4 percent cap had been in effect.

Outcomes of deceptive information

Typically the Senate committee has already been a font of deceiving information about city taxes. Earlier this year, Sen. Bettencourt wrote in a column just for this paper: “In San Antonio between 2005 and 2014, city taxes levies have raised 55 percent, while median household income has grown only 22 percent.” That declaration is true on the face but the comparison is misleading. “City tax levies” refers to the total amount of taxes on all property in metropolis and that amount increases from year to year as the population grows, as new areas are adjoin into the town and as new construction adds more homes and buildings to the taxes rolls.

Nevertheless, Sen. Bettencourt carried his misleading comparison to the extreme by writing: “In other words, an average family faces a tax bill that is increasing 2.5 times as fast as income.” That authorize as “pants on fire.” Every time a new office building is constructed in San Antonio and begins paying city property charges, it increases the total amount of taxes levied and collected by the city but it does not raise the tax bill of the average family or any other family.

These kinds of attempts to mislead and scare taxpayers about the tax bills on their homes just distracts us all and legislators from the real problem which is the way Texas is determined by property taxes to pay for public education.

The particular state legislature depends upon senior high school property taxes to reduce the amount of state funds it has to dedicate to schools. Under the state’s “Robin Hood” school financing scheme, 230 school zones were required to send part of their local property fee receipts to the state treasury this year.

But when the Legislature is using local school property taxes to balance the state budget, it explains why state lawmakers want to divert public attention from the school finance system and try to blame Texas cities for high tax rate. Enforcing a statewide cap on city budgets will not puzzle out the situation of high property fees and it will instead produce other serious problems.

General public safety – police, fire and EMS – is the largest item in every city’s budget. The cap would prevent metropolitan areas from hiring additional personnel, raising salaries and benefits, acquiring new-technology (like body cameras) or dealing with underfunded pension systems. It would also make our traffic problems even worse by limiting the money cities voluntarily contribute to state highway construction projects which amounts to well over $100 million per annum.

Decisions about city taxes and city budgets should continue to be made by local voters and their locally chosen officials. Taxpayers in Texas would be better served if state legislatures focused their efforts on their own budget.

Impression on local taxes:

The particular Senate selects Committee on Property Tax Reform and Relief recently issued the interim document on property taxes and the property tax approach. The committee was charged through Lieutenant Governor, Dan Patrick to study the property fee process, and provide you with options to reduce tax burden on property owners.

Senate Bill 2, which grew out of the record, would limit the amount by which local governments could raise property fees to 4 percent each and every year. The growth limit is currently 8 percent. If the increase goes above 8 percent, citizens can petition for a rollback election.

SB 2 was filed by Sen. Paul Bettencourt of Houston, who chaired the property tax reform committee, which conducted 8 hearings in seven cities. In line with the committee report, tax appraisals have risen in Texas’ major metropolitan centers far faster than consumer income. SB 2 comprises significant changes to appraisal district oversight. Appraisal districts would be required to use a manual provided by the Texas Comptroller.

Blog Author

Patrick O’Connor, MAI, Owner and President
Patrick O’Connor has been active in reducing property taxes, providing expert witness testimony and appraising commercial real estate property since 1983. Pat is active in publishing analyses and data with respect to the real estate market, while being a highly regarded media spokesperson for the real estate community. He holds a MAI, the highest achievable designation from the Appraisal Institute, and is a licensed senior property tax consultant. Pat earned a Master of Business Administration from Harvard University. In 2001, he authored the first definitive consumer guide to Texas property taxes, Cut Your Texas Property Taxes.

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