Ever wonder why Texas has a higher property tax than California, even though it is more expensive to live there? There is one big reason:
That’s because California is protected by a law that limits the annual tax rate increase. Currently, California only allows up to a 2% increase based on the value of the property. Meanwhile in Texas, property appraisals have reached 10%.
Annual Increase Limit
The current cap for the annual increase is 8%. If a taxing unit raises more than 8% of the property tax revenue of the previous year, voters can file a petition. This election can help roll back the increase.
But there are some taxing units such as community colleges that levy property taxes. They set the local tax rate.
With the Reformed Property Tax Code of Texas, the annual increase will be limited. Texas Governor Greg Abbott was in favor of this limit. In fact, he wished for a 2.5% cap, but it was amended to 3.5% which was approved by the House.
It wasn’t the number the governor wanted, but apparently, it was the closest he can get to his original plan. This was compared to what he got during the last session with the House.
Although the 3.5% property tax will not necessarily reduce the property taxes, it’s still beneficial to homeowners. This new bill will lower its maximum increase. In turn, it will make the process for property appraisal more transparent.
But it should also be noted that local taxing bodies can propose a higher tax rate. The only difference is it will take the vote of property owners to implement it.
This makes it easier for the people of Texas to be more involved with the process.
Hospital units and districts, as well as community colleges with the lowest rates, can call for a vote as well. But instead of the 3.5% cap, they should do it before surpassing their 8% revenue growth.
Importance to Taxpayers
Will this annual increase cap actually help Texan taxpayers?
Prior to the Reformed Property Tax Code of Texas, homeowners had no idea how property appraisals worked. Many are in fear of losing their homes because of high property tax. Through the new bill, the process will be more transparent.
The government will create an online database where property owners can see the rate changes. It will show the increase will affect their rate. Transparency also allows taxpayers to be more hands-on with the process.
They can take part in votes which will determine their property tax. An online form will also be easily accessible to the citizens. It’s now easier to have an opinion on the increase with this form.
Once they are more involved, they’ll feel more in control of what they pay the government.
Additionally, it allows them to appeal their property tax. Every taxpayer is allowed to do so, but not very many do. That’s because not many taxpayers are familiar with the ways of taxes.
The proposed limit of the annual increase in tax rate does not mean Texan taxpayers will have significantly lower tax rates. Yet compared to the current situation, people will have more control and will be more aware. In a place where they pay to live comfortably, it’s important that they are aware of what they’re paying for.
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