(Newswire.net — July 2, 2020) —
The government-appraised value of my friends’ home was due to go up 10.7% this year, which, if the tax rates for the school district, county and other taxing public entities held steady, would mean a tax hike of hundreds of dollars.
In the eight years he has lived in Texas since moving from California, this was the largest appraisal increase yet—they’d averaged 4.8% in the previous five years. While California has high income taxes and sales taxes, its property taxes are held down by Proposition 13, passed in 1978, which limits the annual increases in a home’s assessed value to 2% per year based on the sales price of the property. The tax rates are limited as well, generally to 1% of the property’s value.
While Texas state government has done a decent job over the years in limiting spending growth to around population and inflation, especially compared to other states, this hasn’t been the case at the local level. Local governments in Texas—counties, cities, school districts and some others like municipal utility districts and hospital districts—raise and spend more than half of government expenditures in Texas excluding federal dollars. This means local government spending habits have an outsized role in the state’s tax climate.
Local Texas government’s greater relative size led my friend to compare the growth in local government in the two most-populous states, the one he left and his new home. To his surprise, Lone Star local government is growing every bit as fast as its Golden State cousin, according to U.S. Census Bureau data from the most recent 10 years reported, after accounting for population and inflation.
Fortunately, if Texas property owners believe their government appraisals are too high, they can protest them—though the tiny percentage who do usually hire someone for the task. My friend filed a protest, received his date and time to appear, and, having taken a vacation day, trooped down to his county’s all-volunteer Appraisal Review Board.
One of the property owners who appeared before his used his allotted five minutes to complain about potholes and property taxes—forbidden topics in a proceeding to be focused solely on the presenting evidence regarding the value of your property. He became frustrated and, as he raised his voice, a peace officer was called from the waiting room to stand watch.
Even so, the man came away with a modest downward adjustment to his home’s appraisal. He wasn’t fully satisfied, but he’ll be paying a little less in property taxes and hundreds of thousands of his neighbors who didn’t protest could be paying a little more as a result.
My friend then presented his case, citing as evidence both past appraisal increases as well as presenting information from the real estate site Zillow as to his home’s estimated value, as well as that of other homes in his area. My friend suggested a 5.6% increase in value instead.
The review board members then turned to the county appraiser who immediately posted a comparable sales report for my friends’ home. He suggested an appraised value hike of 5.5%.
And, like that, my friend “won” his protest.
As my friend traversed the winding country roads back to his house, he began to realize that the property tax system was indeed working as intended—but not in a good way. Rather, by dividing the property tax system in two—appraisals on one side, which can be protested, and tax rates on the other side, which can’t be, except at the ballot box for the officials who set them—the system was designed to ensure it could only be resisted rarely and with great effort. This is because those taxpayers who are most concerned about taxes are the same taxpayers who are most likely to file a protest over their property appraisals and then go get Texas Property Tax Loans as a result.
And since these individual property owners—and likely a large share of corporate property owners backed up by platoons of accountants and tax attorneys—frequently earn relief, they remain more or less satisfied with the system. They pay less. Their neighbors pay more. And most importantly, they lose their initiative to push for any sort of a tax rate rollback election (which require the circulation of petitions to qualify for the ballot) or challenge spendthrift local officials who keep raising property taxes.
Fortunately, Texas’ 2019 recently concluded legislative session saw the passage of Senate Bill 2 by state Sen. Paul Bettencourt (R-Houston). SB 2 limits local government to 3.5% per year annual revenue growth, excluding the value of new development, without a vote of the people. If local government want to hike spending above the 3.5% limit, they can, but there must be an approving vote. The exception is school districts, which have a limit of 2.5%.
Had this law been in place for the past decade, Texas’ local government growth would have been in line with state government—and far less than the explosive growth it has seen that put it in the same league as California.
SB 2 largely reins in Texas’ out-of-control property tax system. Gov. Greg Abbott, Lt. Gov. Dan Patrick, House Speaker Dennis Bonnen and the lawmakers from both parties who supported the bill deserve praise for a passing a sorely needed property tax reform.