Session is Half-Over and Still No Property Tax Relief…Yet

By Vance Ginn, Ph.D.|March 14, 2019

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Monday, March 18 marks the halfway point of the 86th Texas Legislature—a session that began with unprecedented accord among leadership and high hopes for some relief from the skyrocketing property tax burden that drives too many Texans from their homes and businesses each year.

But midway through, there’s little sign of assured tax reform, and none at all of permanent tax relief.

The Legislature still has time to achieve both of these goals—if it will stand up to the lobbyists of the local governments (paid for with taxpayer funds) who want to preserve their ability to raise their revenues with little accountability.

Real reform and relief are what Texans want—and need.

A recent poll conducted for the Texas Public Policy Foundation by WPAi shows seven out of ten Texans say “property taxes are a major burden for them and their family.” And fully 65 percent say they support a plan that provides real tax cuts to just 46 percent who support only slowing the growth year after year.

The Legislature’s first efforts were encouraging. Senate Bill 2 (and its companion, House Bill 2) provided significant property tax reform. SB 2, authored by state Sen. Paul Bettencourt, R-Houston, would have lowered the rollback rate (the level local governments can raise revenues without allowing voters to petition for a rollback election) from 8 percent to 2.5 percent, and made an election (now called a ratification election) automatic, instead of petition-enabled.

Predictably, local governments came out in full force against the bills, claiming that public safety would suffer and municipal services would be cut. This, of course, is a specious claim.

There’s no spending cut in either bill, and there’s no “cap,” either.

In SB 2, local governments can raise taxes all they want—well above the 2.5 percent trigger, as long as they get voter approval, and the tax base includes only existing property. Those elected officials who so vehemently oppose the bills should explain why they don’t trust their voters. And if they counter that voters won’t approve tax hikes, well, shouldn’t that tell them something?

Though SB 2 fails to provide real tax relief, it’s a good start to protect taxpayers.  Yet it still hasn’t made it to the Senate floor. The heavy tax burden is hurting Texans. Austin, in the vanguard of rising property taxes, has seen landmark restaurants close and people lose their homes and even leave the city over taxes.

Statewide, property tax increases have greatly outpaced the average taxpayer’s ability to pay. From 2012 to 2017, local property tax revenues soared by almost 40 percent across the entire state, according to the Comptroller’s Biennial Property Tax Report. That’s well above population growth and inflation increases, which rose just 15.3 percent.

Newer bills seem to provide some relief.

Senate Bill 5, also by Bettencourt, would increase homestead exemptions for school property taxes from $25,000 to $35,000 for tax relief amount of $1.2 billion. But the truth is that any relief in that bill would be limited and temporary. It wouldn’t apply to the small businesses that are the backbone of the Texas economy. And relief for homeowners would quickly be gobbled up by higher appraisals.

We’ve seen it before. The 75th Texas Legislature attempted to reduce the rising property tax in 1997 by increasing the homestead exemption for school district property taxes by $10,000. The total tax relief package was estimated at $1 billion. However, it resulted in little to no effect as school district property taxes increased by nearly $1 billion and total property taxes increased $1.4 billion the year after implementation and continued rising thereafter. A similar scenario happened when the 84th Legislature last raised the homestead exemption by $10,000 to $25,000.

House Bill 3, by Rep. Dan Huberty (R—Kingwood), included a 4-cent property tax compression in the big school finance bill for tax relief of $2.7 billion. However, like SB 5, this measure would also be quickly washed out from higher appraisals.

Instead of these likely temporary property tax relief measures, the Legislature has an opportunity to provide meaningful, lasting relief.

The Texas Public Policy Foundation has a plan to truly cut property taxes and lessen the burden.

It involves three necessary components: we must limit spending, impose revenue triggers, and we must work toward eliminating the maintenance and operations portion of Texas public school property taxes—the biggest portion of your tax bill. Further, the TPPF plan achieves these goals without making cuts to critical priorities like public education and safety.

If we fail to provide real relief, we’ll simply be adding to the list of attempts that have fallen short for Texas families. But if lawmakers rise to the challenge now, and side with families over lobbyists for local governments, we can allow Texans to prosper as never before.

Session is Half-Over and Still No Property Tax Relief…Yet

Session is Half-Over and Still No Property Tax Relief…Yet

Share

Monday, March 18 marks the halfway point of the 86th Texas Legislature—a session that began with unprecedented accord among leadership and high hopes for some relief from the skyrocketing property tax burden that drives too many Texans from their homes and businesses each year.

But midway through, there’s little sign of assured tax reform, and none at all of permanent tax relief.

The Legislature still has time to achieve both of these goals—if it will stand up to the lobbyists of the local governments (paid for with taxpayer funds) who want to preserve their ability to raise their revenues with little accountability.

Real reform and relief are what Texans want—and need.

A recent poll conducted for the Texas Public Policy Foundation by WPAi shows seven out of ten Texans say “property taxes are a major burden for them and their family.” And fully 65 percent say they support a plan that provides real tax cuts to just 46 percent who support only slowing the growth year after year.

The Legislature’s first efforts were encouraging. Senate Bill 2 (and its companion, House Bill 2) provided significant property tax reform. SB 2, authored by state Sen. Paul Bettencourt, R-Houston, would have lowered the rollback rate (the level local governments can raise revenues without allowing voters to petition for a rollback election) from 8 percent to 2.5 percent, and made an election (now called a ratification election) automatic, instead of petition-enabled.

Predictably, local governments came out in full force against the bills, claiming that public safety would suffer and municipal services would be cut. This, of course, is a specious claim.

There’s no spending cut in either bill, and there’s no “cap,” either.

In SB 2, local governments can raise taxes all they want—well above the 2.5 percent trigger, as long as they get voter approval, and the tax base includes only existing property. Those elected officials who so vehemently oppose the bills should explain why they don’t trust their voters. And if they counter that voters won’t approve tax hikes, well, shouldn’t that tell them something?

Though SB 2 fails to provide real tax relief, it’s a good start to protect taxpayers.  Yet it still hasn’t made it to the Senate floor. The heavy tax burden is hurting Texans. Austin, in the vanguard of rising property taxes, has seen landmark restaurants close and people lose their homes and even leave the city over taxes.

Statewide, property tax increases have greatly outpaced the average taxpayer’s ability to pay. From 2012 to 2017, local property tax revenues soared by almost 40 percent across the entire state, according to the Comptroller’s Biennial Property Tax Report. That’s well above population growth and inflation increases, which rose just 15.3 percent.

Newer bills seem to provide some relief.

Senate Bill 5, also by Bettencourt, would increase homestead exemptions for school property taxes from $25,000 to $35,000 for tax relief amount of $1.2 billion. But the truth is that any relief in that bill would be limited and temporary. It wouldn’t apply to the small businesses that are the backbone of the Texas economy. And relief for homeowners would quickly be gobbled up by higher appraisals.

We’ve seen it before. The 75th Texas Legislature attempted to reduce the rising property tax in 1997 by increasing the homestead exemption for school district property taxes by $10,000. The total tax relief package was estimated at $1 billion. However, it resulted in little to no effect as school district property taxes increased by nearly $1 billion and total property taxes increased $1.4 billion the year after implementation and continued rising thereafter. A similar scenario happened when the 84th Legislature last raised the homestead exemption by $10,000 to $25,000.

House Bill 3, by Rep. Dan Huberty (R—Kingwood), included a 4-cent property tax compression in the big school finance bill for tax relief of $2.7 billion. However, like SB 5, this measure would also be quickly washed out from higher appraisals.

Instead of these likely temporary property tax relief measures, the Legislature has an opportunity to provide meaningful, lasting relief.

The Texas Public Policy Foundation has a plan to truly cut property taxes and lessen the burden.

It involves three necessary components: we must limit spending, impose revenue triggers, and we must work toward eliminating the maintenance and operations portion of Texas public school property taxes—the biggest portion of your tax bill. Further, the TPPF plan achieves these goals without making cuts to critical priorities like public education and safety.

If we fail to provide real relief, we’ll simply be adding to the list of attempts that have fallen short for Texas families. But if lawmakers rise to the challenge now, and side with families over lobbyists for local governments, we can allow Texans to prosper as never before.