Analysis: Property tax relief doesn’t equal extra money in your pocket
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Beware of government officials promising property tax benefits. Be sure to check their math. Ask about the effective dates.
Don’t expect to get any promises in writing.
The Texas Legislature is touting a bill — Senate Bill 2 — that would make it easier for property owners to protest big tax increases from cities, counties and special districts.
The Senate’s version of the property tax bill would require automatic rollback elections if a local government’s overall taxes go up more than 5 percent in a year. The House would allow voters to petition for rollback elections for anything over 5 percent, but wouldn’t make the elections automatic.
Current law puts the rollback rate at 8 percent, and the elections are held only in case of petitions.
Tax rollback elections are relatively rare in Texas. The officials who set the rates are sensitive to voter anger. It’s hard to pull a rollback petition together; the laws conspire against hell-raisers. And most of the time, taxes don’t go up that much anyway. In the state’s 38 largest counties, effective tax rates rose 0.7 percent in 2016, 3.2 percent in 2015 and 3.1 percent in 2014, according to the Texas Conference of Urban Counties. About 85 percent of Texans live in those 38 counties, according to that association.
Patrick said this week that the bill, which doesn’t set property tax rates, would cut the average homeowner’s property tax bill by $20,856 dollars over 20 years.
Don’t spend that money yet.
State promises of property tax relief tend to evaporate. Look in your wallet for the $126 in touted average savings you stashed there the last time lawmakers fiddled with property taxes, and the $2,000 boasted average savings you were supposed to get after major school tax reforms in 2006.
Taxpayers did get some relief, whether they felt it or not, from those efforts. But the savings were mostly eaten up by increasing property values and local school property tax increases driven, in large measure, by the Texas Legislature’s cuts in per-student spending on public education.
The claims are thinner this time. The $20,000 estimated savings for the average Texas homeowner from the current property tax bill is based on two unproven assumptions: That local taxes are growing 8 percent per year, the highest rate allowed before a rollback election can be called; and that if the law passes, they’ll rise 5 percent per year, the new maximum.
It’s not impossible, but it’s highly unlikely.
That doesn’t include school taxes, which aren’t covered by the legislation. Another piece of legislation could actually get some relief to taxpayers in some school districts — “relief” in this case actually means lower taxes — but it’s stuck.
Districts with tax rates above $1.04 per $100 of assessed property value cannot raise the rates without voter permission. And if they temporarily lower tax rates in good times, they can’t return to their previous, higher rates without automatic elections.
As a result, many skip the temporary tax cuts, bank the extra money and use it later. Plano ISD is a prominent example; that district decided not to give its voters a temporary 3.8-cent tax cut — that’s about $113 per year for the average Plano taxpayer — because of uncertainty about whether the district would be able to get the higher rate back when it would need it later.
The stuck legislation, House Bill 486, would let districts return to their old rates without new elections. It passed in the House and is mired now in the Senate.
The state has one guaranteed way to make local property taxes fall and rise: It can spend more money on public education. Since that 2006 school finance reform, the state’s spending has dropped by $339 per student. Local districts and the state used to each cover 45 percent of the cost; now it’s 52 percent local and 38 percent state, according to the Legislative Budget Board (federal government spending accounts for the rest).
House Speaker Joe Straus pointed to that during a public back-and-forth with Patrick over property taxes this week. “We approved House Bill 21 to address the major cause of rising property-tax bills: local school taxes,” he said in a written statement. “As it passed the House, this legislation would begin to reduce our reliance on local property taxes in funding education. Nobody can claim to be serious about property-tax relief while consistently reducing the state’s share of education funding.”
Sure they can; politicians claim all kinds of stuff. But don’t spend the money until they put it in your hand.
More columns from Ross Ramsey:
- Amid rumors of a special session, Lt. Gov. Dan Patrick put out a short list of bills he wants the House to pass if he's going to let the Senate advance must-pass legislation. And he appears to have the upper hand in the last days of the session.
- Rumors of a special session are a normal feature in the last days of a regular session. There's no emergency that would force a special session, but don't discount the Texas Legislature's ability to force one by failing to finish its work.
- The House left an important bill in a dangerous spot, lost it, and might have created an advantage for their institutional rivals on the other end of the Texas Capitol.
Disclosure: The Texas Conference of Urban Counties has been a financial supporter of The Texas Tribune.