Tag Archives: texas property tax

In the rush of legislation filed before last week’s deadline, you wouldn’t be the only person who missed the measure proposing a 6.26 percent state sales tax rate. No reason you should have seen it or made note of it.

For one thing, it’s a teensy tax increase, at least on paper — at least for now. The state’s current sales tax rate is 6.25 percent, and local governments can add two cents on top of that rate. The increase to 6.26 percent is a placeholder in a proposed constitutional amendment — a place to put the real number when it’s available.

That number is in the possession of House Public Education Committee Chair Dan Huberty, R-Houston, who is talking to legislators about raising the state sales tax by a penny, to 7.25 percent (the new tax rate he’s waiting to propose), and pouring the money into public education. It wouldn’t be for new spending, but it would increase state spending enough to significantly lower local property taxes — the driving political force behind the state’s current legislative push for school finance reform.

A little change in your local property taxes, translated into statewide finance, takes a tremendous amount of money. But a 1-cent rate increase in sales taxes would produce a lot of money. The state collected $31.94 billion from sales taxes in the 2018 fiscal year, according to the Texas comptroller of public accounts; at that level of taxable sales, a 1-cent increase in the rate would bring in an extra $5.1 billion.

Local school districts, fueled by the local property taxes Texas voters hate so much, spent about $14.7 billion more than the state on public education in fiscal year 2018, according to the comptroller. The $5.1 billion from a 1-cent sales tax increase wouldn’t be enough to level that out, but it would sure make a dent.

Citing the comptroller’s numbers, one more time: The state currently covers 36 percent of the cost of public education, and the locals cover the other 64 percent; throwing $5.1 billion into the state column and lowering the local spending by the same amount would bring those closer to balance: about 46 percent state and 54 percent local.

That’s also enough — and here is where legislators might find the political payoff, if there is one — to finance a property tax cut that’s visible to homeowners. Huberty’s introductory House Bill 3 — commonly called the school finance bill — would cut property taxes by about $100 for the owner of a home with a taxable value of $250,000, according to the author and others.

He can do that with money that’s already in the state’s hands. His proposed tax swap would increase the size of the property tax cut and also provide money for public education in future years.

His proposed constitutional amendment would raise your sales taxes, but that same sample homeowner would get almost $500 in property tax cuts — in addition to the $100 in property tax cuts in the current school finance bill.

If the sales tax play is the one legislators choose, the issue will be in voters’ control before the end of the year, in ballot language something like this: “The constitutional amendment to provide funding for the cost of maintaining and operating the public school system and to reduce school district ad valorem tax rates through an increase in the state sales and use tax rate.”

Author: ROSS RAMSEY – The Texas Tribune

Texas Legislature 2019

The 86th Legislature runs from Jan. 8 to May 27. From the state budget to health care to education policy — and the politics behind it all — we focus on what Texans need to know about the biennial legislative session.

MORE IN THIS SERIES 

Last week, amid a flurry of votes on more than a dozen other issues, the Texas Senate passed its main measure addressing Gov. Greg Abbott‘s call to reform the laws related to property taxes.

On Wednesday, members of the House took a far more expansive approach, considering proposals ranging from the narrow (carving out a new exemption for Purple Heart recipients) to the explosive (abolishing school property taxes altogether).

And with only two weeks left in the special session, challenges remain in getting many of these proposals to Abbott’s desk.

Take House Bill 72. There was pushback Wednesday on the legislation, which would let voters decide whether Purple Heart recipients should get property tax exemptions. State Rep. Scott Sanford successfully amended the bill to only allow spouses married to Purple Heart recipients at the time of the soldier’s injury to receive the tax benefits.

“Because we have so many gold diggers looking for Purple Heart recipients?” state Rep. Nicole Collier, D-Fort Worth, cracked.

“We don’t want people to go shopping for tax exemptions,” answered Sanford, R-McKinney.

State Rep. Matt Schaefer had broader concerns with the bill, which he argued “gets into making value judgments about people’s service. And that’s an impossible task for this body.” The Tyler Republican also questioned what the cost would be to the cities who would lose property tax revenues from Purple Heart recipients’ properties. He then tried to amend the bill to extend the exemptions to the children of Purple Heart recipients.

State Rep. Dennis Bonnen, chair of the House Ways & Means Committee which deals with property tax proposals, ultimately withdrew the bill and a related resolution. He said he would bring them back to the floor on Friday.

“We don’t want to make a mockery of this bill,” the Angleton Republican said.

Bonnen fared better with his House Bill 32, which would overhaul several aspects of the property appraisal and notice processes in an attempt to help Texans better understand how property values and tax rates each contribute to their tax bills.

One of the key provisions would require local governments to announce a “no-new-revenue” tax rate each year and compare it to the rate they’re actually proposing. Taxpayers would get that information ahead of time so that they could intervene with local governments before the rates were finally set. The lower chamber gave initial approval to that bill Wednesday.

“This will be the most clear and simple process we’ve ever had in the area of property taxes,” Bonnen said.

That legislation is among dozens of property tax and appraisal bills the lower chamber is still working on as the special session heads into its second half.  On Tuesday, Bonnen’s Ways and Means Committee dramatically reworked Senate Bill 1, the Senate’s leading property tax bill, which could set up another battle between the chambers akin to the one that helped prompt this summer’s special session in the first place.

In the House version, SB 1 would require cities and counties to hold an election if they plan to increase their property tax revenues 6 percent, regardless of whether they are increasing the actual tax rate or just taking advantage of rising property values. The Senate had set that trigger at 4 percent. Patrick portrayed that version of the bill as something that would provide Texans with “dramatic reductions” in their property taxes.

“It will be the strongest tax reform and tax relief bill ever passed out,” Patrick said in an online video this week.

But the legislation is only poised to slow future tax increases by focusing on the amount of revenues local governments bring in from all existing land and buildings in their jurisdictions. Revenues – and individual tax bills – can rise with property values even if actual tax rates stay flat or are lowered.

During the regular session, Patrick said similar legislation would save the average Texas homeowner $20,000, a claim that fell apart under scrutiny.

Bonnen expressed concern that voters will mistakenly expect to see lower property tax bills if any version of SB 1 that becomes law.

“What’s frustrating is that SB1 doesn’t provide relief, it provides protection, and the last thing I want is property tax payers to believe that we are doing something to reduce or lower their tax burden. We’re not,” Bonnen said. “We don’t have the ability to do that, but what we do have is the ability to give it protections and transparency.”

But Bonnen’s Ways and Means Committee could face an impossible battle addressing education funding, which makes up the bulk of property tax bills in Texas. House education leaders have argued the Legislature cannot provide tax relief without addressing school funding. As the state pays a progressively smaller percentage of operating costs for public schools, school districts have had to raise their local property taxes to make up the funding.

The committee Wednesday afternoon considered legislation proposing ways to ultimately get rid of the local property tax altogether, in most cases replacing it with revenue from a higher sales tax. State Rep. Andrew Murr‘s House Bill 285 would increase state and local sales taxes enough to garner about $22 billion, enough to completely replace property tax revenue school districts collect to operate.

“It won’t happen in the special session,” the Junction Republican acknowledged.

State Rep. Drew Darby, R-San Angelo, went further: he proposed legislation recommending the complete elimination of the property taxes by school districts as a way, to pressure legislators into coming up with an alternative system.

“I don’t have the answers, but I know this Legislature relies too heavily on local property taxes to fund our schools, and we need more direction to go forward,” he said.

What would replace that funding in the meantime?

“This bill does not give us a plan,” Darby said.

By the end of the day, that committee was slated to have held hearings on 25 property tax bills in addition to the 18 it has already sent on to the House. More than 50 other bills have been referred to the committee.

SB 1 is the only property tax legislation passed from a Senate committee. Two others are pending in the upper chamber’s Select Committee on Government Reform. But Bonnen isn’t worried that the House is going to leave the Senate little time to consider what could become a bevy of bills headed its way as the special session nears its 30-day end. He pointed to how the Senate quickly passed measures addressing nearly all of of Abbott’s 20-item agenda in the first part of the session.

“The Senate has proven that it can move anything at lightning speed,” Bonnen said. “So they have more than enough time to do that.”

Read related Tribune coverage:

• The Texas Tribune wants to hear from Texans about how rising property tax rates are affecting them — and who should have the final say. [link]
• When state senators revive legislation on Saturday that could require voter approval of city and county property tax rates, lawmakers will also consider something new: limiting how much money local governments spend. [link]

Author:  BRANDON FORMBY, KIRBY WILSON AND ALIYYA SWABY

The Senate voted 18-12 in favor of bill that would require an election if a local government entity like a city or county wanted to increase some of its tax collections by 5 percent.

The Texas Senate on Tuesday approved a controversial bill that seeks to curb the growth in property taxes that local government agencies like cities and counties levy on landowners.

Senate Bill 2, which passed in an 18-12 vote, could require taxing entities to hold an election if the amount of operating and maintenance funds they plan to collect from property taxes is, in general, 5 percent more than what they took in the previous year.

State Sen. Paul Bettencourt’s bill has split scores of Texas homeowners and the local officials that they elect. Landowners and some government officials say the bill is needed to slow the increase in property tax bills they must pay every year.

Bettencourt, R-Houston, said from the Senate floor Tuesday that many homeowners are seeing increases of 8 percent to 10 percent in what they pay in property taxes each year. He said commercial property owners are repeatedly seeing 15 percent to 20 percent hikes.

“I for one don’t want to continue to climb the ladder above states like Illinois and New York,” Bettencourt said.

But many local and state officials say the Legislature is sidestepping the real issue that leads to rising tax bills: school districts levying more in property taxes because lawmakers won’t change the state’s system for funding education. State Sen. Lois Kolkhorst, R-Brenham, conceded that point on Tuesday.

“It’s a fine balance between respecting our local elected officials and having an understanding that we still have a lot of work to do,” she said.

Critics of the bill say it glosses over the fact that an election could be triggered when the actual tax rate remains flat because rising property values play a major role in calculating the election trigger. Many local officials also say the bill would threaten their ability to hire police officers, build new parks and fill potholes.

Many police and fire chiefs from across the state testified against the bill last week.

“What do I tell them?,” State Sen. Carlos Uresti, D-San Antonio, said Tuesday morning.

Because Texas has no state income tax, it relies heavily on sales and property taxes. The state and local entities split sales taxes. But only local entities receive property taxes. It’s unconstitutional for the state to levy property taxes, and state lawmakers don’t have the power to set those rates.

The current and proposed thresholds that could allow a rollback election aren’t based entirely on the actual tax rate, which is the amount per $100 of property value that a government entity levies against landowners. Instead, the formulas focus on how much total tax revenue a local entity receives from properties from one year to the next. So a city or county could hit the threshold for an election without changing its tax rate if there was a significant increase in local property values.

Currently, an 8 percent property tax increase or higher allows voters in a city or county to gather signatures to call for an election on the new rate. Bettencourt’s bill would lower that threshold to 5 percent and would require an automatic election.

State Rep. Dennis Bonnen, R-Angleton, has filed companion legislation, Texas House Bill 15, in the lower chamber. No hearing on that bill has been set. That bill has a lower rollback election threshold of 4 percent. That was the same threshold in Bettencourt’s original version of SB 2, but he increased it to 5 percent amid pushback during a Senate committee hearing last week.

Bill proponents say that the automatic election would allow for more local control because it puts more power in the hands of voters. Critics say voters can already oust elected officials for passing local budgets and tax rates they don’t like.

“Do you hold a referendum every time you make a big decision in your role as senator?” State Sen. Eddie Lucio Jr., D-Brownsville, asked Bettencourt on Tuesday.

State Sen. Kel Seliger, R-Amarillo, sought three amendments to the bill. All three were shot down 17-3 by the Senate. One of those amendments would have allowed residents to petition for a rollback election at the 5 percent threshold and only would have required an automatic election if a government entity hit the 8 percent threshold.

Lucio said that even though lawmakers can’t set property tax rates, they can “indirectly” influence them through unfunded mandates, which are constraints or requirements that they pass down to lower levels of government that don’t come with additional funding from the state.

Bettencourt said he’s often requested to see a budget that breaks down how much local governments spend on unfunded mandates from the state, but no one has ever produced one.

“I’m a big believer in what gets measured gets fixed,” Bettencourt said.

Lucio suggested an amendment that would have raised the election threshold to 8 percent during any biennium in which state lawmakers pass any unfunded mandates.

“This amendment will encourage us to take responsibility for our government spending,” Lucio said.

He withdrew the amendment after Bettencourt said he would not entertain it.

Read more of our related coverage:

• Local governments and school districts battling the Texas Legislature over property taxes have a couple of things in common: They want local control over taxes and a more reliable partner in the state government.
• Most Texans don’t know the state faces a tight budget, but asked what they’d do in a pinch, many of them say they’d dip into the state’s savings account, according to the latest University of Texas/Texas Tribune Poll.

Author:  BRANDON FORMBY – The Texas Tribune

Cutting prices can be expensive. The Texas Department of Transportation offered upthe most recent example of that, answering the Legislature’s question about what it would take to make the state’s toll roads free.

Turns out it would be pretty damned pricey. The state borrowed $21.1 billion to build those roads (some construction is still underway) and expects to spend a total of $38.8 billion paying off that debt. James Bass, executive director of TxDOT, told state lawmakers it would cost about $30 billion — that’s his educated guess, mind you — to cash out this year.

The upside? Free highways. But who has $30 billion sitting idle?

This sort of fantasy finance is not new.

Lawmakers wanted to kill the state’s unpopular business franchise tax last session, but they would have had to give up $4.7 billion in state revenue every year. That would mean, in turn, either coming up with money from somewhere else or cutting the same amount from current state programs.

Both of those things, it turned out, were less palatable than the franchise tax. They settled for a significant cut of 25 percent, but most of the tax — along with the government programs it supports — remains in place. State officials expect it to still bring in about $3.5 billion annually.

And they were able to make that cut last year, in large measure, because state government was flush with a vibrant economy boosting sales taxes and an oil and gas boom boosting others. Lawmakers had the ingredients for a popular concoction: cutting taxes without cutting programs.

They’ve promised to return to that idea, and took testimony this week from business groups that want the franchise tax completely rubbed out.

Property taxes are generally the biggest target, and for good reason: They’re the biggest non-federal taxes most Texans pay. The state itself doesn’t levy a property tax, but allows it as a source of revenue for school systems and other local government entities.

Wiping out property taxes and replacing them with higher sales taxes is an attractive conservative talking point: Wouldn’t you like to get rid of property taxes in Texas, along with the built-in increases that come with rising property values? And what if the replacement revenue came from sales and other consumption taxes over which taxpayers can exercise some personal control?

Here’s the counterpoint: Property taxes bring in a total of about $49.1 billion per year,according to the Texas Comptroller of Public Accounts. (The number is inexact because not all local governments are required to report their property tax revenue to the state.)

The state portion of the sales taxes — at a rate of 6.25 percent — brought in $28.9 billion over the year that ended Aug. 31, 2015. That’s 55.9 percent of the state’s total revenue. Sales taxes on motor vehicle sales and rentals bring in another $4.5 billion, or 8.7 percent of the state’s revenue; $4.0 billion of that is from vehicle sales and use, where the rate is also 6.25 percent.

To bring in the $49.1 billion it would take to replace current property tax revenue, the sales tax rate would have to be raised to 16.87 percent. If the tax on motor vehicles was included, the new rate for the two sales taxes would be in the vicinity of 14.82 percent.

The folks at local town hall meetings across the state would love to be off the hook on property taxes, but they might not be too crazy about the bump in sales taxes.

That kind of increase would add $2,142.50 to the taxes on a $25,000 car. It would mean $1 in taxes for every $6.84 in taxable purchases.

There is, of course, another way to do it: The state could end property taxes altogether if lawmakers wanted to cut roughly a quarter of the state budget. If they could figure out how to cut that much without alarming and arousing voters, they would probably have done it already.

The same general arithmetic plagues other “simple” proposals — like the one to turn the state’s tollways into freeways.

The impulse to get rid of toll roads is relatively new, too. The toll boom in Texas was an answer to another math problem in state government. Texans wanted to ease congestion, but really, really hated proposals to raise gasoline taxes to pay for those roads. Political leaders settled on a more popular idea — that the people using a particular state benefit ought to be paying for it. User fees are one example.

Toll roads are another. They were popular, until the bills came due.

Author: Ross Ramsey – The Texas Tribune

The Texas Tribune is a nonpartisan, nonprofit media organization that informs Texans — and engages with them – about public policy, politics, government and statewide issues

Property tax revenue has climbed 46.1 percent over the last 10 years in Texas, and the share attributable to school taxes has dropped over that period, according to the state’s top tax collector.

The fastest-rising component? Special-purpose districts for hospitals and such.

Even with that, schools account for more than half of all property taxes, and with school finance litigation pending in one of the state’s highest courts, that’s where the political attention is focused.

Far more money is extracted from Texans in the form of state and local sales taxes, but property taxes are the source of more complaints. They show up in a single bill, for one thing, while sales taxes are spread out among every taxpayer’s various purchases. Even property owners whose taxes are paid into mortgage escrow accounts get a look at the total every year when they pay their federal income taxes.

The Texas comptroller’s office cranked the growth numbers, which are aggregate amounts for collections of property taxes over the last 10 years. Owners of everything from houses to commercial real estate paid a total of $33.5 billion in property taxes in 2005, a tab that rose to $48.9 billion in 2014.

School taxes accounted for most of that, rising to $26.8 billion in 2014 from $20.2 billion in 2005. That’s an increase of 32.7 percent. That’s a lot, and it’s also the smallest increase of all of the property taxes. Texas counties collected just under $8 billion in property taxes last year, up 67.4 percent from their collections of a decade earlier. Cities increased their total property taxes by 59.8 percent over the decade, to $7.8 billion.

And special-purpose districts were the fastest-growing, increasing 74.3 percent over the decade to $6.3 billion last year.

Much of that last category’s growth has more to do with the number of districts than with increases in their tax rates. The comptroller counted 1,756 such districts in 2013 — the latest numbers available. Of those, 380 were created after 2005 — the base year for those growth rates. More than one of every five special-purpose districts that existed at the end of the decade did not exist when it began.

And there is also some hocus-pocus behind the lower growth in the local property tax rates for schools, too. Every time the state forces those districts to lower their property tax rates — or increase their property tax exemptions — it compensates them for the lost money. The idea, explained in Aman Batheja’s reporting last month, is that the tax rates go down without lowering the amount being spent on education. The voters’ main complaint is being addressed, in other words, without creating a new complaint in its place.

The latest version is on the ballot next month in the form of a constitutional amendment that would increase the size of homestead exemptions for property taxes. The average homeowner would see a reduction of $126 if that passes. But the state would spend $600 million replacing the money lost to local school districts as a result.

“The school districts don’t have to raise their rates to make up for the lost value because the state’s giving them the money,” said John Kennedy with the business-supported Texas Taxpayers and Research Association.

That $600 million would add to $8.4 billion already in the state budget for previous property tax cuts. Texans are still paying for public school education, but out of a different pocket. The money that would have been raised by property taxes is instead paid by the state, which gets most of its income from sales taxes — largely from the same taxpayers.

If the constitutional amendment passes in the Nov. 3 election, that supplement or compensation or whatever you want to call it will amount to $9 billion per year.

The bitter pill for state lawmakers is that they are trying to lower taxes that are mostly out of their control. The state isn’t allowed to levy a property tax. It can and does set the top amount school districts are allowed to levy, however, and as long as not too many of them charge that top rate, the state can tell the courts that it isn’t setting property tax rates.

If enough of them get to the top rate — that’s currently over 250 of the state’s 1,227 school districts — they can go to court and challenge the state’s school finance formulas. They have done so again, in a case now pending before the Texas Supreme Court. If that court decides that the state’s current limit amounts to an unconstitutional state-mandated property tax, the state could either move the limit and allow property taxes to rise or buy it down once again and add to the $9 billion.

Cities and counties and special-purpose districts don’t have a deal like that. But because they aren’t the largest numbers on anyone’s property tax bills, they don’t attract public complaints like the schools do.

The facts are similar, but the politics are not.

Correction: An earlier version of this column said that the homestead exemption in a proposed constitutional amendment applies to more than school property taxes. The amendment addresses only school property taxes.

Authors: by Ross Ramsey – The Texas Tribune

The Texas Tribune is a nonpartisan, nonprofit media organization that informs Texans — and engages with them – about public policy, pol itics, government and statewide issues.