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Property Tax > Journal

Latest update: Monday, 14 August, 2023

Hashtags: #PropertyTax #Finance

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    Americans are facing a housing affordability crisis – and Texans are no exception. Texas families struggle to make ends meet with high inflation, stagnating wages, and rising mortgage rates. Add high property taxes to the equation, and it is not difficult to see why 1-in-2 Texans reported that they were behind on rent or mortgage payments and that eviction or foreclosure in the next two months is likely.

     Property tax relief is needed more than ever to help homeowners, renters, and businesses during these challenging times. For this purpose, the Texas Public Policy Foundation proposes a way to cut local property taxes substantially next year, and cut them nearly in half over the next decade.​

     In Texas, the housing market is cooling as there were three months of supply of homes for sale relative to demand in September 2022, which is the highest since May 2020 after a couple of years of a very tight housing market. This cooling of the housing market resulted from mortgage rates topping 7%, a 20-year high that dramatically raises borrowing costs and monthly payments.​

     Another contributing factor to the affordability crisis in Texas is high and rising local property taxes.​

     These [property] taxes have nearly tripled over the past 20 years. And it’s wrong to think that property taxes are high because there is no personal income tax, as other states like Florida and Tennessee have much lower property tax burdens. The problem is excessive local government spending that requires more taxes.

     Property taxes are regressive. The Texas Comptroller’s office estimates that the lowest 20% of income earners will pay 6.9% of their total income in property taxes compared with 1.9% for the highest income quintile in 2023.

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     Bonds and Property Tax Rate Increase. There were more than 150 different bond propositions on ballots all across Texas this Tuesday. Altogether, those propositions amounted to nearly $21 billion.According to The Bond Buyer, Texas led the Southwest region of states having the largest amount of debt propositions on the November 8 ballot. Of the $21 billion considered, school bonds accounted for $15 billion of them.

     The same voters complaining about increased property tax burdens seemed to overwhelmingly support bond proposals and property tax hikes that will inevitably be paid for by increasing that same burden. This phenomenon is a complete contradiction, but perhaps it can best be explained by the disingenuous way the bonds are proposed altogether, lacking transparency and promoted by entities that would benefit from them by using taxpayer money in a way that those who oppose them cannot.

     This is sadly not a new phenomenon, either. In May, we reported on conflicting messages all across the state regarding local bond propositions. In those elections, nearly $18.5 in bond proposals were considered; similarly, an overwhelming amount of them passed, even though many of the same voters simultaneously supported two statewide ballot propositions in the same election that purported to provide property tax relief. Either those voters do not understand how these bond obligations are financed (primarily through future property tax rate increase), or they do know and are ok with saddling future generations of Texans with that debt. Both scenarios are problematic, especially when you consider that many of the same local governments proposing these bonds are already flush with cash as a result of previous bond proposals, more-than-expected sales tax revenue, and funding from the federal government via legislative vehicles like the American Rescue Plan Act (ARPA).

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     The report’s summary explains that Texas has one of the highest property tax burdens in the United States, something that Texans for Fiscal Responsibility has reported on many times before. The Texas business property tax burden is ranked ninth in the nation, while homeowners in Texas find themselves in an even worse spot, coming in at sixth highest in the nation.

     The report makes the case that the main driver behind high property taxes in Texas is spending by school districts and local governments. According to the report, “Multiple efforts over the last 25 years by the Texas Legislature to provide property tax relief for Texas homeowners and businesses have failed because the state’s politicians have refused to rein in local spending.”

     In the latter part of the report, they compare the state of Florida to Texas on property taxes. They make the important distinction that neither state has an income tax, something that is usually blamed for high property taxes. If Florida has no income tax, how can it have such lower property taxes compared to Texas? Texas specifically has a property tax rate of 2.5% (ninth highest in the nation), compared to Florida’s 1.93% (25th highest in the nation). It also is noted that although populations and business climates are comparable between the two states, even Florida’s sales tax (7.01%) is much lower compared to Texas’ (8.2%).... Ultimately, what separates two very similar states when it comes to tax burdens is government spending. The key to eliminating property taxes in Texas will be reining in government spending and returning to fiscally responsible policies.

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     New Tax Foundation report puts Texas at #13; Wall Street Journal says high property taxes are the problem.Texans like to brag about being a low-tax state, but a new report from the Tax Foundation shows the Lone Star State is not even in the top 10. The Tax Foundation’s 2023 State Business Tax Climate Index put s Texas at #13 on their list.

     The top 10 best states for tax climate are—in order—Wyoming, South Dakota, Alaska, Florida, Montana, New Hampshire, Nevada, Utah, Indiana, and North Carolina. What do they have in common? The Wall Street Journal‘s editorial board noticed one commonality: “None of the best four tax states levy a per­sonal state in­come tax: Wyoming, South Dakota, Alaska and Flor­ida. Fore­go­ing an in­come levy is a hedge against the up­ward tax-rate rachet that typ­i­cally hap­pens.”

     But the lack of an income tax wasn’t enough to help Texas make the top 10, as the WSJ explains, because “prop­erty taxes are high and the av­er­age bur­den for state and lo­cal sales tax is 8.2%.”

     The president of Texans for Fiscal Responsibility, Tim Hardin, explains that local spending—and debt—is weighing the state down. “Our most pressing problem in Texas is local debt and local spending. We have a local outstanding debt on par with New York, with each Texan carrying about $12,500 per capita,” said Hardin. “For Texas to once again lead the nation and create an unmatched business climate, we have to deal with the out-of-control spending from local governments. A much-needed reform would be a spending cap similar to the one we have placed on the state placed on all local governments. Unless Texas lawmakers get serious about reducing the size and scope of the government, we will not be in a position to lead the nation.”

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  • Tax statements on the way, The Community News, 11 October 2022

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This week, the Defend Texas Liberty PAC released polling that suggested a majority of Texans, from both major political parties, support using a majority of the projected budget surplus to lower their property tax burdens.

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     In a recent Texas Senate Finance Committee Hearing, the subject of high property tax appraisals came up during a discussion on what should be done about the interim charge they were to consider related to property tax relief. The committee members acknowledged that many Texas homeowners are lamenting the massive increase in appraisals, acknowledging that the increase is unsustainable for most. 

     This comment reinforces what Texans for Fiscal Responsibility (TFR) has been saying for nearly a year. Lawmakers are content with the slowing growth of budgets and taxes but have no real desire to actually lower anyone’s tax bills. They believe that you as a homeowner should be happy that your already out-of-control tax bill is only going to continue to grow a little bit.

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  • No… We Don’t Have To Replace The Property Tax With Anything, Texans for Fiscal Responsibility, 16 May 2022

    • Population + Inflation, which has long been a metric of conservatives to limit the size of the government, has grown 104%, yet the school portion of property taxes has grown 171% in that same time period. Texas also has the 6th highest property taxes in the United States. With such high growth of tax burdens in Texas, how would it be possible to eliminate the school M&O property tax without creating new taxes or increasing other burdens?

    • The answer is simple, our state lawmakers actually have to start legislating like fiscal conservatives. You know… the thing all Republicans label themselves as to get elected? At the heart of the conservative worldview is that the government should be extremely small in scope… yet, despite Republicans controlling every statewide elected office and maintaining majorities in both chambers of the state legislature for nearly two decades, our state budget is on track to have tripled since 2000 in the next biennium (Fiscal Years 2024-25)! The fact that we passed a constitutional spending limit last legislative session is a huge victory for conservatives, but all these limits actually do is slow the growth of government. This is the same tactic that “conservatives” have used to convince you that they fixed the property tax system in 2019. They passed caps on rate growth, which of course does not lower taxes but merely slows their growth.

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  • Texas Prosperity Plan, Texans for Fiscal Responsibility

    • Ban Taxpayer Funded Lobbying - Our local elected officials, like you, already have the ability to speak with lawmakers, testify on legislation, and help influence it along the legislative process on your behalf. As a matter of fact, that is why we elect them in the first place!… In the 2020 Republican Primary Election, a ballot proposition in support of banning the practice of taxpayer-funded lobbying overwhelmingly passed with nearly 95% support. The Republican Party of Texas has included the issue as a legislative priority for the last two legislative cycles, and yet the state legislature has yet to pass a ban on the practice, despite it being controlled by a majority of Republicans.

    • Eliminate Property Taxes - In the most recent legislative session, the state legislature passed a new spending limit, which recent figures show will result in a roughly $12 billion surplus. When added with the current balance of the ‘Rainy Day’ fund, or as lawmakers seem to see it, the state slush fund, Texas is set to have roughly $25 billion in additional available money next session…  Using just this and future surpluses, Texas can eliminate the need for school property taxes within the next 10 years, less time if lawmakers actually cut government spending at the same time. In the most recent Republican Primary Election, over 75% of Republican voters agreed that the property tax should be ended.

    • Adopt a No-growth Budget- Did you know that since the beginning of the 21st century, Texas’ state budget has increased almost 170% and is on track to triple in size in just a few years? In contrast, Texas’ population has increased by 40% during that same period. 

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The legislature has already earmarked $3 billion of its federal coronavirus aid for property tax compression in the 88th legislative session.The governor of Texas now supports eliminating the largest component of Texans’ rising property tax bills. Governor Greg Abbott told KPRC 2 Houston this week, “I strongly support using the state surplus to reduce the amount of property taxes owed.”  He then stated the Texas legislature should eliminate the school district Maintenance and Operations (M&O) tax rate in a lasting manner, not a one-time buydown. “This has to be done in a way so mathematically it can be calculated so if we put in a billion or five billion whatever, it will be enduring for every year into the future,” he added. Put together, this outline of a policy is essentially the Texas Public Policy Foundation (TPPF) plan called “Lower Taxes, Better Texas.”"

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As seen in the results above, both propositions passed with about 85% support. Proposition 1 was a carveout for the elderly and disabled and Proposition 2 was an increase in the homestead exemption from that of $25,000 to that of $40,000. The likely reason that these two proposed constitutional amendments passed so easily is that Texas taxpayers are being crushed under increased property tax burdens. Sadly, these propositions represent yet another example of the Texas Legislature’s typical approach to property tax relief in the last decade, giving us gimmicks and no real relief at all.

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​This commentary was revealing and serves as a good example of the importance of interim committee hearings. These hearings are the first place that lawmakers begin to really show their hands with regard to what they deem as priorities in ways to spend your tax dollars in the next biennium. What Perry is saying, is that they seemingly have no intention to cut the size of our bloated government, but rather intend to spend every dime of revenue, which will be blamed on inflation.

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Whether it’s an apartment, duplex, or single-family house, renting property comes with hidden costs that are folded into a single rate. Not only does rent cover the cost of the loan, insurance, and property use, but every renter in the state is also paying property taxes, whether they know it or not. As rent continues to climb for Texans every year, understanding how property taxes contribute to your monthly bill is critical.

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The system itself is purposefully complicated, with lawmakers changing definitions and the state Tax Code nearly every two years, it is nearly impossible for the average taxpayer to keep up. Fortunately, there are some lawmakers attempting to make confusing tax systems understandable for the average Texan… Texans for Fiscal Responsibility (TFR) taxpayer champion, State Rep.Matt Schaefer (R-Tyler) shared 10 facts on Twitter that we feel could be very helpful for Texas taxpayers to know.

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This month, appraisal districts across the state began notifying Texans about their home’s updated yearly appraisal value…  According to the Texas Real Estate Research Center, average housing prices in the DFW area saw an increase of more than 18 percent from 2020 to 2021. 

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 ...often than not the answer we get at Texans for Fiscal Responsibility (TFR) as we travel around the state, visiting with Texas taxpayers, is a resounding yes! Despite this, for years now, the Texas Legislature has appropriated more money to fund state government than in the legislative session that preceded it.

    The Last Two Decades. Republicans have controlled every statewide elected office and held majorities (to include a supermajority at one point) in the state legislature for nearly two decades. Despite this and in spite of many of them claiming to be fiscally conservative, state government appropriations have increased nearly 170% in that time, whilst Texas’ population has grown by about 40%.

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    A new assessment by the Texas Taxpayers and Research Association has confirmed what Texans for Fiscal Responsibility (TFR) has been saying for years now: There has been no relief, just merely a slowing of the growth of the overall tax burdens.

    Unfortunately, this has been the status quo in our great state for decades, as taxpayers have generally been content to not go after elected officials who desire to grow our government to unsustainable proportions. These results can be seen in a number of metrics, including the Texas budget, which has grown 169% since 2000, and TFR expects that after a year of runaway inflation and state lawmakers already chomping at the bit to spend a reported massive surplus, we could soon see a state budget which has tripled in size in just 25 years right here in Texas.

 

  • Property Taxes—How They Impact You, Taxpayers have two powerful, tangible tools at their disposal to keep property taxes in check. Sadly, many forget about them. Texas Scorecard, 20 April 2022

Local government entities set a tax rate, which is then applied to your appraisal. School districts typically take the largest piece of your tax pie, often accounting for 40-50 percent or more of your tax bill (which is why school board races are so important). City, county, and school taxes and bonds (a softer way of saying “increased tax burden”) have the most direct impact on your everyday life as well as your pocketbook, yet elections for these critical positions are largely skipped by the very people they impact. What most people don’t know is that every local taxing entity is free to set the property tax rate to $0.00. Every local government could abolish property taxes, like the City of Stafford, Texas, has done. 

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  • Federal Coronavirus Funds May Be Used to Cut Taxes, District Court Rules on Texas Lawsuit, The Texan, 12 April 2022
        The Texas legislature earmarked $3 billion of its American Rescue Plan Act funds for "property tax relief" in 2023.
        A federal district court in Texas ruled that states may use the coronavirus relief dollars to cut taxes, negating Congress’s prohibition within the American Rescue Plan Act (ARPA).
        The State of Texas, joined by Louisiana and Mississippi, sued the federal government and Treasury Secretary Janet Yellen over the prohibition in May 2021. The U.S. Treasury is tasked with enforcement of Congress’s monetary directives.
        Texas was allotted $16 billion in disaster relief aid from ARPA. During the October special session last year, the Texas legislature appropriated that sum for various purposes. Those include $7.2 billion to replenish the state’s unemployment insurance fund; $2 billion for buttressed staffing and services in the health care industry for coronavirus response; $4 billion for a medley of projects like broadband expansion and state university construction projects; and $3 billion earmarked for property tax relief during the 2023 session.

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  • Texas Senate Eyes Elimination of ISD Maintenance & Operations Property Tax Rate, The school district M&O rate accounts for the largest portion of local property taxes collected in Texas. The Texan, 08 April 2022
        As a political issue in Texas, property taxes have lingered longer than the Texas summer heat. The legislature has approved various degrees of reform to try and lessen the burden shouldered by taxpayers — but the problem continues to appear near the top of voters’ priority lists.
        But in his Senate interim charges, Lt. Governor Dan Patrick hopes to take a bigger swing at the issue than at any previous point. Among the items is the exploration of eliminating the school district Maintenance & Operations (M&O) rate, the largest component of the largest portion of Texans’ property taxes.
        School districts account for over half of the local property taxes collected every year, dwarfing the totals from cities, counties, and special districts.

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  • May Property Tax Propositions: A Slap In Texans’ Faces, Texans for Fiscal Responsibility, 06 April 2022
        In just a few weeks a statewide special election will be taking place specific to two ballot propositions, which if adopted, will amend the Texas Constitution. Both relate to property taxes,  and potentially offer some relief to those reeling from increased property tax burdens. Is it enough though?

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Many Texans began receiving their property appraisals from their respective appraisal districts this week. We have heard from many who report higher than expected appraisals, fearful of yet even more increases in their property tax burdens. Are you prepared to protest them?

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This surplus was made possible for a number of reasons, one of which was the spending limit that was placed on the budget in the last legislative session. TFR has written at length about this being the key to finally dealing with the increasing burden of property taxes, and we have presented our plan on how we could eliminate the school property tax with the surplus alone over the course of a few years.

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    In the last few decades, the burden of property taxes has exponentially increased as a portion of the overall taxes paid by Texans. The Tax Foundation reported in 2021 that Texas had the 6th most burdensome property tax in the United States. Wallethub reported just a year earlier that Texas ranked 7th in the nation. This happened despite Republicans maintaining every statewide elected office and control of the legislature for the better part of two decades and promises to address the issue.

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    The Texas Public Policy Foundation is promoting a plan that would purportedly eliminate property taxes by the year 2033 by lowering government spending, eliminating the largest portion of the property tax calculation; school maintenance and operations (M&O) taxes, and redesigning the state’s tax code so that local governments are instead primarily funded by sales taxes.

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  • VIDEO Everything's Bigger in Texas: How to Protest Your Property Tax Appraisal, Texas Public Policy Foundation, 14 May 2021

    • It’s no secret, property values are on the rise in Texas. Appraisals have arrived and the deadline to protest them is just around the corner. More than ever, Texans should be protected from escalating property taxes. One thing you have the power to do directly is protest your property tax appraisal.

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