Viewpoints: Is property tax relief possible?
I realized recently how interesting it is to live in the “information age” and still lack the clarity that details ought to provide.
In an attempt to learn more about our recent legislature, I spent hours pouring over material, interviews, and watching speeches of our state legislators discussing the need for property tax relief.
During that process, I realized quickly why homeowners (myself included) were left feeling confused. Did we get relief? What bill provided it? Is what being said, true? In an attempt to explain my findings I wrote a note on my council page describing how I felt politics was interfering with making meaningful policy. I hope this helps understand the numbers beyond the words as we tackle the challenge and need for property tax relief.
I spent six hours in Austin several weeks ago. We covered approximately 163 bills within that time. As I have continued to dig deeper and deeper into solutions to our property tax increases, I also found the problem.
We have some politicians (not all) who are busy playing politics instead of making meaningful policy. The idea and playbook are so simple I feel like it could be derived from my 11-year-old, just blame someone else... and they have.
Before anyone feels this is partisan related- it is not. I hold a non-partisan seat, and if I intended to seek a partisan seat, it would be as an independent. At this point, I’m looking at both parties like a mother with two children fighting. Neither one wants to take accountability, neither one wants to correct their behavior, or take a different approach. The best argument of all, and a mother all-time favorite of “Well, they started it.” is equally as exhausting. With both parties hurling insults and acting foolish I am left like many Americans, to find the truth on my own.
Now let’s move on to State Bill 2 and taxes. For the record all SB 2 did was make government bigger. There was already a rollback cap in place at 8%. What the State did was reduce the cap from 8% to 3.5%. Amending laws is important, amending laws under the guise of it having an impact is just making government bigger.
To break this down here is how it works. I’ll be using Burleson numbers as an example.
Effective Tax Rate: A tax rate that would produce the same revenue as the year prior.
Rollback Tax Rate: A tax rate adopted that would result in an increase of current law of 8%. SB2 reduced to 3.5%.
Let’s look at the numbers.
I’ll use Burleson rates as an example, and break it down using a $200,000 home. 200,000/100 = 2,000 per $100 of valuation
Effective: 0.69840 2000 x 0.69840 = $1,396.80 (0% from previous year)
Rollback: 0.7487 2000 x 0.7487 = $1,497.40 (8% from previous year)
Adopted Rate: 0.7350 2000 x 0.735 = $1,470.00 (3.3% from previous year)
The difference between the rollback tax rate and the effective rate is $100.60/year or $8.38 a month. Hardly a savings. Which is what SB 2 did for us- nothing. In fact, Burleson was already within the 3.5% so it really did nothing by way of relief.
I will always consider myself to be a fiscal conservative. Spending will always be a concentration and should always be examined. One of the benefits of having a local government is your representatives are less likely to raise taxes on themselves. Also, this is Texas. Local control, and not having politicians in Austin telling us what to do has been fought hard for.
We have to pay what we raise if that isn’t an incentive for appropriate spending- I don’t know what is. Additionally, Burleson has not increased its tax rate in years and the last time it was lowered.
The state should not dictate local decisions; this is the conservative approach that I have always supported. I am not sure where specific politicians in Austin decided to make some incredible overreaches in local governments, they can call it what they want, but it is not conservative.
The property tax increases are not caused by city tax rates or spending.
This is clearly shown above where the effective tax rate, in lieu of adopted, would save you $6.16 a month. Effective would be considered a 0% change, which is below the 3.5% of SB 2.
Despite the incredible fake news I have seen from Empower Texans and a few Senators, it makes for a great story.... but numbers don’t lie- and THAT is our problem.
When we have Senators and Empower Texans trying to convince people the problem is in spending- they don’t address the real issue of Property
Value Increases of 10% each year for 4-5 years.
Using that same example of a $200,000 home becomes $322,102 home value in 5 years.
Year 1: $200,000 x 10% = $220,000 ($20k increase) = 2,200 x 0.735 = $1,617
Year 2: $220,000 x 10% = $242,000 ($22,000 increase) = 2,420 x 0.735 = $1,778.70
Year 3: $242,000 x 10% = $266,200 ($24,200 increase) = 2,662 x 0.735 = $1,956.57
Year 4: $266,200 x 10% = $292,820 ($26,620 increase) = 2,928 x 0.735 = $2,152.08
Year 5: $292,820 x 10% = $322,102 (($29,282 increase) = 3,221 x 0.735 = $2,367.44
Same Tax Rate from 1 entity increases $750/year. You spread that property value increase across all entities such as school, county, and people are literally being taxed out of their homes due to property value increases.
Let’s examine if cities reduce the tax rate to effective, which is 0 spending and below SB2 requirements....
Effective: $322,102 (3,221) x 0.69840 = $2,249.56 = $117.88/yr or $9.82
The result below shows it would be a difference of only $117.88/year or $9.82/month.
Hardly a savings and that is if the cities increase spending by 0, which is also unrealistic.
Yes, while municipalities may receive more revenue... they also have increased costs. Our roads need more attention with the growth, we need more police officers, more fire stations and firefighters, more infrastructure, extending water/sewer lines, more parks, bigger libraries, attending to our senior centers to accommodate the baby boomers, and by the way, our seniors LOVE their senior center. The list goes on and on...
City of Burleson home (not business) property taxes accounts for 1/3 of the overall budget. Home and business property collectively account for a little less than half of the overall budget.
So while State Senator Paul Bettencourt says “The tax rate should reduce at the same rate as property values increase...” tell him you do not need a 4-year degree to do the math. Math is your friend.
The State is responsible for property values. They set the rules for the appraisers and also ensure that all property values are at 100%. So, while a few have cowardly blamed the appraisers, they neglect to tell everyone about the State Laws, Tax Codes, and Property Values are set by the State- the appraisers are just doing the job the way the State directs them.
City: Adopts Tax Rate
State: Property Values
Appraiser: Does what the State directs them to do
Not to mention. The State then adopts a budget based on where they feel the property values ought to be.
This isn’t a dig on State Legislators. I have many friends there and continue to work well with them. Many are hardworking policymakers being railroaded by a few who like to play politics instead of making policy.
The few who criticize those who cross isles for compromise, use punchlines instead of policy and forget that bigger government is not the answer.
Fine. Fine. Fine. Address spending. I’m good with that. Spending control is always important. Considering local elected officials have no desire to increase taxes of themselves, and over spending their own tax money make little sense- but go ahead. That is not the problem we have but go ahead. Just don’t say it is a step when it isn’t.
What we do know is that property values decreases would result in savings across all entities. Reducing those will have a significant impact across your city, county, and school district taxes.
So now that we know the problem is property value increases, what are some solutions? SB2 clearly did nothing for the majority of Texans. Yes, they say a big number to make it sound like impact, meanwhile, the savings depending on where you live is $0-$10 a month. However, complaining without solutions is just whining.
What are viable policy solutions to address this problem?
1. Many states use an assessment ratio. Instead of being evaluated of 100% market value, they are valued at 80%.
$200,000 home would be 80% ratio assessed valued at: $144,000
1440 x 0.735 = $1058.40 is a decrease of $412/year
This would affect every home and business owner in Texas and small business owners. This also helps give the new growth in North Texas. With new homes being built, those prices are being compared to older homes close by. Or, they are being compared to older homes that have been remodeled in order to achieve the 100% market value. If you have to spend $20k-$30k to sell your home like a new build- that cuts your property value profits you would make selling it. Not to mention you would have to go back out and purchase a new home at those prices.
2. Increase the homestead exemption
Currently, the homestead exemption sits at $25,000. Why not increase it for homeowners? We can double it... $50,000
$200,000 - $50,000 = $150,000 for only homeowners. This reduction would apply specifically to school districts where the bulk of taxes are being collected from homeowners.
3. Lower the tax increase cap from 10% to 5%
Instead of capping each home at 10% increase per year, why not reduce it to 5%? Or tier it out to where we do not have a 10% increase amount for more than 2 years in a row. Making policy ought to address the issue at hand and in the future. This should have been a foresight. If we were to experience a 10% increase each year for the 4-5 year it would have a grave impact. We cannot change the past, but we can certainly try to address the future.
4. Or a combination?
Now, I realize that this will affect the overall revenue to a city, but it will also provide relief and the end result is cities working within their budget allotted. These are solutions that will BOTH tighten spending AND give property owners REAL TAX RELIEF. SB2 did nothing but give an opportunity for a few to tell a good bedtime story and pat themselves on the back. Well done, said no one who can do the math.
5. The ultimate solution, of course, is figuring out a better way to fund school districts. However, this note it specifically created to de-bunk the fake news of city tax spending being an issue for the property tax increases we have seen. As if the increase of property values isn’t enough to bear with, the State then cuts the funding to your school district as it rises. Well, that is just swelling. It is like getting sucker-punched, twice.
I am out of ideas why the State did not address property values, or why Senator Bettencourt chose to attack positions of city elected officials, several of those who are minimally paid ($5 a council meeting) or who are certainly not getting paid $190/day while in session. I know his private business fights high property taxes. I suppose when property values are high, his business makes a killing from those who hire him to fight it. If property values are reasonable, it is not good for his business- maybe?
I have no idea. Hell of a coincidence though.
Katherine Reading represents Place 3 on the Burleson City Council