Property Tax Burden Threatens Texans, Causes Concern

Texas homeowners’ plea: Do mess with taxes.  

By Kenric Ward / Note: This article was published by watchdog.org

SIGNS OF THE TIMES: Protests over soaring property tax bills are breaking out across Texas.

Texans are tiring of the bait and switch on taxes.

Without an income tax, but with the sixth-highest property tax burden in the country, the Lone Star State is no longer a low-cost haven for homeowners.

Property taxes have more than doubled over the past 13 years, rising 63 percent faster than population and inflation combined, according to the nonpartisan Tax Foundation. And the hits just keep on coming.

“The Legislature has cut property taxes four times and no one felt it,” says state Rep. Dennis Bonnen, chairman of the House Ways and Means Committee.

The reason? Local schools and governments aggressively hike property assessments every year, flouting market realities and making a mockery of “flat” tax rates.

“My neighborhood (assessed values) went up $100,000 on every house,” recalled Cheryl Johnson, of Galveston. Those “disproportionate increases” prompted her to run for, and win, the job of county tax assessor.

Across the state, more Texans are protesting their property tax bills. Nearly 90,000 Bexar County residents filed protests last year – up 70 percent over 2012. Documented challenges can knock values down a few thousand dollars, translating into savings of a few hundred dollars. Homeowners wage these battles annually because assessments bounce back up the following year.

On Wednesday, taxpayers lined up to complain to a Senate Select Committee. More than half the 300-plus attendees were local government officials, along with well-coiffed lobbyists keeping tabs on the simmering tax rebellion.

VIDEO: Senate panel hears property tax complaints

Bonnen, Johnson and others have pitched proposals to ease the pain on Texas property owners:

PRICE PAID: Johnson favors a one-time assessment based on a property’s sales price. “End of conversation. End of protest,” she says. Johnson sees another benefit to this Proposition 13-style freeze that harks back to the landmark initiative in California: “You save $400 million in (county) appraiser costs” and remove subjectivity from the equation, she says 

TABOR: A Taxpayer Bill of Rights would restrict government revenue increases to a combination of population growth and inflation. The cap could be exceeded only if residents vote to raise it in a referendum. “That’s the ultimate in a democratic process,” says Bonnen, R-Angleton.

The newly expanded homestead exemption shields just 20 percent of the tax bill, sometimes less. Cities are not required to apply the full discount, and most don’t. Austin, for example, sets its exemption at just 6 percent.

Dale Craymer, president of the Texas Taxpayers and Research Association, favors limits on revenues.

“When the Legislature tries to limit value by a homestead exemption or appraisal caps, jurisdictions just raise the tax rate. When districts want to avoid tax rate increases, there is great suspicion that they put pressure on the appraisal districts to raise values,” Craymer told Watchdog.org.

“Either way, they get all the dollars they want,” he said. “The only effective way to limit property taxes is to limit the growth in revenues from one year to the next.”

San Antonio Councilman Ron Nirenberg, like local leaders across Texas, says his city needs evermore tax revenue for “investment.”  "We’re falling further behind on infrastructure. Growth is outstripping revenue,” he told Watchdog. The growth is fueled in part by San Antonio’s ongoing, expansive annexation agenda.

Nirenberg acknowledges that the Alamo City is receiving record state appropriations for transportation projects. And the Bexar County appraiser is raising taxable values on existing properties an average of 10.7 percent this year. The San Antonio Board of Realtors reported that the average home price rose 5.4 percent from January to November 2015 — half the rate of increase pegged by the county appraiser for 2016.

Offering no homestead exemption protection to its residents, San Antonio expects to reap a $25 million tax windfall through higher appraised values.

Still, it’s not enough. The city plans to take on more debt by floating another nine-figure bond issue in 2017. Financing would come from future property tax revenue.

“Property taxes are growing far faster than Texans’ paychecks,” said Peggy Venable, policy and legislative director at the Americans for Prosperity Foundation of Texas. “The rate local governments can increase property taxes should be lowered to no more than 5 percent, and voter approval required to exceed that amount.”

Could Texas be morphing into a high-tax state like New Jersey?

Jonathan Williams, a policy expert at the American Legislative Exchange Council, noted that in 1965 the Garden State had no income tax or sales tax, and very high property taxes. “Now New Jersey has some of the highest taxes on all three. Failure to control spending is the Achilles’ heel,” he said.

The co-author of the report, “Rich States, Poor States,” warned against any proposals that simply shift tax burdens.

“There’s risk in any approach by states to lower local property taxes. Spending must equal taxation and competitiveness requires property tax restraint,” Williams said. “Subsidizing spenders is a moral hazard.”

Kenric Ward writes for the Texas Bureau of Watchdog.org. Contact him at kward@watchdog.org.