Analysis: Property tax relief in Texas, perhaps — but not right away
A new state law limits the ability of local governments to raise property taxes without voter approval — but not yet. And some are rushing to get one last big increase.
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While trying to limit the annual growth of property taxes in Texas, the Legislature gave local governments an incentive to raise taxes nearly 8% this year. Maybe it was unintentional, but the state gave the locals a reason to raise property taxes faster than they would have without state action.
Everyone who’s seen a car dealer’s TV spots or commercials for a year-ending sale at a furniture store understands how this works: It’s a classic closeout sale. You tell the customer there’s a big change right around the corner — a new model year, higher prices, new rules. And you add that there’s a better deal for anyone who acts quickly, to help the dealer clear the car lot, to assist that poor furniture store owner who wants to reduce inventory before the new year begins.
Act now and save!
Legislators know that stuff, too, but it’s not clear they were thinking about it. In their most recent session, they passed, with a great deal of self-congratulation, a new law that requires local governments (not including school districts) to get permission from voters for any property tax revenue increases of more than 3.5%.
The city or the county can raise more, but only if voters approve. And there’s an exemption for community colleges, hospital districts and small government entities.
Before that law passed, the limit was 8%. This is the last calendar year when that older limit is in effect. Those local governments argued, unsuccessfully, that the state’s newly imposed limit would hobble their efforts to keep up with growth and operating costs. They have some third-party support for that view; Moody’s Investor Service said in a report this year that the legislation would lead to minimal homeowner savings but would “hurt local governments substantially.”
You see why the governments would jump?
Act now, and revenue from property taxes can go up 7.99% without a public vote. Next year, the maximum increase without going to the polls will be 3.5%. And unlike current law, which requires citizens to petition for a rollback before a vote, the new law makes the public referendum automatic.
A number of those governments are taking advantage of this, which will mean higher tax bills for some Texans and might keep legislators seeking reelection in 2020 from claiming they acted to cut your taxes or provide tax relief. Not all local governments are taking advantage of this 8% solution, but some big ones are. According to the Houston Chronicle, the list of governments taking or considering the high-tax road includes Harris, Tarrant, Travis, El Paso and Webb counties, and cities like Austin, El Paso, Arlington and Corpus Christi.
“I think a lot of cities and counties know that we are putting them on a diet, and they are going on one last bender before it happens,” State Rep. Dustin Burrows, R-Lubbock, told the Chronicle. He was the House sponsor of the property tax law.
Your actual taxes will vary, depending on where you live and what your local governments are doing. The biggest part of your property tax bill — for local schools — isn’t subject to the new limit. But the rest of the bill is, as you’ll see when you get it between now and the end of the year. It’ll also show what your bill was last year, so you can do the math and see whether you’ll get any promised property tax relief now, or later, or at all.
One sponsor of the legislation, state Sen. Paul Bettencourt, R-Houston, told The Dallas Morning News last month what some local governments were up to. “No question. They're trying to build an increase before the law takes effect.”
He indicated his displeasure, but he shouldn’t be surprised. He’s a tax law consultant in real life, and he knows the ins and outs of property taxes as well as anyone in the Legislature. And politicians are supposed to have a pretty good grip on what effect their new laws will have.
This one will limit the growth of property taxes — after it gives local governments one last chance to get a bigger revenue increase before the end of 2019.
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