Possible Approaches to Property Tax Relief


So, we definitely need property tax relief; but what form could such relief take, which ones are the most bang for the buck, which ones are politically possible, and how would they make it up to the entities that lose revenue?
First, it has to be understood the different between property tax relief and various types of actual tax CUTS. Our most serious problem has been the rapid GROWTH of taxes we have to pay, primarily through skyrocketing appraisal growth. In 2015, we received a one-time tax ‘cut’; in the form of an increase in homestead exemption from $10,000 to $25,000. That ‘cut’ was immediately swamped out by the next year’s appraisal growth (but STILL meant the tax growth was $100-$150 less than it would have been otherwise.) And it was no help to commercial and multi-family properties. So a fixed-amount, one-time cut is of little long-term benefit.

So, what are better, more enduring approaches?

  • Eliminate Property Taxes altogether!  Yeah, OK; I’d like everybody to have a pony, too. But it ain’t happening, and certainly not in one legislative session. It’s the only revenue source of sufficient size & stability to cover city & county  needs like streets, fire, police, courts, jails, etc. The state of Texas would have to make massive statute changes to even ATTEMPT this. However, the stat DOES have shared responsibility for the LARGEST portion of our property taxes- that portion for school systems. Indeed, the state has a Constitutional REQUIREMENT to provide for ‘an adequate education’.
  • Eliminate ALL local school taxes!  Uhh, really can’t do that.  Remember all those school bonds your community voted for to pay for capital items? Well, sorry; your district is stuck paying for that since you signed off to doing so. So that leaves the Maintenance & Operations of the school taxes. That STILL represents about HALF of the entire property tax bill of most homeowners. So THAT is the logical ‘area of attack’ for the state of Texas to help the homeowners actually keep their homes.
  • The state should pick up as much of the school M&O as possible.  This is the plausible goal of this session of IMMEDIATE tax relief. The only reason any immediate relief could happen is that Comptroller Hegar, just a couple weeks ago, announced an additional $6 billion in oil-related revenue will be available to the state. That is the equivalent to throwing a chuck roast at a pack of hungry dobermans in a session, but possibly property taxpayers could get a piece of that in a swap with public education. That will be a hard fight & the relief might be minor if spread across ALL property owners. There are other approaches to using this listed below.
  • The state would further restrict tax growth rate without getting voter approval.  This gives no IMMEDIATE relief but will- long term- do more to protect property owners from tax inflation driving them from homes. This is Gov. Abbott’s suggested approach, recommending setting it at 2.5%.  instead of the current 8% (plus ‘growth’) that number will likely be going up in negotiation.
  • The state could give homeowner only relief via indexed homestead exemption.  By giving a MAJOR increase to homestead exemption AND indexing it as a percentage of the appraised value (say 20-25%) would assure CONTINUED benefit to homeowners. It would be important to REQUIRE the use of the homestead exemption for ISDs receiving compensating state money.
  • The state could give relief to the most at-risk property owners first.  The most at-risk people of not being able to keep their homes- are retirees, who are on fixed incomes. Many have their tax rates frozen but may no be protected from appraisal growth. And it is rather ridiculous that a government service- education- that they haven’t made use of for their family for over 15 years is what is going to drive them from their home. One way that the state could help prevent that is to come up with a retiree specific homestead exemption, one tied to a percentage of their appraised value(say 40-50%), so it increases as the appraisal does. This would significantly reduce the school portion of their tax. But this would be a SELECTIVE benefit, not benefiting ALL property owners.
  • The state could eliminate or substantially reduce Robin Hood. This would benefit those taxpayers being ‘bled’ far worse that all others; those in wealthy districts where nearly $2.7 BILLION this year alone will be taken from them, supposedly to benefit ‘property-poor’ districts, but most of the funds actually end up in General Revenue. And, as of late the increases in the amount taken from these ‘wealthy districts is INSANE, for example, the amount has DOUBLED for Plano for $103 million to $209 million in 2 years!  Here is a link to a spreadsheet of the amounts the districts must give up. However, any elimination or serious reduction of Robin Hood should be iron-clad conditional that the MAJORITY of the reduction needs to be given back to taxpayers with a reduced tax rate. It can’t spark a giant spending binge by the wealthy districts (though SOME should go back to the districts).
  • Lastly, an insane but logical consideration; treat property like every other asset.  If property were treated like every other investment and asset, it would be taxed at the purchase price until you sell the asset, at which time you might be taxed on the capital gains (but then you’d have the money to PAY the tax), The impact of this would be profound; Appraisal districts would no longer factor into the taxing equation. Government entities would only get gains (through a ‘property tax capital gain’) upon the sale of property. A lot of property ‘churn’ would disappear, impacting the real estate industry. I can’t think of a change in property taxation that would get more people in an uproar- but would help property ownership more (other than elimination property taxes altogether).

So, there are a number of approaches. We homeowners are up against an insatiable appetite for our money from local government entities. we ALL need to be in the fight for this one. Or give up ever actually controlling our own property’s destiny.

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