Issue
Local property taxes in Texas have increased dramatically over just the past few decades. From 1996 to 2015, the total property tax levy statewide increased more than 200%—or $35.36 billion—according to the latest data from the Texas Comptroller.1

Part of the increase in local property tax revenue can be attributed to new property added to the appraisal roll and higher property values. However, an increase in property value should not be an automatic increase in property tax revenue. If a local taxing entity needs more revenue, a more honest and transparent conversation needs to occur at the local level so taxpayers completely understand why. But the current system is confusing, and it ends up with more Texans seeing a hidden property tax increase.

What does this means for the real estate industry?
Texas has been a dominant force in the national economy and housing affordability has been a contributing factor. But the increase in property taxes threatens this affordability.

According to the Houston Chronicle, “… the lack of affordable housing is being viewed as a crisis that affects Americans of all ages, races and income groups.”2

The Texas REALTOR® position
Our association supports various measures to ensure a more transparent and honest conversation occurs at the local level when tax rates are set. These measures include supporting:

  • The reduction of the rollback rate from 8% to 5%;
  • An automatic tax ratification election if the rollback rate is exceeded;
  • Requiring all effective and rollback tax rate worksheets to be filed with the State Comptroller and requiring a certain percent of worksheets to be audited;
  • Enhancing property tax notices (e.g. eliminate last year’s tax rate from notice, as including last year’s rate leads to confusion and inaccurate comparisons of tax rates); and
  • Simplifying the calculations of effective and rollback tax rates

 

Legislative outlook
Many bills relating to local property taxes will be filed during the 86th Texas Legislature. It is anticipated that the Legislature will take action to improve the local property tax system and bring more transparency and honesty to the process.

Historical perspective
The 85th Texas Legislature proposed several truth-in-taxation measures that would better inform taxpayers about the processes used to set local tax rates and appraise property.

The current local property tax system has been in place for over three decades and is revered as the best property tax system in the country. Texas Legislature continues to make improvements to the system; however, the system still needs improvement to best serve Texas taxpayers.

1 Biennial Property Tax Report for 2016 and 2017, Texas Comptroller of Public Accounts, https://comptroller.texas.gov/taxes/property-tax/docs/96-1728.pdf

2“Affordable housing: Now it’s a problem for the middle class, too,” Houston Chronicle, June 29, 2015. http://www.houstonchronicle.com/local/gray-matters/article/Affordable-housing-It-s-a-problem-for-the-middle-6356250.php