Posted on 01/10/2005 9:42:09 AM PST by weegee
Deer play on fenced land near Spring above a huge underground reservoir holding the natural gas supply keeping Houstonians warm this winter.
The large herd also allows Houston Pipe Line Co. to receive a special agricultural valuation on its property, saving the company $400,000 in taxes it otherwise would owe Spring Independent School District.
In suburban Austin, a 1,757-acre ranch owned by Michael Dell has what Travis County appraisers call a "well-managed deer herd" that reduces the ranch's market value of $74.8 million to an agriculture value of $290,000. Dell, founder of the computer company that made him the second-richest Texan, saves $1.2 million on taxes he pays to Eanes ISD.
The fact that some of the state's wealthiest businesses and individuals are receiving tax breaks originally designed for families who made their living off the land is prompting lawmakers from both parties to question special-use valuations, commonly called "ag or wildlife exemptions."
A property-tax system that devalues 85 percent of the acreage in Texas and a business tax that only one out of six companies pays reflect the state's outdated revenue system, some lawmakers say. The need for a tax system that will grow with the 21st century economy is made even greater by a court order that lawmakers must find a new way to fund public schools.
So when lawmakers return to Austin to begin a 140-day legislative session on Tuesday, the school finance dilemma will be at the top of their agenda. And there is increasing focus on who pays and who doesn't pay their fair share for education.
Lawmakers have been mulling over the issue since the 2003 regular session.
A plan still being worked on in the Senate would cut property taxes by one-third and add $1.5 billion in new education spending. To do that, senators would have to raise $7.5 billion in new revenue.
Among the options being considered are a universal business tax, an increase in the sales tax, new "sin" taxes on cigarettes and alcohol and expanded gambling in the form of video lottery terminals at horse and dog tracks.
But a growing number of legislators would like to add a revamp of the agricultural valuations to the list.
Rep. Sylvester Turner, D-Houston, said the state could add $400 million to its school finance coffers by tightening the law.
"A lot of weekend farmers get an ag exemption and agriculture is not their primary income," said Sen. John Whitmire, D-Houston. "If we're going to really, really examine school finance and our tax system, everything should be on the table. No sacred cows."
Whitmire is one of several Houston-area lawmakers who receive ag valuations on property they own. He said his farm near Chappell Hill is not a weekend operation; he pays a family to manage 100 cows on 300 acres.
Across the state, $91 billion in property value is taken off the tax rolls. The loss in revenue to school districts tops $1.5 billion.
In comparison, the state-mandated $15,000 homestead exemption costs school districts statewide $1.1 billion.
The state's reliance on local property taxes to fund nearly 60 percent of the $30 billion public school system has many homeowners straining under ever-increasing property tax bills. A homeowner with a large lot in an urban area pays full market value on the unimproved land.
But land surrounding a home near Brenham may be valued at as little as $1 per acre if the owner has qualified for an agriculture valuation.
And those getting the breaks are increasingly less likely to be family farmers and ranchers. According to the state comptroller, $409 million in agriculture productivity tax savings goes to out-of-state interests and $500 million goes to Texans whose family income is more than $90,000.
In Harris County, some of the largest tax savings goes to Rouse-Houston, a subsidiary of The Rouse Co., a real estate development concern based in Columbia, Md.; Texas Genco, the generating assets recently sold by CenterPoint to a group of investors; Hewlett-Packard Co. and Memorial Hermann Hospital. School districts are the biggest losers, but cities and counties also are seeing their tax base eroded.
Keeping open space Local county appraisers assess a property's market value, including the lot and improvements such as homes and outbuildings, and then various exemptions are deducted. An agriculture valuation is not an exemption but an alternative valuation usually significantly less than market value.
No one is suggesting eliminating the agriculture valuations, but there is increasing talk about rewriting the law to toughen the requirements and capture some of the lost revenue.
"There's bound to be some happy medium that wouldn't take this much off the tax roll," said Willy Dilworth, chief appraiser for Washington County.
Lawmakers have been reluctant to open up the agriculture valuations to scrutiny. And there is yet to be a public outcry about the inequalities in the property valuation, as Texans cling to the state's prevailing myth of wide-open spaces even as more and more residents crowd into urban and suburban areas.
Environmental-conscious Austin residents supported Dell's purchase of the ranch land because he prevented it from being developed into a subdivision.
"Very few people earn 100 percent of their income from agriculture. There are fewer and fewer family farms," said Gary Eldridge, chief appraiser for Llano County.
The Llano school district ranks No. 8 in the state in the value of property taken off the tax rolls — nearly $794 million.
Despite the need for more money for schools, Eldridge said that even tinkering with the valuations could be devastating to agriculture.
"Whether it be in the Valley or plains in North Texas, there's no way agriculture can stand a bigger expense and burden," said Eldridge.
Since the last session in 2003, legislators have been vowing to lower homeowners' property taxes and find a new way to fund education.
The need for change became more urgent last summer when state District Judge John Dietz of Travis County ruled that the school funding system is operating as an unconstitutional state property tax and is inadequate to meet the high standards lawmakers have set for students.
The state is appealing the landmark ruling to the Texas Supreme Court. Even though it may take months for the high court to rule, lawmakers hope to enact a new school finance system during the regular session that ends in late May.
Rural lawmakers, however, are expected to fight changes in the property appraisal law out of fear it could hurt their constituents. Conservation groups also are determined to keep the wildlife designation. Rep. Harvey Hilderbran, R-Kerrville, said there are sufficient safeguards in the law to prevent most abuses. If land that has been in agricultural use is sold for development, local tax officials assess a "rollback tax," the difference between the taxes paid over the previous five years and the taxes paid if the land had been taxed on its higher market value.
Corporate tax avoidance While property tax records are public, it's much more difficult to find out if Texas corporations have taken advantage of a legal loophole to avoid paying franchise taxes.
James LeBas, former chief revenue estimator for Comptroller Carole Keeton Strayhorn, said that almost every major corporation has used the tax shelter. As a result, franchise collections have been dropping since 1999.
That loophole again will be under scrutiny. Legislative hearings have mentioned some of the giant corporations that have reorganized their Texas operations as limited partnerships to escape the tax. Those include Dell, SBC and Reliant. Most of the state's major newspapers, including the Houston Chronicle, don't pay the franchise tax. Strayhorn's office said the state is losing about $400 million more each year as companies shift their profits into tax-free partnerships.
House Speaker Tom Craddick and Lt. Gov. David Dewhurst have said that Texas must find a broad-based tax to replace the franchise tax, which only one of six businesses pays. They say the rate would be lower than the franchise tax of 4.5 percent of net profits.
Chronicle staffer Amy Raskin contributed to this report.
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LAWMAKERS' TAX BENEFITS
Several area lawmakers receive special agriculture or timber valuations on land they own that make their property's taxable value much lower than its market value.
• Sen. Jon Lindsay, R-Houston: 14 acres in Harris County, market value, $280,980; taxable value, $60,120; taxes lost to Klein ISD, $3,755
• Sen. John Whitmire, D-Houston: 357 acres plus home in Washington County, market value, $1.5 million; taxable value, $276,440; taxes lost to Brenham ISD, $17,697.
• Rep. Bill Callegari, R-Katy: 1,082 acres plus home in Blanco County, $2 million market value; taxable value, $157,530; taxes lost to Johnson City ISD, $27,787.
• Rep. Joe Crabb, R-Atascosita: 627 acres plus mobile home in Gonzales County; $702,240 market value; taxable value, $66,860; taxes lost to Waelder ISD, $9,022.
• Rep. Debbie Riddle, R-Tomball: Nine acres in Harris County; market value, $98,000; taxable value, $1,080; taxes lost to Klein ISD, $1,648.
Lawmakers' personal financial statements, county appraisal districts, school district tax offices
He said on KSEV 700AM radio that it takes around 25 years to "harvest" trees yet in 30 years he had not done so.
There are some fat cat legislators in this state.
HOUSTON (Texas) PING
I believe that person is Lindsey..... Please correct if wrong.
Whitmire's an ass;
probably not one farmer in five can get by on farm income alone.
I've just planted a fruit and pecan orchard and likely won't get my first crop for 5 years; what am I supposed to do in the meantime - lose my ag exemption?
I can't blame anyone for wanting and getting a tax break, but we should all get them, and as a practice, not a reward. And, of course, screw the schools.
This is not a Houston thing. It's a Texas thing.
I sit on 110 acreas and I raise Axis deer. It is ONLY for a tax dodge. However I think I should get some break for keeping 110 acres from going to 5 acre lots and I do make a profit from the deer.
There are subdivisions containing over a hundred lots around here where the acreage of each lot is set at 12 or so acres and each lot owner gets an ag exemption. This is corrupt. Our local very rural school district is suffering. Our whole county is suffering. We just plain need more money.
I predicted this would come to pass ten years ago when I bought this place. Just couldn't believe I was getting away with such a blatant scam.
There are several multi-thousand acre (up to 35,000) ranches in Central Texas that keep just a few cows running around to maintain their ag exemption. They are owned by guys like Red McCombs.
Reform is coming.
I think it was. My discussion about it was done on the Texas forum page on FR so I can't really go back to the discussion.
There are some fat cat legislators in this every state.
I have a novel idea...How about equal protection under the law for EVERYONE???
This is rich... You deserve a tax break for preventing other people from being able to own their own property???
There are subdivisions containing over a hundred lots around here where the acreage of each lot is set at 12 or so acres and each lot owner gets an ag exemption. This is corrupt...
Your rural schools are suffering. You employ a TAX DODGE! You claim you DESERVE it! You claim others are "corrupt" for employing the SAME tax dodge!
I didn't say I deserve the full break ... just something. I'm not preventing anyone from having a five acre lot. Have you any idea how much land we have doing nothing in Texas? Somebody has to own large pieces of land ... unless you want the state to take it over. It CAN"T be taxed at the same rate as a city lot otherwise the state would own 90% of all the land. If I owned a small parcel I would expect to pay the full valuation and I admit that I am taking advantage of the situation as it now stands ... as is everyone else.
I can qualify for my ag exemption even if they crack down because I can show a true and substantial ag income and expenditures. Right now people are getting a full ag exemption on thousands of acres because they nurture the deer population. This is a bit much. Folks who claim an ag exemption are just plain liars. They are not nurturing the deer, raising anything or maintaining open space. I do all three.
BTT!!!!!!
Land should ALL be taxed at the same percentage of market value. 1000 acres of rural land may have the same value of 5 acres of suburban land or 1/12 acre of commercial land. Each should pay the same tax on the land.
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