Skip to comments.What happened to the tax cut? (Texas property taxes)
Posted on 10/22/2007 8:57:56 AM PDT by Cat loving Texan
Much-touted rate cut has not lowered school taxes bill as much as was hoped.
By Jason Embry , Marty Toohey AMERICAN-STATESMAN STAFF Monday, October 22, 2007
In many Central Texas school districts, the tax bill due on an average-value home has decreased 15 percent or less over the past two years. That drop may seem paltry to home-owners who remember that state lawmakers reduced tax rates for school operations 33 percent not too long ago.
A variety of factors have blunted the much-ballyhooed rate cut, including rising home values, voter-approved debt to build schools and school boards' decisions to inch taxes back up.
"People should be really mad," said Carl Tepper, a commercial property manager who expects that the rising value of his home in the Allandale neighborhood of Austin will eat up the school tax cut.
The Legislature made the rate cut during a special session in 2006. A school district with a tax rate of $1.50 per $100 in property valuation, for example, had its rate reduced to $1 over two years.
The changecame in response to a Texas Supreme Court order that local school boards be given more control over the tax rates they set. The court said state funding for education had fallen to such a point that school boards were virtually forced to charge the highest possible rate, creating a statewide property tax, which the Texas Constitution prohibits.
Lawmakers, hoping to appease the court and residents angry over their bills, replaced the money that school districts lost in the rate cut with a new business tax, higher sales taxes on tobacco and money from a budget surplus.
But the rate cut has not reduced actual school tax payments by a third, for a variety of reasons.
For one, property values have increased in many parts of the state. The average value of a home in the Austin district before the cut was $196,039. Today, it's $226,720. As the value of a property goes up, every penny in the tax rate costs a homeowner more.
The effect on a specific property depends on its value, and most homes are protected by a 10 percent cap on how much their value can rise in a year. Individual owners can see how they fared as tax bills begin arriving this month.
Secondly, to avoid further lawsuits from school districts saying they lacked the discretion to set their own tax rates, legislators gave local school boards a little room to move them back up. Most school boards wasted no time in doing so, adding 4 cents back to their tax rates last year. That was the maximum amount they could add without having to ask voters for approval.
Catherine Clark of the Texas Association of School Boards said schools have had to push their tax rates back up to pay rising fuel and insurance costs and to fund salary bumps for employees who did not receive state-funded pay increases. The Legislature has paid for raises for teachers over the past two years but not for other employees such as bus drivers and secretaries.
"School districts are facing the same kinds of cost increases that ordinary Texans are facing," Clark said. "You've got to have somebody to drive those buses and serve the food and keep the place looking clean and the light bulbs changed."
Finally, the cut did not affect schools' leeway to use voter-approved debt to finance construction projects.
In the Manor school district, for example, voters approved two bond packages within a year, pushing the tax rate used to pay for new buildings from 33 cents per $100 in property valuation two years ago to 49 cents this year.
Lawmakers never claimed that they would do anything about the taxes used to pay off bonds. But even when looking at the section of tax bills that covers only the cost of day-to-day operations, the payment for the average-value home has decreased about 20 percent or less in many school districts.
During the 2006 session, lawmakers often talked of a one-third reduction in school tax rates. Members of the media at times repeated that piece of political shorthand, and it made its way unabated into political ads across the state. They tapped into angst over the size of school tax bills, which are usually the single biggest piece of a property tax bill and are often more than charges from the local city, county and other jurisdictions combined.
"Historic property tax relief enacted by the Legislature during the last session benefited Texas homeowners by reducing their ad valorem (property) taxes by one-third," proclaims an October newsletter from House Speaker Tom Craddick, R-Midland, without elaboration.
Defenders of the tax cut have said that angry taxpayers should consider how much higher bills would have been had there been no cut.
Gov. Rick Perry said during his 2006 re-election campaign that owners of the average-value home in Texas would get a $2,000 tax cut from the plan. But that claim did not take into account that property values would increase or that school boards would add a few pennies back to their tax rates.
Two years into the tax cut, the savings on the average-valuehome in the Austin district has been $536.
But Perry got only half of the changes he wanted from the Legislature. This year, a task force that he named recommended a series of ways to soften the effects of rising property values, but the Legislature largely ignored the suggestions.
"The governor believes that the Legislature appropriately addressed half of the equation through the school tax cut," Perry spokeswoman Krista Moody said. "The other half of the equation is the appraisal side. The governor thinks that's something the Legislature needs to take on so Texans can feel the relief of the tax cuts in their entirety."
Michael Sullivan of Texans for Fiscal Responsibility, which advocates smaller government, also said the Legislature needs to directly attack appraisal increases.
"Our elected officials were all pretty honest in saying they were going to cut maintenance and operations tax rates by a third," Sullivan said. "That's what they've done. But what most people heard was, 'Cut your school property taxes by a third,' and that only happens when you address both ends of the property-tax equation."
Dick Lavine, a researcher at the Center for Public Policy Priorities, which calls for more government spending on public services, said that fiddling with appraisals would distort the market and equate to a tax break for the wealthy.
The appraisal cap favors homes that are rising most quickly in value, Lavine says, shifting the tax burden to less-valuable homes, renters and businesses. (He said East Austin, where lower-value homes are jumping in value, is a special case.)
"I'm quite surprised people here don't have more respect for the market," Lavine said.
For many taxpayers in Texas, the savings may get even smaller. That's because school districts can raise their tax rates for operations as high as $1.17per $100in property value, but they need approval from voters to do so.
A total of 116 districts have called referendumsto do so this fall, including San Marcos, and hundreds more are expected to in the next few years. If the increases are approved and many educators say they'll need to pass for schools to keep up with inflation and prevent their employees from leaving the tax savings would further erode.
In addition, rising property values don't necessarily equate to a windfall for schools.
When property values went up this year, the state reaped the savings. The end result of such a system, said school finance consultant Dan Casey, is one that gradually shifts the burden back onto local property owners.
Without appraisal caps property tax cuts are worthless and we got a defacto state income tax with Perry’s new business tax.
We avoided Perry's business tax. We moved our two family businesses out of Texas.
Perry is a disaster but would Kay Bailey be better? Maybe we should get Ron Paul to run. LOL
What county are you in? In Harris County we have appraisal caps -- albeit, they are 10% max.
Texas: great for gunowners, terrible for homeowners.
Another Texas Government LIE, just like the one promising that all the lottery ticlet sales proceeds would go to education! Will we EVER learn?
Just trust a government, they have all the answers to every problem. Hillary will soon fix your health-care too! LOL
Government is a beast with a life of it’s own. It usually serves itself, not the constituents and unlike the private sector, you don’t even have an emphasis on efficiency and marketing to offer the consumer the good or service he likes. Government services always end up looking like the VA, Social Security......systems.
Perry is a disappointment. He’s the new type that calls themselves “conservative” but in reality is fiscally liberal. He’s the “big government “ conservative type; that’s why you today have the state of Texas offering up to $3,500 for people to buy new cars if they fail the emissions test and and and. It’s not his money, so spending it is easy.
OH no! The election is over and Hillary won?
There is no property ownership in America as long as there are property taxes.
Us Floridians are still waiting for ours too...
I know one thing. It’s apparently dirt cheap to tag a vehicle in Texas, because it feels like half of the Kansas households tag their vehicles in Texas, to evade our incredibly high personal property tax.
Texas is definately doing something wrong. Texans don’t realize they are sending Austin much of their equity in property taxes. My family has been looking at rural homes with acreage in west Texas and in New Mexico and the difference in prices for comparable homes is astonishing. This is even true when comparing a large Texas city like Lubbock (pop. about 260,000) and a small New Mexico town like Clovis (pop. about 38,000). Even homes way out in the County around Clovis are more expensive than homes in the growing southwest part of Lubbock. Having lost on two Texas properties in the past, and now unable to sell a third for even the tax appraisal value, our minds are made up.
And I forgot to mention that this Texas county also has an annual property tax on vehicles under ten years old. I’ve been told that this tax can be significant for a newer vehicle, i.e. around $400.
Tax cuts? We got ‘em, but the Appraisal Districs keep jacking up property values each year to (over)compensate for it. The law states a maximium of 10% (capped) property value increase each year, and since inception I have received 10% increases each year.
“Carl Tepper, a commercial property manager who expects that the rising value of his home in the Allandale neighborhood of Austin will eat up the school tax cut.”
This is by design- under current regulations the system can be too easily manipulated. Texas desperately needs Property Tax reform.
They raised my property taxes by about 7.5% from last year. Makes me sick to think what we’ll be still paying with we pay the house off!
I take it you are both in Texas. Do you protest your appraisal value each year? I protested my appraisal value and got it down to 2003 levels. Between the school tax reduction and the reduction in my appraisal value I am paying much less than in 2004.
Yep, I live in Austin, the San Francisco of the Southwest.
I’ve protested appraisals before and basically have been laughed out of the Travis Central Appraisal District office (in recent years). My property is what they call “historically undervalued” because it was a tiny POS house in a POS neighborhood under the flightpath of the old airport (basically end of the runway at IH35). Once the airport closed, values began to skyrocket- before the cap was in place I got hit with a $38K increase in one year- more than 50% of the property value at that time (I protested and got about $9K knocked off).
I quit going to the appraisal office to protest because the total appraised value never got anywhere close to being under the previous years value plus the 10% cap. Just an exercise in futility since they got what was dictated by law anyway.
Sept 1 Texas started paying 7-8% more to those providing medical and dental services to people covered by state Medicaid and totally eliminated even the small co-pay which could be collected previously. Not sure how much of this is fed money but do know that it covers an awful lot of kids whose parents are illegals. Managed care medicaid payments also went up plus the amount they are paying an insurance co to manage program. These programs cover lots of folks ages 18-35. We’re also paying $10,000 a month for gated housing complete with pool for the Perry family while their other quarters are being refurnished. Just wait until Kay Bailey is elected!
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