“The fact is, not enough Texans actually see the property tax relief we have delivered,” said Governor Abbott. “It’s time to change that. I’m running for Governor to pass a Taxpayers’ Bill of Rights that will deliver substantial and lasting property tax cuts.”
At his re-election campaign launch, Abbott touted the “$18 billion in property tax cuts throughout [his] time as governor.” But he immediately qualified that assertion by saying those cuts have not been fully realized by taxpayers because of rising appraisals.
Texas’ local property tax-heavy system means that tax bills are not commensurate with the taxpayer’s ability to pay. This became painfully obvious in 2020 when state and local government shut down orders closed many businesses, leading to massive unemployment. But despite losing their income, homeowners who lost their jobs did not automatically see a reduction in their tax burden.
In fact, because of the disaster loophole that was utilized by many cities and counties, property tax rates could be raised above the legislature’s then-newly set limit of 3.5 percent without voter approval during a fiscal year in which an emergency declaration was issued for their jurisdiction. Not only did the pandemic lead to statewide emergency declarations, but so did the winter storm-caused blackouts a year ago. In 2021, the legislature closed that loophole for “economic disasters” like the pandemic. But it still exists for physical disasters, which are far less likely to reach all corners of the state.
Disasters or not, property taxes have increased substantially over the years. In 2021, localities collected $38 billion with school districts accounting for the largest individual share by category.
Property taxes are consistently rated among the leading issues of concern for Texas voters. Abolishing property taxes is a Texas GOP platform plank, along with several items the legislature has already delivered on, fully or partially — setting a 2.5 percent cap on school district increases and a 3.5 percent cap on other localities was done in 2019; the pandemic loophole closure passed last year.
But moving forward, property taxes will continue to be an area of concern. Abbott’s property tax plan includes:
- Reduce school district rates across the state every year
- Provide an up to 3 percent discount for taxpayers who pay their bill in full early
- Allow property tax bills to be paid off quarterly or semiannually
- Reduce the taxable value of a newly purchased home in line with the price paid
- Create an exemption for small business equipment
- Increase transparency in the appraisal protest system and streamline the process
- Require all debt issued by local governments to have either two-thirds support of the governing body or two-thirds support of voters
The first item is more of a goal than a new policy as the state can reduce the local property tax burden by injecting its own money into school’s — lowering the ISD side of the school finance seesaw.
Establishing a sort of payment plan option, either quarterly or semiannually, would mirror a practice already used at the federal level by the Internal Revenue Service (IRS). In certain circumstances, the IRS allows taxpayers to pay off their tax bill on short-term or long-term payment plans. This would be a similar policy at the local level.
Appraisals are one of the two main causes of unceasing tax bill increases. The appraisal process is not an easy hoop to jump through, and it can be inflexible depending on the situation. In many places across the state, the taxable value of property rises year after year, even with exemptions. Taxpayers may dispute their appraisal, but the burden of proof is on the homeowner.
And gathering alternative evidence, which usually entails paying for a third-party appraiser, often costs money out-of-pocket. Added to this, during the pandemic many appraisal districts closed their doors to in-person hearings. That reduced face-to-face accessibility between taxpayers and the bureaucrats in charge of setting one half of the property tax equation. Attorney General Ken Paxton warned this was not legal back in 2020, but lawmakers and politicians have continued to beat the drum on appraisal reform.
The other side of that equation is the tax rate set by the governing body of the political subdivision. These officials have available to them the total taxable value of the district’s appraisal rolls. Those are the individuals who took advantage of the loophole and they decide whether to raise, lower, or keep the same rate, or to adopt the no-new-revenue rate that does not raise tax bills.
Abbott’s proposal would require all debt issued by local officials, whether paid for through property taxes (General Obligation bonds) or through debt service (Certificates of Obligation, etc), receive a supermajority support from the elected officials or their voters. While this likely wouldn’t affect localities whose boards of governance are united behind spending more and more money, it would make spending more difficult for those with more divided lines of support and opposition.
One factor that adds to appraisals for businesses is personal property used in operations. Whether it’s an ice cream machine or a forklift, those items have value, and they are included in the appraised taxable value.
During the interim in 2019, the Texas Senate Finance Committee conducted a hearing on business personal property taxes, but nothing passed on the issue in the 87th legislative session. Abbott’s plan calls for that to change in the 88th legislative session, specifically an exemption of up to $100,000 of their business personal property — meaning, the first six figures of equipment value would not be taxable.
Abbott’s challengers have each set out their own approach on property taxes. Former state Sen. Don Huffines has called for the abolishment of the property tax system — through a phasing-out approach that would include a constitutional amendment requiring their elimination. In tandem with it, Huffines’s plan homes in on a gradual consumption tax swap while leaving income taxes entirely off the table.
Former Texas GOP Chair Allen West’s plan calls for replacing property taxes with a consumption-only tax system, like at the state level. He also calls for scouring the Sunset Advisory Commission’s two decades of recommendations, finding savings by identifying which programs or agencies were singled out for reform or abolishment.
And BlazeTV host Chad Prather’s plan calls first for the state to rein in spending and debt before evaluating a transition away from property taxes. In the meantime, Prather wants to buy down property taxes even further with savings made from cutting spending. His platform also mentions one of Abbott’s items: freezing the taxable property value at the purchase price.
Back in 2019, Abbott, along with Lt. Governor Dan Patrick and then-Speaker Dennis Bonnen, pushed for a sales tax swap to decrease property taxes even further in that session’s marquee tax reform bill. The plan failed in a blaze of glory after the Legislative Budget Board estimated the swap would create an effective increase in taxes paid and polling showed its substantial unpopularity among voters.
That episode shows just how difficult changing course from the status quo can be. Tax policy in Texas has changed, but a radical shift such as immediate abolishment would be unlike anything the state has ever seen. Abbott’s plan tinkers with the current system while his opponents have each expressed their desire to move away from property taxes entirely but to do so gradually.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.