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Are Texans’ property taxes ‘no longer really dependent’ on values?
Citing economic concerns from the coronavirus pandemic, some local officials in Texas have asked state leadership to consider freezing property appraisals at their 2019 values to protect against a drastic increase in property taxes.
During a May 24 television interview with reporter Jason Whitley of WFAA-TV in Dallas, Lt. Gov. Dan Patrick said the proposal is "a terrible idea."
"We don’t want to freeze your taxes, because then they can’t go down," Patrick said. "This is what the scam is by the cities and counties. It sounds good, ‘We want to freeze your values.’ Well the bill that we passed last year, Jason, says this: Your taxes that you pay are no longer really dependent on your values, it is on their revenue growth."
Patrick went on to explain that cities and counties have been growing their property tax revenue by 8% or more annually, and that the legislation passed last year prevents them from growing their property tax revenue by more than 3.5%.
"So the value of your house, Jason, or anyone watching, no matter how high it goes up, they have to lower their tax rate to bring their (total revenue growth) to 3.5%. It is a seesaw. The values go up, they have to lower their rate so they cannot grow any more than 3.5% in their budget."
Patrick gets some parts of his larger explanation right, but his initial claim that property tax bills paid by individuals are no longer dependent on property values needs further examination.
Broadly speaking, property tax bills are based on the value of a person’s home or business (determined by an appraisal district) and the tax rate set by local taxing entities (cities, counties, school districts, etc.). Texas does not have a state property tax.
State lawmakers approved a bill in 2019 that lowers the cap on how much local entities can collect in increased property tax revenue, which affects the property tax rate they ultimately charge. The legislation established an automatic election for entities that want to exceed the cap. Previously, voters needed to petition to prompt an election.
The legislation did not change the formula for calculating property tax bills, which relies on the tax rate and home and business appraisals.
When asked for more information about this claim, Patrick’s spokeswoman Sherry Sylvester pointed to the text of the bill and the lowered cap on increasing property tax revenue.
"Lt. Governor Patrick did not say that appraised values are no longer a factor in the property tax equation," she said in an email. "What he wanted to make clear is that they are far less important now because local governments can't just keep the tax rate the same and increase their revenue based on a rising appraisal."
To be clear, Patrick said: "Your taxes that you pay are no longer really dependent on your values, it is on their revenue growth."
Examining property taxes
Dick Lavine, former chairman of the Board of Directors of the Travis Center Appraisal District, said the equation for calculating property taxes is "foundational," and was not altered by the bill Patrick referenced.
Lavine, who serves as senior fiscal analyst at Every Texan (formerly the Center for Public Policy Priorities), described the process for levying property taxes in an email:
"The city/county determines the size of the pie (total revenue to be collected). Your individual appraisal determines how big your slice (your personal tax bill) is. If your appraisal has gone up more than the average, then your tax bill will go up more than the average. And vice-versa.
"So if the city/county is increasing its total property tax revenue by 3.5%, your tax bill might go up by more than 3.5% or less than 3.5%, depending on how much your appraisal changed compared to everyone else's."
The legislation the state adopted last year requires most local taxing entities to seek voter approval through an election if they want to increase property tax revenue (the size of the pie) by 3.5% or more than the revenue collected one year prior. Previously, this limit was set at 8%.
This allows taxing entities to then calculate the annual tax rate, which is applied to individual property values to determine the final property tax bill a resident must pay.
Bruce Elfant, the Tax-Assessor Collector in Travis County, said the first thing taxing entities do is determine where the tax rate needs to be set in order to bring in the same amount of revenue as the year before.
This rate was previously called the effective tax rate, but the bill Patrick mentions renames it the "no-new revenue tax rate." It is based on properties taxed both years and does not include revenue from new construction.
"So, in theory, if the values rise, this rate should go down and if property values decrease, this rate will go up," said Susan Zavala, director of the Property Tax Collections division at the Travis County Tax Office.
From there, cities, counties and school districts assess their budgetary needs and decide whether to grow their property tax revenue by changing the tax rate.
The bill adopted in 2019 limits how much taxing entities can increase revenue for maintenance and operations by a different cap, depending on the jurisdiction. For cities and counties, the cap is 3.5%. For school districts, it is 2.5%.
If a taxing jurisdiction wants to increase revenue beyond this cap, it triggers an automatic election. Previously, voters had to petition in order to prompt a "rollback election."
This is the rollback rate, renamed the "voter-approved tax rate" under the new law. This rate allows taxing jurisdictions to grow their revenue and collect on debt that has already been approved by voters, Zavala said.
But, all things considered, Zavala said property values are "still part of calculating how much taxes you will owe and it definitely can affect how much you pay in taxes."
State Sen. Paul Bettencourt, who authored the new tax law, said the bill is about "changing the culture" by putting "more emphasis on the tax rate setting than on the value setting."
Historically, Bettencourt said taxpayers were fixated on appealing appraisals and "committing jitsu" to keep their values low, even though values are just one part of the equation. He said the bill puts "a complete flashlight on the tax rate setting process."
"Basically, we're taking the elected officials’ setting of tax rates and bringing it up to at least the same level of importance as the value itself," said Bettencourt, R-Houston. "Because both sides of the equation times each other, equals the bill people pay."
He said this is a "really subtle problem" the legislature has been fighting, so many of the changes in the new law are about "transparency in tax rate setting."
"If he had said ‘completely’ dependent versus ‘really,’ I don’t think anybody would be arguing," he said.
Dale Craymer, president of the Texas Taxpayers and Research Association, agreed.
"In fact, all your appraisal does is determine what your share of the jurisdiction’s desired amount of property taxes is," Craymer said in an email. "If your home is 1% of a jurisdiction’s tax base, you’re going to pay 1% of whatever revenue the jurisdiction wants to raise, whether they want more money or less. Your value doesn’t turn into a tax bill until jurisdictions adopt the tax rate that will apply against that value. No matter what your value is, your tax bill is zero until jurisdictions adopt their tax rates."
Patrick said a 2019 law adopted in Texas means that property taxes in the state "are no longer really dependent on your values, it is on (city and county) revenue growth."
The bill Patrick mentioned limited how much taxing entities can increase property tax revenue before triggering an election, but it did not change the role property values play in any part of the calculation. Property values remain essential to the process.
The law’s author said the bill was more about shifting culture than changing the literal calculation for taxes, as it increases transparency and requires an automatic rollback election.
But regardless of where the bill shifted focus, property values dictate what a person’s tax bill will be each year and they are part of the equation for cities and counties when they calculate the annual tax rate.
We rate this claim Mostly False.
Twitter, Jason Whitley, May 24, 2020
Texas Legislature Online, Senate Bill 2, signed June 12, 2016
Texas Legislature Online, Fiscal Note: Senate Bill 2, May 24, 2019
Texas Legislature Online, Bill Analysis: Senate Bill 2, July 26, 2019
Phone interview with Bruce Elfant, Travis County Tax-Assessor Collector, May 27, 2020
Email interview with Dick Lavine, Senior Fiscal Analyst at Every Texan, May 27, 2020
Texas Comptroller, Frequently Asked Questions About Property Tax, accessed May 27, 2020
Emailed remarks from Susan Zavala, director of the Property Tax Collections division at the Travis County Tax Office, May 28, 2020
Email interview with Steven Aranyi, spokesman for Patrick, May 28, 2020
Email interview with Sherry Sylvester, spokeswoman for Lt. Gov. Dan Patrick, May 29, 2020
Phone interview with state Sen. Paul Bettencourt, May 29, 2020
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Are Texans’ property taxes ‘no longer really dependent’ on values?
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