Property Tax Relief by the Texas Legislature? I think not!

Anyone who is interesting in Texas politics knows how things are all crazy in Austin during the time that the Legislature is in session.  That being said, on May 1, 2015 Lt. Governor Patrick sent out an announcement that they had passed meaningful property tax relief.  Below is the E-mail announcement.

HOUSTON – Today, Lt. Governor Patrick, along with Senator Paul Bettencourt, addressed the media regarding property tax reform accomplishments by the Texas Senate. The Texas Senate continues leading the charge for real property tax relief and reform by providing meaningful assistance to all property owners and Texas businesses, large and small. “As one of Texas taxpayers’ top priorities for this legislative session, I am proud of the successes achieved by the Texas Senate for monumental property tax reform and relief,” said Texas Lieutenant Governor Dan Patrick. “While others said it couldn’t be done, Sen. Bettencourt, Sen. Creighton and Sen. Nelson went to work – and continue to work on this issue for the people of Texas.” “I couldn’t be more proud of them and of all the Senators for the hard work and additional transparency and accountability we’re providing for Texas taxpayers.” Among the bills already passed by the Texas Senate that will structurally reform the entire property tax system and provide billions of dollars in property tax relief for small businesses, are:

  • Senate Bill 1 (SB 1) by Nelson, et. al. – provides $2.15 billion in homestead property tax relief for Texas homeowners.
  • Senate Bill 545/SJR 30 by Taylor – includes a property tax exemption for real property leased to certain schools that are used exclusively by the school for educational purposes.
  • Senate Bill 683 by Hancock – ensures citizens, or their representatives if they so choose, automatically receive funds for which they qualify and have properly requested.
  • Senate Bill 762 and Senate Bill 849 by Bettencourt, et. al. – relate to the exemption from ad valorem taxation of income-producing tangible personal property having a value of less than a certain amount.
  • Senate Bill 1760 by Creighton – requires all local taxing districts that wish to exceed the effective tax rate to first have a vote of at least 60% of the governing body in support of the tax increase.
  • Senate Bill 1821/SJR 60 by Campbell – allows businesses that hire an honorably discharged veteran to receive an exemption of up to $15,000 on the ad valorem tax of the appraised value of the property.

“SB 1760 levels the playing field for Texas taxpayers,” said Sen. Creighton. “Standing strong for taxpayer rights was a promise I made to the citizens of Senate District 4; and, I am thankful my Senate colleagues voted to pass this landmark legislation.” “This is a historic day – for the first time we have established a super majority requirement to help protect Texas taxpayers from rising property taxes,” said Sen. Bettencourt. “I want to applaud Sen. Creighton for supporting the amendment, as well as Lt. Governor Patrick for his leadership on these and all other property tax relief measures.”

Let me clear some things up for those that are not quite clear because of the political speak.  Yes they did pass legislation that will impact property taxes.  Yes some of that legislation will provide accountability and transparency for property owners (both real estate, and physical). But to call the total package that was passed in those six pieces of legislation.

monumental property tax reform and relief

A monumental pile of crap.  And I am here to point out that two of the major pieces of legislation do little or nothing to provide property tax relief to Texas homeowners.

First regarding SB 1; increasing the homestead exemption is fine for some, but not as great as it seems. This only will help those that own homes, those that rent homes or live in apartments do not get any benefit from this. Second an increase in the exemption will do one of two things, first reduce the taxable value of the property for the homeowner and thus reduce the taxes due (what the bill is intended to do) second, because of other legislation this session and other restrictions on the taxing entities force these entities to eliminate the homestead exemption all together after 2024, thus increasing the tax bill on home owners.

Second on the hit parade is SB 1760; The bill restricts taxing districts from raising tax rates without a vote of their residents and requires a 60% super majority to pass.  This is all well and good but does ZERO when it comes to reducing the growth of property tax revenue.  That is because the real power of growth is in the hands of the appraisal district, not the taxing district.  Let me repeat that,  a taxing district can effectively sit on their collective hands and get up to a 10% increase in revenue without doing a single solitary thing.  No vote needs to be taken, nothing outside the public notice of setting their tax rate in the small local paper, no say by the residents. ZERO. 

The residents do have a voice but it is only through the painful and trying process of challenging the appraised value of their property.

If our leaders had really wanted to provide meaningful property tax control and relief they would have done this one thing.

1) Reduce the maximum that your appraised property value can increase to 3% or the rate of inflation which ever is greater.  This reduction would allow more people to buy better homes in growing neighborhoods because they would not be under the pressure of seeing their taxes possibly double in less than 1/4 of their mortgage.  As it is right now with a 10% cap on property values the average home owner can see their taxable value double in just 8 years.  With the changes in SB 1 that may increase to  a few more years.  Attached is a google doc showing how little this changes the person’s property taxes.

Link Here

The spreadsheets shows the worst case in each configuration for a house that was originally valued at 100k

  • Sheet1 – a 10% increase every year and no successful reductions with standard 15K exemption
  • Sheet2 – a 3% increase every year and no successful reductions with standard 15K exemption
  • Sheet3 – a 10% increase every year and no successful reductions with the 25% exemption (SB 1 once enacted)
  • Sheet4 – a 3% increase every year and no successful reductions with the 25% exemption

A quick summary,

  • Sheet 1 – 397K in taxes over 30 years.
  • Sheet 2 – 105K in taxes over 30 years.
  • Sheet 3 – 306K in taxes over 30 years.
  • Sheet 4 – 87K in taxes over 30 years.

So what this little math lesson show?  SB1 could save a homeowner about 90K in taxes over 30 years or maybe 3K the majority of which would be at the back end of the 3o year window.   That is if all the taxing entities keep the exemptions after 10 years, if not expect to see a huge property tax increase around 2025.


Hello All

Well Hamous was kind enough to give me posting permission.   Every so often as time allows I will cobble together something that I think might create some discussion.  Or at least some thought.  My first one will be coming out soon.