Under a new proposal from a key Republican state senator, city and county property tax increases of 4 percent or greater would automatically trigger elections in which voters could nix the planned tax hikes.
State Sen. Paul Bettencourt, R-Houston, who chaired a special committee that studied ways to limit local property taxes in advance of the next legislative session, on Tuesday unveiled Senate Bill 2, which would make changes to Texas’ “roll back” process for tax increases.
Currently, if cities and counties raise taxes by 8 percent or more, residents can petition to hold an election on the tax rate. Under the proposal, the “roll back rate” is lowered to 4 percent, and the referendum is automatic.
“Property tax bills go up much faster than people’s paychecks,” Bettencourt said. “The taxpayers’ ability to pay has to be looked at.”
Critics of the proposal, however, said that it usurps local control and that Bettencourt uses fuzzy math in claiming that property taxes have outpaced income growth. They also questioned whether the bill would make an impact given that it doesn’t address the largest source of property tax collections in Texas: school districts.
The mayors of Austin, San Antonio, San Marcos and New Braunfels issued a joint statement attacking the plan, saying it would save their taxpayers little but would result in significant cuts to city services.
“We should not risk police, fire fighting, EMS, parks, safety nets and transportation projects – all to save Austin homeowners only $2.69 a month. It’s risky and not real tax relief,” Austin Mayor Steve Adler said in the statement. “If the Legislature really wants to help local taxpayers, it should better fund education because that’s most of the Austin property tax bill.”
Bettencourt’s bill includes a dig aimed directly at the city of Austin, which last year sued the Travis Central Appraisal District to argue that commercial properties are systematically undervalued in Texas, indirectly costing homeowners who end up paying more on their property taxes. Earlier this month, a judge tossed out the lawsuit, saying it was a question for the Legislature, not the courts.
The Bettencourt bill would codify that finding by prohibiting local governments from filing similar suits. In a news conference, he criticized Austin’s handling of the lawsuit, in which the city encouraged local tax authorities to reject its appeal of the valuations to set up a showdown in court.
“I can’t imagine anything more un-American,” Bettencourt said.
Adler fired back in a statement: “I hear the senator’s passion, but there are few things more American than the right to seek redress in our courts — especially as regards a broken tax system.”
The property tax measure is one of Lt. Gov. Dan Patrick’s top priorities for the legislative session that begins in January. He appointed Bettencourt’s Select Committee on Property Tax Reform and Relief, which held eight hearings across the state since the last session.
“Texans pay the sixth-highest property tax in the nation and Texans have told us loud and clear that common-sense property tax reform legislation is long overdue,” Patrick said in a statement. “Property taxes are driving people out of their homes and hampering business expansion and growth. It’s time for this to stop.”
With lackluster sales tax collections caused by persistently low oil and gas prices and growing demands for increased funding for scandal-plagued social programs, there will be little wiggle room in the state budget adopted by lawmakers next year. Republicans might find the Bettencourt proposal to be politically useful because it allows them to take credit for tax relief without having to find cuts in their own budget.
Bennett Sandlin, executive director of the Texas Municipal League, said that the Bettencourt plan is politically motivated and that real property tax relief must involve changes to the funding system for public schools.
“It’s just diverting attention away from the real issue,” he said. “It’s coming after a very small piece of the pie. It’s not going to provide meaningful relief.”
Travis County Commissioner Brigid Shea said she thinks Bettencourt’s bill is unfair to counties because the state often gives them “unfunded mandates” that require counties to carry out costly functions without providing state money to pay for them.
“The Legislature takes actions which force additional costs on local government and a lot of that is in the court arena,” Shea said.
Apples and incomes
Bettencourt’s pitch for Senate Bill 2 comes with a packet of line graphs comparing city and county tax collections with median household income over the last decade. The graphs appear to show that property tax collections have far outpaced Texans’ incomes, but critics say that comparison is too simplistic
Bettencourt’s approach fails to take into account population growth because it compares the growth of one typical Texas household’s income to the growth in tax collections across the entire state. A more direct comparison would do one of two things: compare a typical Texans’ income to what a typical Texan pays in taxes; or compare all Texans’ combined incomes to what all Texans’ pay in taxes combined.
Dick Lavine, a senior fiscal analyst for the left-leaning Center for Public Policy Priorities, chose the latter option and found that the growth in total personal income for all Texans has tracked closely with the growth in total city and county tax collections since 1993.
“It’s really the foundation for his whole argument,” Lavine said. “That’s his fundamental complaint about the system, and it’s a misinterpretation of what’s going on.”
Bettencourt said the committee chose to use median household income because it was “the best reflection of what a median household in Texas has with extra disposable income.”
“No matter what graph you use, you’ve got property tax payments rising faster than people’s ability to pay for it,” he said. “We’ll leave it to the folks to decide: Are their paychecks rising faster than their taxes? And the universal answer is no.”