Dick Lavine, senior fiscal analyst for the think tank Every Texan, said it’s too early to panic about a rapid rise in property taxes as he thinks Texas lawmakers have the tools to ease people’s concerns.
“You can’t say whether property taxes are going up; tax rates are being set right now,” Lavine told Austin Journal. “Just because your appraisal has gone up does not mean your final tax bill is going up. I think it’s a little early to say anything about what the final number for your tax bill is going to be.”
He advises people to go to online sources to learn more about what their tax bill might be before they grow too upset. But he realizes property taxes are a concern for many residents.
A pair of constitutional amendments reducing property taxes were passed by voters with landslide margins May 7.
Texas Proposition 1, a school maintenance and operations tax reduction for elderly and disabled residents, was approved by an 87.03% to 12.97% margin.
In the same election, Texas Proposition 2, which increased the homestead exemption on school taxes from $25,000 to $40,000, passed 84.95% to 15.05%.
The record home prices Texans are seeing in addition to quickly rising mortgage rates have made it discouraging for potential homebuyers to enter the market. Compared to June 2021 home sales, there was a 9.4% drop in home sales during June 2022.
On June 21, Gov. Greg Abbott noted the $30 billion account balance estimated by the Texas Comptroller’s Office to be on hand by the dawn of the 2023 legislative session.
“We must use a substantial portion of this money to cut property taxes in Texas,” Abbott tweeted.
According to Vance Ginn, Texas Public Policy Foundation's chief economist, property taxes have gone up 181% since 2002. Due to these property tax increases, 76% of Texans say the increasing property taxes have been a major burden on them and their families.
Lavine said it’s important to look at the other side as property taxes play a crucial role in providing vital public services.
“Property taxes are how we pay for schools and police and fire and EMS and libraries and parks and a lot of our other important public services,” Lavine said. “If people value those services, they should also value the chance to support them.”
But he understands the alarm.
“I think there’s a lot of concern because of the appraisal notices that went out in April, which were quite a shock because appraisals in Austin were up 20%-50%, which may have reflected the market, which is all the appraisal district is supposed to do,” he said. “Then the tax rate is an entirely separate process that the school district and the city and the country don't know. I think people may still be focusing on the first step. They aren’t understanding the process isn’t over yet.”
Lavine said the Legislature has options to provide property tax relief.
“For schools there is a flat-dollar homestead exemption, (it) used to be $25,000 and recently raised to $40,000. If your home is a $400,000 home, your taxable value is $360,000,” he explained. “The cities and counties can give exemptions, homestead exemptions, but only a percentage exemption.
"The one thing the Legislature could do — which might require a constitutional amendment — is to give cities and counties the ability to offer their own flat-dollar homestead exemption," he added. "And the advantage of that is, a flat-dollar exemption is worth a lot more to a person with a lower/middle value home compared to the upper-value home."
He said this would be a greater benefit to people living and paying taxes on homes in the mid-range, because people who live in a $1 million house would still be assessed based on $900,000 of property.
“It concentrates or would concentrate the benefit on people with lower-value homes,” Lavine said.
Such a move would require the Legislature to put the question on the ballot and then would have to be approved by a statewide vote. It could be approved during the 2023 session, placed on the November ballot and enacted in 2024.
“They could even do it quicker than that if they wanted to,” Lavine said. “And it takes a little while to make change, but it would make a really significant change on working middle-class families’ tax bills for cities and counties.”
He said city and county officials have testified at legislative hearings that this is an option they would like to see explored. It’s more fair than a percentage.
There are other ways to lessen the burden on homeowners, Lavine said.
“Another way to protect homeowners is to make sure that businesses, especially the larger commercial and industrial businesses, are really paying on their real market value, the way the homeowners are,” he said. “And the way to do that would be either by sales price disclosure.
"What we want to make sure is that everybody's paying what they really should be paying," he added. "And so sales disclosure, meaning that you have to report what you’re paying when you buy or sell a piece of property, would give the appraisal district a lot better information."
He said if cities and counties have more accurate information on the values of commercial and industrial property, they can raise the same amount of money they need at a lower tax rate.
Lavine said he realizes there may be some opposition to this measure. Businesses and industrial companies would likely be up in arms, he said.
“I think they’re doing pretty well under the current system, and so they might resist change,” Lavine said. “But I think if people understood that the responsibility wasn’t being shared evenly, there certainly might be a lot of public support for it.”
He said in the past, critics of sales disclosures argued it could lead to taxation on real estate sales. But in 2015 Texas voters approved a constitutional amendment on residential homestead exemptions that also prohibited the enactment of a law that imposes a transfer tax on a transaction that conveys fee simple title to real property.
“So that no longer really is an issue,” he said.
At Every Texan, Lavine focuses on building state and local revenue systems that meet Texans’ needs, according to an online biography. He has worked there since 1994.
Prior to joining Center for Public Policy Priorities, as the think tank was known until 2020, he served as a senior researcher at the House Research Organization of the Texas House of Representatives for a decade.