I have four things to say about this.
A statewide property tax relief plan that takes effect next year is prompting hefty tax increases this fall in many of the biggest cities and counties in Texas, even in places that have historically kept rates flat or decreased them.
Elected officials in some cities and counties say they have no choice but to raise taxes as high as they can this year to brace for the implementation of property tax reforms that Republican Gov. Greg Abbott and the Texas Legislature called historic earlier this summer. The average effective tax rate for single-family homes in Texas was 2.18 percent in 2018, third-highest in the nation, according to a study by ATTOM Data Solutions.
Starting next year, cities and counties will be barred from increasing property tax collections more than 3.5 percent in any year without a vote of the public. Currently, the state has an 8-percent limit, called the rollback rate, that state lawmakers say has allowed cities and counties to overtax homeowners. The lack of a state income tax makes Texas municipalities especially reliant on property tax revenue.
A look around the state shows many counties and cities are pushing rates to the 8-percent rollback rate this year to bank money or, in a few cases, even to fund pay raises for themselves, in reaction to the new law. El Paso, Harris, Tarrant, Webb and Travis counties are among those pushing to the current rollback rate, or near it. And cities including El Paso, Arlington, Corpus Christi and Austin are similarly considering rates at or near the 8-percent limit.
“I think a lot of cities and counties know that we are putting them on a diet and they are going on one last bender before it happens,” said State Rep. Dustin Burrows, R-Lubbock, who was a key player in crafting the property tax reforms as the leader of the House Ways and Means Committee.
In Harris County, which hasn’t raised the tax rate in decades, county officials say the state’s new restrictions are forcing them to react by raising the tax rate by 2.26 cents per $100 of assessed value. County Judge Lina Hidalgo said the county needs to create a contingency fund to ensure it can pay for services, such as health care, transportation and flood control, once the state’s 3.5-percent cap goes into effect. The rate increase, if approved next month, would allow Harris County to collect more than $200 million extra in tax money than last year.
1. There are some extremely bitchy quotes in the story from Sen. Paul Bettencourt, who pushed the bill that led to this in the Senate. I may have rolled my eyes so hard that they will never unroll.
2. The counties and cities that are considering this are acting in what they believe is their best interest, and the best interest of their residents. Plenty of expenses that counties and cities face, from disaster relief to health care to salaries and pensions, aren’t subject to any kind of rate limit. HB3 radically changed their long term financial picture. They had no choice but to adjust.
3. Just as a reminder, there are plenty of things the Legislature could have done to improve our property tax system without putting the squeeze on local governments. The Lege could also greatly help counties on the expenditure side of the balance sheet by expanding Medicaid, which would do a lot to reduce the cost of health care on counties. The whining from the likes of Bettencourt on this is just beyond rich. All that is without even pointing out that having a property tax-based system, in which the main expense is completely disconnected from people’s annual incomes, instead of an income tax-based system, is always going to have problems like this.
4. The same voters who will be given the power to approve or reject future tax collection levels also have the power to approve or reject the local officials who may be raising tax rates now ahead of that. They also have that power over people like Paul Bettencourt and Dustin Burrows and Greg Abbott and so forth. Maybe some day that power will be exercised.