AUSTIN, Texas — Property taxes are complicated, but Texas homeowners say they're too high and are begging for relief. State lawmakers promised to help, but they're split over the best way to lower them.
What You Need To Know
- The Texas House wants to control how much appraisals go up while cutting tax rates too
- The president of the Texas Taxpayers and Research Association says Texas’ appraisal cap today is targeted toward homeowners
- Right now, the Senate's plan focuses on raising the homestead exemption from $40,000 to $70,000
- The House proposal would save homeowners an average of $460 a year. The Senate’s would save them about $341 annually
The Texas House wants to control how much appraisals go up while cutting tax rates too. A part of their plan would mean a home's taxable value could only increase 5% rather than the 10% today. The cap would also apply to properties like grocery stores, apartment complexes and rental homes.
“With appraisal caps, they remove a portion of the growth in the tax base. They take that off the tax base,” said Dale Craymer, the president of the Texas Taxpayers and Research Association (TTARA). “So with appraisal caps, your tax base is going to be lower than what it would be if there were no caps, and local jurisdictions are raising the same amount of money. But on a lower tax base, they adopt a higher tax rate. So if you don't have a property that’s subject to the cap, you see the higher tax rate, so you end up paying more taxes.”
Craymer added that Texas’ appraisal cap today is targeted toward homeowners. TTARA's research shows those caps save homeowners $4 billion last year when the market was hot.
“But because local jurisdictions adopted higher tax rates to offset that tax base loss, other business property that was not subject to the cap ended up having to pay those higher tax rates," Craymer said. "Now what the House has proposed is different. It is a broader appraisal cap that applies to all real estate. So there are going to be some pluses and minuses within that. But it is more than just a cap on homeowner property. It is a broader cap on all property.”
Right now, the Senate's plan focuses on raising the homestead exemption from $40,000 to $70,000. That's the share of a home’s appraised value that is exempt from property taxes. For example, if you have a home that’s worth $200,000, you’d be taxed for only $130,000 of it.
“It’s a joke,” said Austin resident Jak Kesterson about the property tax proposals. He purchased his South Austin home in 2006. He said he pays more than $10,000 in property taxes for 1,000 square feet.
The House proposal would save homeowners an average of $460 a year. The Senate’s would save them about $341 annually.
“Three hundred fifty dollars a year out of $10,000. Come on. That’s not even 10%,” Kesterson said.
But Craymer said the Senate still has more legislation to introduce on property taxes, so that savings number could be much higher. This is just what we know so far.
“They will use additional money to buy down property tax rates further, so I don’t think we’ve seen the complete Senate plan yet,” Craymer said.
Craymer said the median price of a home in Texas is $340,000. The owner would pay about $6,000 in property taxes every year. And even though Kesterson doesn’t think lawmakers are doing all they can to reduce property taxes, Craymer said a few hundred dollars per year could help someone who really needs it.
“Obviously, the very high-end properties pay a lot more property tax. And maybe $400 of tax relief doesn’t mean a lot to them. But for someone who owns a $250,000 home and is barely making their mortgage payments, $400 can be a godsend,” Craymer said.
Property taxes are levied at the local level in Texas. The state government is getting involved because lawmakers have heard so many complaints about rising costs. But Craymer said what’s driving homeowners’ tax bills is not their appraisals, but rather, the desire for local governments to spend more money.
“It is a bit challenging from a policy perspective for so many legislators to be focusing on cutting a tax that they don't levy directly, but there are mechanisms in place to do that,” Craymer said. “And, with regards to the way the state funds schools, we do expect that schools are going to get more money. Schools are going to get enough money that they're able to cut property taxes as well. So the way the state can cut property taxes is through school funding.”
Kesterson wishes Texas would just have an income tax instead. He’s seen many neighbors priced out of his South Austin neighborhood.
“They tax everything else, but they don't tax the income of the wealthiest people. And that's where the taxes should be coming from,” Kesterson said. “I mean, these people who are retired and living in these houses, they have no income, so they wouldn't pay taxes. They would pay very low taxes."
Craymer is confident that some sort of property tax relief bill will pass this legislative session.
“Both plans are opening offers,” he said. “The state has a tremendous amount of surplus money, and there is additional money yet to be committed. So my expectation is by session end, both the House and the Senate are likely to be talking about bigger numbers on tax cuts than what we've seen initially. But as I said, we haven't seen all of the Senate plan yet, so it's difficult to run the numbers and compare the two. But the good thing is, there's one thing they agree on, and that's that taxes do need to come down.”