Analysis: The challenge of making a property tax cut pitch pay off in Texas

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Two years ago, the promises about property tax relief were big and the rewards were small. Don’t expect that to improve much.

The hoopla has not left town. Lt. Gov. Dan Patrick is again making property tax relief a priority. Paul Bettencourt of Houston, who replaced Patrick in the Senate, held hearings across the state and found exactly what he was looking for — Texans mad about paying some of the highest property taxes in the country. Bettencourt and his allies are pledging relief.

But it’s really hard to deliver on such promises. For one thing, the state doesn’t levy a property tax. It’s unconstitutional here. State lawmakers don’t have the power to raise or lower those taxes. That’s left to local governments — school districts, cities, counties, hospital districts and the like — the only bodies allowed to tax property in Texas.

When state lawmakers take the blame for high property taxes, they’d be within their rights to redirect those protests to city, county and school officials. But this is politics, so they promise to fix things and hope to win credit if and when the situation improves.  

It hardly ever does, at least in this category. Texas has no income tax — and no demonstrated yearning for one. It relies heavily on sales taxes for state and local income and on property taxes to pay for schools and other local services.

As of 2013, Texas had the 15th-highest per-capita property tax, according to a study by the Lincoln Institute of Land Policy. The state ranked fourth-highest in the nation, however, in the effective tax rate for a median owner-occupied home (another analysis, from the Tax Foundation, ranks Texas sixth overall). The Lincoln study said the average per-capita property tax burden in the U.S. was $1,441, compared to $1,563 in Texas. Part of that reflects the state’s relatively cheap housing: The median U.S. home was worth $176,700 in 2013, while the Texas equivalent was worth $128,900.

You might remember the last round of the property tax wars. Unfortunately for some politicians, you might not.

The rates here are high, the study said: “Effective property tax rates on owner-occupied housing in Texas are the fourth-highest in the United States and about 58 percent above the median rate for all states.”

According to the Tax Policy Center, a project of the Urban Institute and the Brookings Institution, property taxes account for 40.4 percent of total state and local government revenue in Texas — sixth among the states. The national average is 31.3 percent of the total, but most states — unlike Texas — have personal income taxes in the mix.

Bettencourt, who chaired the Senate Select Committee on Property Tax Reform and Relief, contends that property taxes have been growing faster than median household incomes in Texas. That depends on which numbers you use. The committee compares total tax levies — which include growth in tax rates, property values and tax bases — to median household incomes, a number that doesn’t account for economic growth in the same way. Officials with the Texas Municipal League, which represents cities, told the committee that total personal income in Texas and total property taxes in Texas have been growing at about the same rate.

No matter. Many voters are mad about their property tax bills. Politicians, whatever else you might think about them, are responsive to voters’ expressions of unhappiness. The committee knocked out an 89-page report that recommends tighter restrictions on local governments’ ability to raise property taxes without voter approval and adjusting the dates of the property tax year to match the election calendar, putting voters in position to do something about their taxes as they find out about them.

You might remember the last round of the property tax wars. Unfortunately for some politicians, you might not. The Legislature sent voters a constitutional amendment raising homestead exemptions from property taxes. Voters approved it. The average benefit? A $126 tax break.

Meanwhile, legislators have been reluctant to tear into the state’s public school financing system, though that is arguably the fastest way to change the size of your property tax bill. Schools account for the biggest part of property taxes. And as school budgets have grown, the local districts have borne most of the increase in costs. State spending on public education rose 7.4 percent from 2008 to now, according to the Legislative Budget Board. Local spending during the same period rose 44.2 percent. Ten years ago, the state and the local districts each covered about 45 percent of the cost of public education, with the federal government picking up the rest. The feds are still at about 10 percent, but the state share has fallen to 38.4 percent and the local share has risen to 51.5 percent.

On a per-student basis, the state spends $339 less today than it did in 2008, while the local districts pay almost $1,000 more per student.

It’s not a complicated formula: Local school property taxes rose as state funding fell. The legislators seeking property tax reform are also about to write the next state budget.

More columns from Ross Ramsey:

• If they were only listening to voters, Texas Republican lawmakers could cast stress-free votes on a proposed bathroom bill. That's also true if they were only listening to businesses. But voters and businesses don't want the same thing.
• Changes in federal policy during the coming Trump administration could mean big changes in state policy in Texas. But it's probably going to take some time.
• Post-election criticism of the news media is on point — journalists need to get out of their bubbles and listen to people they haven't been listening to. But that's only part of the problem: Voters need to do the same thing.

Disclosure: The Texas Municipal League has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.