Analysis: There's a reason Texas governors keep failing to lower property taxes

Texas Elections 2018

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First things first: Gov. Greg Abbott’s latest campaign idea isn’t going to lower your property taxes.

Property taxes are local. It’s in the Texas Constitution: The state can’t levy a property tax. The governor and the Legislature can’t lower rates. The state doesn’t do property appraisals, either, so they can’t mess with the value of any particular property on the tax rolls.

Still, anguish over property taxes is at or near the top of the list of what Abbott and other politicians hear most often from Texans. This is not a complicated part of the civic compact: Voters are peeved. Politicians aim to please. Lowering taxes would make a politician popular with voters.

Abbott, who is running for re-election, proposed Tuesday to limit local governments to annual revenue increases of 2.5 percent, require two-thirds of voters to approve additional local debt, attempt to make property appraisal boards more accountable to voters and give taxpayers a little more leverage in disputes over property values.

It’s no wonder property taxes are unpopular. Income taxes are based on taxpayers’ ability to pay: Make no money, pay no tax. Sales taxes are somewhat (but not completely) discretionary: Don’t buy stuff, don’t pay. Property taxes can rise even when property owners don’t have the money to pay them. Nevertheless, Texas is dependent on them, and now has the sixth highest property tax burden in the country and the 12th highest sales tax burden, according to the Tax Foundation. But just because voters and the people they elect hate income taxes doesn’t mean they love property taxes.

State officials in Texas have never found a way to lower property taxes on more than a temporary basis. The last serious effort was in 2006, a school finance makeover that then-Gov. Rick Perry claimed cut school property taxes by one-third. Taxpayers never saw those savings.  

That 2006 effort took a lot of pressure off of school districts, limiting their top tax rates and pumping more state money into public education, but it evaporated quickly. On a per-student basis, the state pays less for public education now than it did then, according to the Legislative Budget Board. Local school property taxes have risen, in part, because of that decline in the state’s share. The state even uses money recaptured from local school property taxes for general spending on programs that have nothing to do with education.

As Perry found (and other governors from both parties found before that), getting a handle on local property taxes is really hard — especially if you’re not one of the local officials who levy those taxes.

That’s a particular problem with public education, which is the largest portion of Texas property tax bills, the most expensive tax to lower and the local property tax that’s most directly dependent on state spending, since public education spending is shared by local, state and federal sources.

Texas legislators came close to capping increases in city and county property taxes last year, but the House and Senate couldn’t settle differences in how much growth to allow without requiring public referenda.

Abbott’s latest proposal goes one place they didn’t, proposing that the state stop imposing unfunded mandates on the local governments whose growth they want to regulate. Cities and counties alike have griped that the state is forcing costs on them and then squawking when taxes go up as a result.

“The Legislature should be statutorily prohibited from imposing any mandates on local political subdivisions that impose additional costs without, at the same time, providing the appropriate funding — effectively prohibiting future unfunded mandates on political subdivisions,” Abbott writes. Note that weasel-word “future” — an indication that existing unfunded mandates will remain in place.

Even so, the next line in the proposal could have been written by a lobbyist for the cities and counties in Texas: “Such a proposal must go hand in hand with a property tax revenue cap because the state should not limit the ability of political subdivisions to raise revenue while at the same time imposing additional fiscal burdens on those same subdivisions.”

That bit was missing from last year’s legislative proposals, giving local governments a seemingly legitimate reason to argue against the state’s attempt to cage them on spending.

Most of Abbott’s ideas were included in legislation that didn’t pass last year or in earlier legislative sessions. He’s staying away from thorny school finance issues, though the state’s strongest mechanism for lowering or slowing the growth of property taxes would arguably be to raise its own share of the costs of public education, taking cost pressure off of local districts.

To be fair to Abbott, that’s what Perry tried to do in 2006. But if Perry turned out to be wrong on the policy front, he was right on the political front: He was re-elected in 2006, and again in 2010.