Texas Among States with Highest Real Estate Taxes, Republican-Backed Legislation Aims to Change That

Texas rises to the top again — this time, when it comes to high taxes.  According to a new study by WalletHub, Texas ranks sixth-highest for real estate taxes in the country. It’s no wonder then, that more than 60 tax-related bills sit before the Texas legislature now.

Worth noting: the WalletHub study cites Republican states as having lower overall property taxes when compared to their blue counterparts. So it comes as no surprise that much of the legislation aimed at decreasing Texans’ property tax burden originates from Republicans.

State lawmakers authored some of these bills, it seems, simply to appease a constituency unhappy over rising property taxes, and not because of any real fiscal prudence. According to property tax professionals, these bill face slim chances of passing. For instance, State Rep. Mark Keough (R – The Woodlands) proposed legislation to limit the year-over-year increases on property taxes to 5 percent. No limit currently exists to year-over-year increases, except on properties without homestead exemptions. The limit for homestead properties is 10 percent, year-over-year.

Patrick Melton, property tax consultant and vice president at Texas Tax Protest, doesn’t see Keough’s bill gaining much traction. “For individual homeowners trying to pay the bills, it sounds great. But a very large percentage of property tax revenue comes from commercial property. And so while a bill like this may be popular for a politician to champion, I don’t know that it will change.”

Keough’s bill, House Bill 44, is currently being reviewed by the Ways and Means Committee. A call to Keough’s office for comment was not immediately returned.

Tax Payers Perceived as ‘Overburdened’

One of the most talked about pieces of proposed tax legislation came from Texas State Sen. Paul Bettencourt (R – Houston) late last fall. Senate Bill 2, currently in reviewed by the Senate Finance Committee, seeks to limit the property tax rate (see the bill’s history). Proposed as a solution to ‘overburdened’ tax payers, Bettencourt’s SB2 aims to drive down property taxes even as property values rise. Bettencourt argues that tax hikes outpace that of the average Texans’ income. The Houston Chronicle quotes Bettencourt doubling down on that premise.

“What happens is tax bills go up faster than Texans’ pay checks,” Bettencourt said. “What this means is, that we’re putting too much pressure on where they live and work to pay property tax bills, and those bills must slow down.”

Only, it’s simply not true.

The Dallas Morning News reports data from the both federal and state agencies shows property taxes and personal income growing at essentially the same rate since 1990. In fact, since 2005, personal income has risen at a slightly higher rate than property taxes. Moreover, after 2010, median household income actually grew faster than the median tax bill. Interestingly, a chart produced by the state’s own Legislative Budget Board echoes the data used by The News. But Bettencourt persists as the perception looms that property taxes are rising uncontrolled. And perception seems to be everything – at least enough to fuel potential changes in policy.

Could Public Institutions See Funding Crises?

Critics of the bill (and there are many) see the proposed legislation as a cap on revenue, at a time when public institutions – city and county roads, police and fire protection, community colleges  — already face funding issues.

“Vital government services could be harder to fund which may be a valid concern as Texas sees a population surge,” Melton said. But it’s not all bad news. The measure creates a uniform voting system for tax increases, eliminating the need for residents to petition to set tax rate elections. “The bill also introduces measures that will enhance transparency and accountability among taxing jurisdictions and appraisal districts, which will bode well for tax payers.”

The Legislature reconvened yesterday, but whether we’ll see movement on these bills any time soon remains unclear. In the meantime, if you’re making any second shelter decisions, you should consider that WalletHub reports that Hawaii has the lowest real-estate taxes in the country. Aloha!