From AP and STAFF REPORTS
AUSTIN - Taxpayers would have to approve some city and county spending increases and disclose the sales price or fair market value of property under recommendations made Tuesday by a governor’s task force on Texas’ tax appraisal system.
The spending limit would prevent local governments from collecting revenue of more than 5 percent above the previous year’s budget, unless there is voter approval.
Two state constitutional amendments also were part of the package of proposals. Those would have to be approved by two-thirds of the Legislature - not an easy proposition - then by the state’s voters before they could take effect.
One of those amendments would cap residential appraisal increases at 5 percent for cities and counties, instead of the current 10 percent.
Chairman Tom Pauken said he encountered upset taxpayers all over the state as the task force held public hearings over the past few months.
“There’s a lot of anger, a lot of frustration on the part of the property owners,” Pauken said, adding that often taxpayers don’t know where the blame lies. He said it tends to lie with local government spending.
The task force report said Texas has the nation’s ninth-highest property taxes as a percentage of personal income and that property taxes have increased 233 percent in less than 20 years, even though inflation growth was much lower.
Local governments weren’t happy with Pauken’s package and insisted its local spending limits would penalize fast-growing areas in need of providing basic services.
The Texas Association of Counties issued an analysis saying the package “is problematic for counties in recommending a 5 percent revenue cap - despite the fact that local governments already live under an 8 percent revenue cap.”
The Center for Public Policy Priorities, which advocates for low-income Texans, issued a statement saying Pauken’s recommendations are not about the appraisal system and that the report offered no evidence that the appraisal system is overvaluing property. It said the recommendations would keep taxes unrealistically low, leave local officials unable to meet local needs and shift more of the tax burden onto low-income families.
“The commission proposes a new cap on local tax revenue that would leave localities unable to meet critical needs and ignores such elementary factors as population growth,” said Dick Lavine of the CPPP. “An area with 10 percent growth in population - not uncommon when a new subdivision opens in a town on the urban fringe - would be forced to cut per capita spending at precisely the time the need for police, fire, EMS and transportation services is increasing.”
There was no immediate word on which state lawmakers would push the proposals, and some opponents of the recommendations privately suggested they were dead on arrival in the Legislature.
Republican Gov. Rick Perry, who joined Pauken in rolling out the recommendations, said it’s too early to say who will be the legislative sponsors.
“Obviously this is a difficult issue to resolve,” said Perry, who criticized what he called appraisal creep throughout his re-election bid last year.
Perry said the Pauken proposals would protect Texans from the “silent tax hikes” allowed for in the existing appraisal system.
One of the proposed constitutional amendments would let taxpayers calculate their property taxes based on a five-year rolling average of the property’s appraised value.
The other would lower the residential appraisal cap on city and county taxes from 10 percent to 5 percent; double the local property tax homestead exemption to $6,000; and permit local governments to enact a half-cent countywide sales tax if it is dedicated to property tax reduction. The appraisal cap reduction to 5 percent could only happen in counties that enact the half-cent sales tax increase.
Possible sales tax increase
Lavine described the commission’s proposal to increase the sales tax to compensate for lowering the appraisal cap as “a bad trade.”
“The commission’s proposal to raise sales taxes by another half-cent in order to pay for property tax reductions would increase the tax burden on the majority of Texas families,” Lavine said. “The sales tax is extremely regressive, taking a much larger percentage of the income of a lower-income family than of a higher-income family, while the benefit of appraisal caps is concentrated on fast-appreciating, high-value homes. The Pauken Commission’s proposal to increase the county homestead exemption by $3,000 would save typical homeowners less than $10 a year, doing little to offset the sales tax increase.”
School district taxes - typically the highest of the local taxing entities - would largely be untouched by the proposals.
Sales price disclosure
The task force was divided on the issue of requiring property owners to disclose sales prices. Those opposed brought up the issue of confidentiality, Pauken said.
The panel suggested having the property owner provide a fair market value estimate, or a “market rendering,” if the owner doesn’t disclose the actual sales price. Pauken said sometimes other costs can be woven into sales prices, making the figures misleading.
“The key will be fair market value,” he said.
The CPPP’s position is one of sales price disclosure.
“Fair property taxation depends on appraisal of all property at true market value,” Lavine said. “Owners of high-end homes and certain business properties have long benefited from below-market appraisals because of the lack of accurate sales price information for these properties.
“The typical home, however, is easy to appraise at market value,” he said. “As a result, many homeowners are paying more than their fair share. Thirty-five states mandate disclosure of the sales prices of all property, so that appraisal districts have the best information available from which to estimate market value.
“Instead, the commission would require actual disclosure only if the buyer failed to report his or her own ‘estimate’ of value,” Lavine said.
The CPPP also advocates strengthening the ability of the comptroller’s office to “carry out a rigorous property value study, using sales-price information.”
“Bringing undervalued properties up to true market value would allow local governments to maintain their revenue at a lower tax rate, easing pressure on the majority of homeowners,” Lavine said.
Pauken’s proposals also don’t provide a sure way to crack down on unfunded state mandates placed on local governments, the Texas Association of Counties said.
The CPPP also noted the pressure of those mandates on local government.
“Texas relies heavily on local governments to meet public needs, and local governments must rely heavily on the property tax,” Lavine said. “Focusing on explicit mandates, as does the commission, ignores the real source of fiscal pressures on cities and counties.
“When the state fails to meet its responsibility to provide for Texas families, local governments must step into the breach,” Lavine said. “Local governments, elected by the people, should have control over their own taxes and budgets to meet those needs.”
On the Internet
Center for Public Policy Priorities: www.cppp.org