The Texas Newsroom | By Sergio Martínez-Beltrán
PublishedFebruary 1, 2023 at 12:19 PM CST
Homeowners in Texas pay some of the nation's highest property taxes. And state lawmakers know it. Now that they're back in session, they’ve vowed to address the issue, in part, by spending $15 billion to provide property tax relief.
But, how did we get to this point?
Dale Craymer, the president of the Texas Taxpayers and Research Association, said the answer is simple.
“Property taxes in Texas are so high because that’s the price we pay for not having a personal income tax in this state,” Craymer said.
State tax systems are usually looked at as a three-legged stool — one leg is property tax, the second leg is sales tax, and the third leg is the personal income tax.
But Texas is one of only nine states, including Alaska and Florida, without a personal income tax. In fact, Texas has never had one.
The chances of that changing are almost none.
In fact, in 2019, lawmakers made it even more difficultto enact an income tax— now, creating one would require two-thirds of the Legislature to approve it, plus voter support through a statewide referendum.
“So those two legs have to be made bigger to make up for the difference,” Craymer said.
And it shows. According to the Tax Foundation, Texas currently has the 6th highest property tax rate in the county.
All of this worries Vyasar Ganesan, an Austin educator who bought his house in the city in 2017.
“I’m concerned about my property taxes, right? That’s the bulk of what I’m paying,” Ganesan said. “But it’s not just about me — It’s about my friends, my coworkers.”
Ganesan works for the Austin Independent School District.
“Most of the people I know, who I work with, who don’t own a home already, don’t feel like they’ll ever be able to own a home,” Ganesan said.
Dick Lavine, a senior fiscal analyst with the left-leaning think tank Every Texan, told The Texas Newsroom property taxes account for about 50 percent of the total taxes Texans pay each year.
Of the property tax funds collected, half goes to the state’s public schools. The rest goes to cities, counties and special districts, such hospital or community college districts.
Lavine believes one way the state could give homeowners property tax relief is through adjusting school taxes.
“The way that works is if they force the school districts to, say, lower their tax rates, or they increase the homestead exemption reducing the amount of taxes that are collected on homes — the state, through the school finance formulas, makes up the difference,” Lavine said.
He stressed public schools would not lose money, but they would not be getting more money either. That is, unless the Legislature allocates more funding.
This frustrates Austin homeowner Jenny Stirrat, a former employee of the city’s school district.
“Of course I want my property taxes to be lower. But, at the same time, if all this money was coming into AISD it would be a totally different ball game in the school district,” Stirratt said, adding that sometimes her library didn’t have a working heating system.
State lawmakers have already said they’d like to bump education funding this session.
However, their number one priority is to use at least $15 billion dollars to lower property taxes. That includes $3 billion dollars to raise the homestead exemption. This money is coming from the billions of dollars in surplus funds the state has to work with.
Gov. Greg Abbott has said he’d like to see even more than $15 billion spent on property tax relief — signaling we'll probably see lively negotiations during this legislative session.
Ganesan, the Austin resident, is somewhat skeptical about these plans.
"So, there's a lot of potential for what's to be done with this surplus, what I hope that can come from all this money coming in,” Ganesan said. “But I'm fearful — how far is it really gonna go?"
As an expert on taxation and fiscal policy, I can attest to the complexity of the issues discussed in the article from The Texas Newsroom by Sergio Martínez-Beltrán, published on February 1, 2023. The focus is on the high property taxes in Texas, the proposed $15 billion spending by state lawmakers to provide property tax relief, and the underlying reasons for the state's high property tax rates.
Dale Craymer, the president of the Texas Taxpayers and Research Association, provides a crucial insight into the situation. He points out that the high property taxes in Texas are a consequence of not having a personal income tax in the state. Texas is among the minority of states, just nine including Alaska and Florida, that lack a personal income tax. Craymer explains that the absence of personal income tax necessitates making the other two legs of the state tax system—property tax and sales tax—larger to compensate for the revenue gap.
The article emphasizes that Texas has never had a personal income tax and, in 2019, lawmakers made it even more challenging to implement one, requiring a two-thirds majority of the Legislature and voter support through a statewide referendum.
The impact of this tax structure is evident, with Texas currently having the sixth-highest property tax rate in the country, according to the Tax Foundation.
Vyasar Ganesan, an Austin educator, expresses concern about property taxes, emphasizing that it's not only about individual homeowners but also about friends and coworkers who might find homeownership unattainable.
Dick Lavine, a senior fiscal analyst with the left-leaning think tank Every Texan, provides additional context, stating that property taxes make up about 50 percent of the total taxes paid by Texans each year. He suggests that adjusting school taxes could be a way to provide property tax relief to homeowners without negatively impacting public school funding. Lavine explains that if school districts lower their tax rates or increase homestead exemptions, the state can compensate through the school finance formulas.
The frustration of homeowners, such as Jenny Stirrat, is highlighted. Stirrat, a former employee of the city’s school district, expresses the desire for lower property taxes but acknowledges the potential impact on school district funding.
State lawmakers have outlined their priorities for the legislative session, with a significant focus on using at least $15 billion to lower property taxes, including a $3 billion allocation to raise the homestead exemption. The surplus funds available to the state, reaching billions of dollars, are the source of this proposed spending.
Governor Greg Abbott's expressed desire to see even more than $15 billion spent on property tax relief indicates the potential for lively negotiations during the legislative session. However, there remains skepticism, as voiced by Ganesan, regarding the effectiveness and extent of the proposed measures and the ultimate impact on homeowners.
In conclusion, the article provides a comprehensive overview of the factors contributing to high property taxes in Texas, the proposed solutions by state lawmakers, and the concerns and perspectives of homeowners and experts in the field. It underscores the intricate balance required to address property tax relief while ensuring adequate funding for essential public services, particularly in the realm of education.
