Big Texas property tax reform bill won't reduce taxes but it might slow the increase

Governor Abbott campaigned on property tax reform and no doubt got a lot of votes just for that. But now that the bill is approaching his desk it's looking like the give and take between the parties wanting higher taxes or lower taxes has resulted in a compromise.

Dallas Morning News provides some detail at Texas House passes massive property tax overhaul, moving one step closer to Gov. Abbott’s desk. Their summary follows:

Here's the latest version of Senate Bill 2 as passed by the House:

3.5% revenue cap on local governments. This means cities and counties can collect only up to 3.5% more in property tax revenue than they did the previous year. The original versions of the House and Senate bills had a 2.5% cap. Local governments can exceed the cap if they hold an election and voters approve the additional tax hike. Currently, they can increase property tax revenue by up to 8 percent a year without the threat of an election.

Schools districts included under the cap, but only "symbolically." In the original versions of the bills, school districts were also included under the 2.5% cap -- which the House Ways & Means Committee changed to 2% last week. Burrows said that legally, the cap doesn't hold water in their bill and has to be addressed in school funding legislation. The Senate's version of the school funding bill includes a 2.5% cap. School districts make up more than half of a property owner's tax bill.

No exemption for rural and small districts. The original version of the bill excluded small cities and counties that collect less than $15 million in revenue. This was an important carrot for rural Republicans in the Senate to get on board. But the House committee cut the exemption. "All property tax bills big or small deserve property tax reform," Burrows said.

Exemptions for hospital and community college districts. The cap as originally written applied to special taxing districts, which include utility districts, community colleges and hospital districts. House Ways and Means carved out the latter two because of a concern that community college tuition would increase and because hospitals endure high medical inflation costs, Burrows said.

Passage of property tax overhaul tied to passage of House school funding bill. The House's No. 1 priority this session is a massive $9 billion bill that increases funding for schools, gives teachers raises and rewrites how school districts receive money. The bill ensures that if the school funding bill does not pass, the property tax bill doesn't go into effect. Burrows said this is significant because the school bill also includes property tax relief, and capping cities and counties alone isn't enough to make a meaningful impact.

Every year, our own city council here in Midland, Texas, puts an item in its budget for lobbying. It would be interesting to see how much money various municipalities spent lobbying to keep taxes high.

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10:46 AM 5/1/2019

Comments

[Houston Tax Attorney]

The timing is interesting, as we are waiting to see what happens with the Wayfare case and sales tax. That case allows states, including Texas, to collect tax on out of state retailers, like Amazon. If it ends up increasing sales tax collections significantly (like some think it will), then it seems like some property tax relief might be in order....