Abbott seeks to slow property taxes
Governor proposes 2.5 percent cap on revenues for local governments
Launching a new round in a long-running fight, Gov. Greg Abbott on Tuesday unveiled a plan to curb soaring property taxes in Texas by restricting how much additional revenue cities, counties and school districts can spend each year.
The plan — which promises to be a centerpiece of Abbott’s re-election campaign — would place a 2.5 percent cap on revenue growth from property taxes collected by local taxing agencies, with exceptions for law enforcement and school teacher pay raises.
If local officials wanted to raise that cap, and spend more, they would have to get voter approval. If they stuck with the cap, property tax rates could drop.
The proposal drew sharp reaction from local officials, with Harris County Judge Ed Emmett saying the proposal would “destroy” Harris County government if the limit on revenue is not complemented with a new revenue source such as a consumption tax.
Mayor Sylvester Turner said the proposal would “strangle local governments.”
The proposal is expected to face strong opposition from cities, counties and school districts, which in many areas have been raising taxes to cover expanding needs, especially in Houston and other fastgrowing parts of the state.
Between 2015 and 2016, Abbott said Houston grew its property-tax revenue by 6 percent, and Harris County tax revenues grew by more than 7 percent.
Had the revenue growth cap been in effect, Houston taxpayers would have
saved about $40 million and Harris County taxpayers would have saved $75 million, the governor said.
The city of Houston already is under a voterimposed cap that limits property taxes to the combined rates of inflation and population growth or 4.5 percent, whichever is lower.
“With the skyrocketing rise in property taxes, more and more Texans face the risk of being forced out of the homes they have lived in for decades,” Abbott said Tuesday in announcing his plan at a press conference in Houston, which has become Ground Zero in recent years for complaints about skyrocketing property taxes.
“Young families who are just starting out are having trouble affording their first home and businesses are unable to grow and hire more workers. Enough is enough.”
The passage of federal tax reform in recent weeks “creates a new urgency to provide property tax relief,” Abbott says in his plan, since it caps the deduction for state and local taxes at $10,000.
With school taxes the biggest drivers of propertytax growth statewide, Abbott said the state may have to pay for some of those increased costs and must abolish the so-called practice of unfunded mandates on local officials.
Texas ranks sixth in the nation in property-tax burden. Since 1997, property taxes in Texas have risen 195 percent overall, according to Abbott’s office.
Texas, however, has a low overall tax burden, in part because there is no state income tax.
In announcing his plan, Abbott cited the example of Meyerland marketing manager David Garcia, a single father of four whose property taxes have increased 45 percent in the last four years. And he noted that an Austin toy store recently closed after 42 years because of higher rent driven by steadily increasing property taxes.
“We can no longer sit idly by while homeowners are made tenants of their property,” he said. “We must rein in property tax growth.”
Abbott said that while his proposed 2.5 percent cap on revenue growth will affect some fast-growing areas of Texas, others like Tarrant, Fort Bend and Collin counties will not be affected because their revenue growth rates have been less for several years.
Abbott said his plan also will require local elected officials who oversee taxing districts would have to publicly vote to raise property-tax appraisals, a move designed make the process more transparent to taxpayers — and could thwart some increases.
In addition, the plan also would limit local debt — now at $218.4 billion statewide, the second highest in the nation among the 10 largest states.
Good and bad
Emmett said Abbott’s proposal contains “a lot of good and a lot of bad.” But he said all counties should not be subjected to the same revenue growth cap, since the needs of fastgrowing Harris County with 2 million people in its unincorporated areas are much different than rural, low-population counties.
“I hate the property tax. It needs to go away and be replaced with something that’s more reasonable in urban areas,” Emmett said. It needs to go away and be replaced with something that’s more reasonable in urban areas.”
School districts, which receive about 40-60 percent of property taxes collected across the state, would face the biggest upheaval under Abbott’s plan. Many have seen property tax revenue growth of 7-12 percent each year — significantly higher than the proposed 2.5 percent cap — and immediately questioned where they can make up what appear to be the likelihood of lost revenues.
“The only way to reduce local school property taxes is to increase state funding for public education,” said Texas State Teachers Association President Noel Candelaria. “(Abbott) needs to show us the money . ... Without a plan for additional state funding, the governor’s proposal to limit local property taxes is nothing but an electionyear gimmick that would cut school funding and force curtailment of other critical public services, such as fire and police protection.”
Abbott’s plan says the state must be prepared to increase its share “to the extent necessary to ensure that public schools have access to the funding they need.”
Bill Pilkington, the president of Klein ISD’s Board of Trustees, said the proposal could bring relief to local taxpayers without harming school districts, but only if the state follows through with additional funding. Klein ISD would be budgeted to collect about $10.8 million less in property taxes this year if a 2.5 percent growth cap was in place.
“I believe the governor will do what he says,” Pilkington said. “The challenge, though, is the Legislature comes and goes, and that sometimes is less consistent.”
In Austin, the Center for Public Policy Priorities criticized the plan as a regurgitated tax plan that would prevent cities and counties from raising money for firefighters, police and paramedics, echoing the sentiments of some local officials.
Turner predicted that if the plan were implemented the city would have to cut police and fire services.
“The best way to lower local property taxes would be for the state to fully fund public education. The state once funded 60 percent of the cost of public education. Now it only funds 40 percent,” he said. “School taxes, not city taxes, are the largest portion of Houstonian’s property tax bills.”
At a time when skyrocketing property taxes have become a top issue for voters, the issue has also gained momentum in recent week with the passage of federal tax reform that caps the deduction for state and local taxes at $10,000. That change “creates a new urgency to provide property tax relief,” Abbott states in his plan.
“Property taxes are remnants of an antiquated system of taxation that was necessitated because wealth was tied directly to the land: farming & ranching primarily,” Abbott’s reform plan states. “As Texas has urbanized and the economy has shifted largely to manufacturing, research and development, retail and professional services, the system of taxation is outdated.”
Property tax reform has been debated by Texas leaders for years, but reforms have been slow or blocked by local taxing entities who have complained that changes would limit their ability to provide basic and necessary services to their communities, and to comply with state-mandated school standards.
Even so, Abbott said the time has come to change Texas’ antiquated property-tax system. He said at least 15 other states have adopted similar revenue-growth caps as a way to curb runaway property tax bills.
Big and bold
At his announcement, he was flanked by Lt. Gov. Dan Patrick, long a proponent of reforms, and other Senate and House leaders who immediately endorsed the plan. It toughens a property-tax measure that was nearly approved last year, when the Senate and House approved differing proposals to limit how much additional revenue cities and counties can raise with higher rates without voter approval.
“This is a real, bolder, bigger reform plan,” Patrick said. “I can promise you the Senate will deliver on property tax relief. That’s a guarantee.”
House Ways and Means Committee Chairman Dennis Bonnen, R-Angleton, and state Rep. Jim Murphy, a Houston Republican who is a member of the Ways and Means Committee that considers tax bills, said Abbott’s plan is a possible solution to a long-running problem.
“Serious problems demand serious leadership and that’s that we’re getting here today,” Bonnen said.
Sen. Paul Bettencourt, a Houston Republican who chairs a special Senate committee on property-tax reform, said the proposed 2.5 percent revenue growth cap could help some school districts avoid sending money back to the state under the controversial “recapture” rule.
“As appraised values increase, property taxes should decrease,” said Bettencourt, who served as the Harris County tax collector and assessor before he was elected to the Senate. “This plan would mean some relief to property-taxpayers.”