Doors closed on state appraisal caps
GOP lawmakers say option isn’t answer for property tax relief amid rising home values
One of the most popular ideas among homeowners to cut their property taxes is also one of the least likely to become law in Texas.
With the Legislature sitting on a $33 billion budget surplus,
Gov. Greg Abbott and other lawmakers have promised historic tax cuts.
But already, Republican leaders have joined tax relief advocates and real estate experts in ruling out legislation that would cap year-over-year increases in appraised home values.
Though some Texas counties saw single-family home values rise 20 percent or more on average in 2022 (in Harris County, it was 21 percent; in Bexar County it was a whopping 28 percent), the experts see appraisal caps as a stopgap that ultimately won’t drive tax bills down.
“It’s a Band-Aid, not a permanent solution,” said State Sen. Paul Bettencourt, R-Houston, a leading voice in the Legislature on property tax reform.
Whatever temporary relief an appraisal cap provides a homeowner for one year, local governments can just raise tax rates — the other variable in a Texas property tax bill — more on uncapped properties, such as rentals and commercial real estate to make up the difference.
Worse, some experts say renters and business owners would be stuck with even higher bills.
Since 1998 Texas has set a 10 percent limit on year-over-year appraisal increases for owneroccupied houses that are protected by homestead exemptions. The appraisals can be higher, but for tax purposes 10 percent is the maximum.
But still, with appraisals climbing fast, some properties are being hit with property tax bills that march up 10 percent every year, resulting in thousands of dollars in additional
Tried and failed since 2015
Already, several bills have been filed in the Texas Legislature this year that would cut that appraisal cap to 5 percent.
“This bill fills the gap in recent sessions’ attempts to lower property taxes by ensuring that the appraised value of homes is not inflated exponentially year after year,” said State Rep. Nate Schatzline, R-Fort Worth, author of one such measure.
He’s not alone. State Sen. Lois Kolkhorst, a Brenham Republican whose district includes parts of Harris County and Fort Bend County, has filed a similar bill to cap appraisal growth at 5 percent just as she did in 2021, the last time the Texas Legislature met.
But the idea still has significant opposition to overcome.
Even anti-tax advocates have fought against the idea for years. The Texas Taxpayers and Research Association has routinely opposed appraisal caps because they don’t reduce taxes as much as they shift the tax burden onto other properties that don’t qualify for the appraisal cap.
“Whatever tax-saving capped properties enjoy is paid for with higher taxes on all other properties,” said Dale Craymer, president of the taxpayers group.
Appraisal cap proposals have also triggered stiff opposition from powerful interest groups like Texas Realtors who have warned “artificial” caps distort the market and are a form of government overreach. That distortion can be seen in similar homes that are side-by-side yet have dramatically different tax bills because one homeowner has an appraisal cap in place for 20 years, while the other just bought the home a year or two ago.
Politically, one of the biggest hurdles could come from groups like Every Texan, a leftleaning Austin think tank. That group has opposed appraisal caps because they generally benefit the wealthiest homeowners the most. The higher the property value, the bigger the tax shift to other non-capped properties.
The opposition from the left is key because lowering the appraisal caps from 10 percent to 5 percent would require voter approval for a constitutional amendment, and two-thirds approval from lawmakers in both the Texas House and Texas Senate. Republicans hold the majority in both chambers but they would need Democrats to vote with them on the appraisal cap measure.
Past legislative sessions show the difficult road ahead for the appraisal cap legislation. Similar measures have been introduced in every session since 2015 but have rarely even received a hearing in committee, and never made it to the floor of either chamber for a vote.
Still the best option?
But past failures aren’t stopping lawmakers and some antitax advocates from pressing ahead.
Chandler Crouch, a Fort Worth real estate broker who has a long history of helping homeowners fight their appraisal bills, has in the past testified before the Legislature calling for the lower caps. He said he still sees them as the best way possible to give existing homeowners relief from appraisals that drive up tax bills even when cities and counties keep tax rates flat.
“I still do support this, but only because I don’t have faith in the Legislature to actually solve the problem,” Crouch said. “I think a solution like this is about the best we could realistically hope to see.”
That pessimism comes after years of promises by state lawmakers to cut taxes, yet most homeowners in Texas have only seen their property tax bills increase steadily.
Over the past several years, lawmakers have passed a series of property tax reforms that have slowed the growth of tax bills. For owner-occupied properties in Bexar County, the average property tax bill finally dropped by about $70 last year, according to data from the Bexar Appraisal District. In Harris County, the drop was $50.
Bettencourt said it was a long process because even though appraisals are going up, the key was to rein in how local governments set tax rates and not focus so much on appraisal caps.
“You have to control the growth of government to control tax bills,” he said.
To do that, the Legislature passed a pair of measures in 2019. House Bill 3 limited school tax growth to 2.5 percent a year, while Senate Bill 2 required cities and counties to limit overall tax growth to 3.5 percent unless they get voter approval.
The state has also increased the size of the homestead exemptions from $25,000 to $40,000 for taxes imposed by school districts, adding another layer of protection from higher tax bills.
Abbott has made clear he wants a lot more property tax relief. During his 2022 re-election campaign, Abbott promised to use at least $13 billion of the budget surplus for “historic” property tax relief.
“This is your money, I want to return at least half of that money to you with the largest property tax cut ever in the history of Texas,” Abbott pledged.
But Abbott hasn’t said how he wants that done. He said it could include the state paying down more school property taxes, rebates to homeowners or an increase in homestead exemptions. Others have talked about focusing tax cuts on businesses and renters so they too can see the impact of the cuts that have largely passed them by.
It is all for the Texas Legislature to sort out. The regular session of the Legislature began in January and runs through May. While dozens of bills have already been filed to reduce taxes in various ways, no consensus has emerged. But if history has proven anything, the idea of lowering the appraisal caps will have a tough road ahead.