TAG: Texas State/property taxes.

State policymakers can cut your property taxes permanently

Rep. Andrew Murr

Jan 25, 2023

This past fall, all across Texas, property owners began to receive their property tax bills for the year. As a member of the Legislature, my telephone predictably begins to ring this time of year and letters come pouring in from frustrated homeowners and property owners urging, asking and demanding we do something about the never-ending and ever-growing burden of property taxes.

There are some myths and little-known facts about property taxes.The State of Texas does not, in fact, collect property taxes; our state constitution prohibits it. Importantly, 254 counties, over 1,000 cities, 1,108 school districts and more than 1,800 special purpose districts (such as hospitals, junior colleges and water districts) assess and collect property taxes to fund many of the basic services they provide to all of us. Every one of these taxing entities operates under laws created by the Legislature though.

DEFINING THE PROBLEM

More than half of all property taxes across the state are levied to fund public education. In fact, according to the Texas Comptroller, using 2019 data, approximately 53.9% of all property taxes are used to fund schools. Combined with the state’s obligations to public education funded from other sources, Texas spends about $69.5 billion a year on schools.

What folks may not know is that the Texas Constitution requires that the state provide free public education to our younger generations. How and with what monies is the purview of state and local budget writers.

When you analyze the school finance system through the lens of property taxes, education can easily top 60-70% of all local property taxes in many areas. As the largest piece of the pie in a circle graph of property taxes, school taxes are the elephant in the room.

RECENT LEGISLATIVE EFFORTS

While the state itself does not collect property taxes, the State Legislature has been consistent in working to improve the process of property tax collection and has focused on providing transparency and property tax relief when possible.

For example, in 2019 the Legislature passed a large omnibus bill establishing numerous reforms to the system and bolstering taxpayers’ rights with component topics of increased transparency, greater public access to information and threshold limitations on the automatic growth of city and county property taxes. Other policy changes have addressed assessment and valuation of disaster-affected areas, increased exemptions and instituted technical corrections.

Unfortunately, while this legislation influenced property tax policy around the state, Texans are still burdened with significant property tax bills every year, and many are being taxed out of their property.

REDUCING WHAT YOU PAY

Cities, counties and special purpose districts operate much of their budgets on revenues from property taxes. We as constituents constantly ask them to do yeomen’s work with finite resources. Yet these slices of the pie are peanuts when compared to school funding.

If state policymakers were to consider alternate funding sources for public education, then school maintenance and operation property taxes could be eliminated almost entirely. The concept of “Robin Hood” would be abolished. And property taxes would be slashed statewide by more than half.

Where would the state find the funds to replace this lost revenue? To start, Texas will have more than $27 billion in additional funds when the Legislature convenes in 2023, along with a healthy balance of around $12.6 billion in the Economic Stabilization Fund, commonly known as the Rainy Day Fund, by the end of 2023. But we shouldn’t stop there simply because our state economy has flourished lately.

An additional source of revenue exists with the Texas Lottery. Since 1997, the Texas Lottery has contributed $29.9 billion to the Foundation School Fund, which supports public education in Texas. In FY 2022, the Texas Lottery transferred $1.972 billion to the Foundation School Fund, which marked 24.3% of overall profit from the lottery.

An analysis of major sources of state revenue shows that sales tax is a dominant revenue-generating force. Texas receives sales tax revenues primarily from goods and not services (with only a small list of 17 services that collect and remit sales tax). Other states have explored and applied their sales taxes to a variety of goods and services.

Should the Legislature at least give some critical analysis to broadening the sales tax base in a cautious and fair way so that we can permanently cut property taxes? Broadening this base would also serve to shift the burden from property owners to a wider tax base and better incorporate funds directed through our state from tourism.

Notably, we have more than $42 billion annually in sales tax exemptions in state FY 2021, according to the Texas Comptroller’s Office. Shouldn’t lawmakers review the public benefit of these existing exemptions and consider their importance when having a serious conversation about trying to eliminate the school property taxes that you pay?

In addition to a review of sales tax, should policymakers consider other revenue sources in an effort to permanently remove school taxes from the property tax hammer we are annually struck with?

We will never consider a state income tax; it was rightly outlawed by our state constitution by Republicans and Democrats a generation ago. But I believe that lawmakers should carefully and methodically review all other “wells from which to draw funds from” so that homeowners, small business owners and all others owning their little piece of Texas can quantifiably see a real, lasting and tangible decrease in their annual property tax bills.

NEVER REDUCE SCHOOL FUNDING

When the state eliminates school M&O property taxes, it should never reduce what it allocates and spends on our schools. Period.

Our students, teachers and staff deserve all that we send their way. Every penny should continue to be spent to ensure that our youth have safe, well-rounded and expansive educational opportunities to prepare them to be tomorrow’s parents, business owners, community leaders and state policymakers.

LEGISLATION TO CUT PROPERTY TAXES

The effort of policymaking is historically reactive, rather than proactive. It is usually borne out of necessity and urgency from a process that collectively chooses the path of least resistance while seeking to achieve a measurable amount of positive outcomes.

A serious change in policy is an enormous and ambitious undertaking, and it requires many sleeves to be rolled up with a consequence of challenging the status quo to consider a shift in broadly applied frameworks in how we fund vital government programs. But if the result is permanent property tax relief without reducing spending on public education, then I want that for you, my constituents, and all Texans.

Session after session, I have filed legislation to do just that. I’ve already filed legislation to address this topic now that the 2023 Legislative Session has begun, and I’ve started engaging in serious, constructive and thoughtful deliberations with my fellow members of the Legislature.

There is an opportunity to change our tax structure for the better. Please join me in urging your representatives and senators to understand how important it is to you to address property taxes in Texas.

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