Texas Property Tax – The Definition of Egregious Has Not Changed

By Linda Morgan

Since the 2007 legislative session, our “politicians” in Austin have been very busy praising themselves for reducing property taxes by 30%.

For the upcoming 2009 legislative session, Rep. Patrick Rose and others are now speaking up about their “intent” to cap increases on residential appraisals at 5% instead of the current 10%.

Let’s do the math. Property tax rates were reduced by 30% in 2007. However, property appraisals throughout much of Texas routinely increased as much as 10% in 2007, 10% in 2008 (and my bet is we will see the same in 2009). So exactly where will we find ourselves in 2010? Answer: Exactly where we were in 2007. I tend to believe that is how the “fuzzy math” and “coincidence” were designed to work.

So, by the end of the next legislative session and only if such appraisal caps are adopted, all we will have gained is a slowing rate of increase in the already egregious Texas property tax system.

Texas is one of seven states that do not have a state income tax. Is it feasible to think that forty-three states have it “so wrong” and Texas is one of seven states that have it “so right”?

Obviously, real property taxes are based on property appraisals while income taxes are based on current earnings. We have all seen, heard, or even experienced the property tax “creep” that has forced homeowners out of their homes.

To illustrate, let’s map out any typical street in any typical community where property appraisals are approximately $200,000 (after homestead exemption).

Home #1: A single wage earner of $75,000/annually
Home #2: Two wage earners of $150,000/annually
Home #3: A single wage earner of $65,000/annually with two minor dependents
Home #4: Two wage earners of $200,000/annually with four minor dependents
Home #5: A recent widow whose income has been reduced by one-half – now, $55,000/annually instead of $110,000/annually.
Home #6: A wage earner has become temporarily unemployed or seriously ill with mounting medical bills. Income has been drastically reduced from $100,000/annually to $35,000/annually.

Under the current Texas property tax code/appraisal system, each of these homeowners will receive a property tax bill of approximately $3520.00 – without exception. The remedies are limited – either pay up, sell out, or risk losing your home. This situation highlights why property taxes are considered a regressive tax – meaning households who earn less pay a higher percentage of their annual income in property taxes.

A voter-approved state flat-tax or income tax would drastically lower property taxes, provide revenue to bring education up to the national average, and provide for a much fairer tax system. Furthermore, the majority of households would save money, changing the state's tax system from regressive to progressive.

If we open the income-tax door, we don’t have to worry about the income tax monster jumping out and eating us as soon as we turn our backs. The Texas Constitution guarantees that an income tax cannot be adopted without a vote of the people, and once adopted, that the tax rate cannot be raised without another vote of the people. The Constitution also requires that two-thirds of the revenue from an income tax go to cut property taxes and dedicates the other one-third to education. Plus, any Constitutional amendment could/would guarantee that property tax rates cannot go back up without a vote of the people.

Isn’t it time we faced our fears and considered a state income tax?

Linda Morgan retired from high-tech in Houston in 2002 and headed for the hills. She is a member of the Hays County Texas Master Naturalists Chapter through which she has learned a great deal about the conservation of our natural resources and the ever-increasing growth/development issues. Ms. Morgan is a big proponent of school finance reform and real property tax relief for Texans. She is a real estate agent and remains active in the real estate market.