Sunday, March 13, 2011

Why property taxes are too high for the average taxpayer

From a fatalist perspective, one would assume that the electorate in Texas enjoys being abused by unfair taxation, since it keeps electing the same lackeys for the rich and powerful

Note: Here's something to chew on while our Legislature's in session, making deep cuts in the state budget, putting even more pressure on local taxing entities and hard pressed low and middle income taxpayers to pick up the pieces. Reports are that drastic cuts in public education will be shorting local school districts many millions of dollars. Our county, school districts and cities are assessing the damage. Over the spring and summer, they will be reviewing their next year budgets. There's a high probability that some or all of the new budgets will come with . . . another round of property tax increases. If you think you've had enough, now's a good time to give your elected representatives a piece of your mind.

Send your comments and news tips to, to Mr. Moden at, to State Rep. Jason Isaac at (512- 463-0647), State Sen. Jeff Wentworth at (512-463-0125) or click on the "comments" button at the bottom of the story

By Merle Moden

Ad valorem taxes – property taxes – are a major source of funding for Texas school districts, cities and counties. The burden of this tax has been increasing in recent years as a result of steadily increasing appraisals and stagnating incomes.

The ad valorem tax as contemplated in the Texas Constitution is a tax on wealth. Prior to the age of computers, Texans were required to render their property for taxation each year. The tax base, i.e., those things being taxed, as specified and required in Article 8, Sec. 1(b) of the Texas Constitution is composed of: (a) real property - land and buildings (appraisal districts refer to buildings as improvements to land); and, (b) tangible personal property (livestock, wagons, cars, trucks, motorcycles, boats, etc.). Household goods not held or used for the production of income are exempt under Article 8, Sec. 1(d) among other exemptions. Article 8, Sec. 1(c) of the Texas Constitution grants the Legislature the authority to include in the tax base intangible personal property (bank deposits, savings deposits, mutual funds, stocks, bonds, etc.).

Texas Legislatures through the years have whittled down the tax base primarily to real property and personal property for businesses. For individuals, the ad valorem tax is levied primarily on the necessity to live somewhere – not wealth as originally contemplated. Now, we tax a $20,000 lot in a subdivision, but we don’t tax an $80,000 car, a $250,000 boat or a $500,000 stock portfolio.

Why are investments in land and buildings included in the tax base when investments in cars, boats, and stocks are not? The answer is amazingly simple. Wealthy individuals have most of the wealth in this country; expanding the tax base to include these items would subject them to higher taxation; and they choose not be taxed. How is that possible? The answer again is amazingly simple. Texas Legislatures do the bidding of the rich and powerful, as they have done these last many decades.

From a fatalist perspective, one would assume that the electorate in Texas enjoys being abused by unfair taxation, since it keeps electing the same lackeys for the rich and powerful. Inclusion in the tax base of tangible personal property with reasonable exemptions for cars plus the inclusion of intangible personal property with reasonable exemptions for small savings and investment accounts would significantly expand the tax base. Such expansion would lower the tax rates and shift more of the burden for ad valorem taxation up the wealth scale.

The next time that you have a chat with your State Representative or your State Senator ask him/her why we tax $20,000 lots in a subdivision, but not $250,000 boats or $500,000 stock portfolios. After all, they are all just assets. Why discriminate?

Merle L. Moden is a retired economist. He and his wife, Joy, moved to the Wimberley area from Austin in 1997. He served on the Austin Electric Utility Commission for several years, chaired a citizen’s committee on City of Austin Water and Wastewater cost of service, served on the Travis Central Appraisal District Board of Review, and was president of two neighborhood associations in Austin.


Anonymous said...

Bravo, Merle!

Peter Stern said...

Some good basic information.

I have some more info. There are 3 main methods of raising property taxes: the one already mentioned by the writer, the tax rate and via bond packages, e.g., for roads and schools (buildings and other things not included in the regular school property taxes).

In fact, school taxes comprise 80 percent of the total property taxes collected. That's a heck of a lot for a mostly unsuccessful and costly school budget.

Lastly, property taxes are too high because almost every year the district almost automatically raises the value of most properties. It could be you structure(s)and attachments and of course land value.

With all due respect to the districts (county and schools) are being forced to look to homeowners for more tax dollars because the State (Perry and legislators) continue to divert its constitutional obligation and responsibility for providing school tax dollars onto local government, whose easiest method of increasing tax dollars is to increase property values. It sucks, but that's the reality.

Four years ago, that little dance Perry, Dewhurst and Craddick did by "cutting" property taxes actually did very little to cut taxes. The cut was made almost obsolete by the ongoing increases in the very next year.

Homeowners continue to be screwed by the song and dance politics and by the diversion of state responsibilities onto local government, which then overburdens homeowners with increasing property taxes.

There's a reason that during the past 3 years there have been more home foreclosures in Hays County than ever before.

And still, our Hays County Commissioners are spending our tax dollars wastefully instead of providing fiscal conservation during these lean years.

Anonymous said...

And Mr. Stern.....

What would you SPECIFICALLY cut-out of our county budget?

Sam Brannon said...

Let's not get stuck in the trap of thinking all of these budget problems are revenue problems... They just aren't.

Forget capital projects for now (roads, buildings, parks)...

Since 2007, the cost of normal county government operations has increased 40%, while the population has increased 13%. Even after you factor for inflation, it's over-the-top. This type of trend pretty much holds true for many of the other municipalities and ISDs as well.

Its a spending problem, pure and simple.

At the county, they're forecasting to cut road maintenance money to pay debt service and numerous non-essential endeavors. Road maintenance is a core function of county government.

County employees should be worried... two members of the court have told me that the "only place to cut is in payroll". I challenge that rationale as very narrow thinking.

If we start making smart moves now, we can avoid widespread layoffs in future years. If we don't, we could see some/a lot of county employees put in the unemployment lines, and that won't serve anybody.

I'm currently reviewing the SMCISD budget presentation from Feb 21. Most of what they list as cuts seem to come from classrooms and schools. You see the trend. This is avoidable.

Shining new county buildings don't pay taxes, and they don't feed families. We've got to get the special interests out of our pockets, and focus on the core needs.

Rocky Boschert said...

This dialectic is where smart small government conservatism productively meets honest and compassionate populism. And this is where we need to go if our cities, county, state and nation is going to turn themselves around from economic strangulation back to a path of economic health and balance.

As others have pointed out, government budgets that are humane and fiscally responsible must incorporate revenue increases in concert with spending decreases. Any sane person can see that.

The reality is no Texas politician - especially Republican - has the courage to admit this truth, as they are either lost in their own ideological nonsense or afraid of getting voted out of office by the extreme right, the latter of which are the same citizens whose families and children will be hurt the most by such cuts-only solutions. The irony of it all.

Until revenue sources at the federal and state level can once again be generated and filtered down to the county and city levels to meet their mandates, we will continue to see the legal assessment "crime" of property tax increases during a time when residential home values are decreasing.

And it is an outright Wall Street and corporate media lie that the American corporation pays the highest taxes in the developed world. They are privileged with massive accounting tax write offs and offshore tax shelters. Both Bank of America and GE paid a lower percentage tax rate than I did in 2009, a year when they got billions of dollars in corporate welfare.

And there are many Texas oil and gas and real estate interests who get unlimited access to public land that they do not pay the State any usage or metals or mining depletion fees to exploit.

Although neither Merle, Peter or Bravo has said so directly, it is time the rich and powerful of our nation and states pay their fair share of taxes. As Merle states: does the "electorate in Texas enjoy being abused by unfair taxation, since it keeps electing the same lackeys for the rich and powerful?"

If so, then keep paying your yearly increase in property tax while your house loses value in a housing market where the rich got richer - and you are not. And watch your children be in public classrooms with 30 other kids taught by one overworked teacher and an overwhelmed minimum wage ssistant.

And watch out for the budget experts who say your childrens' education is expendable - in so many insensitive words. My guess is they do not have children to care for, or they have the money to send their kids to private school. Or, they are just plain out of touch with reality.

Anonymous said...

Thanks for the article, Mr. Moden. This is the discussion our government leaders fear the most and I feel that most taxpayers will agree with what you have written and more. Many seniors are being forced out of their homes and young people can’t afford housing even in these tough times. Something is very wrong in Texas and is quickly becoming a State only for the wealthy.

“In fact, school taxes comprise 80 percent of the total property taxes collected. That's a heck of a lot for a mostly unsuccessful and costly school budget.”

You nailed it Mr. Stern! That is where the real rip-off is and it is treated as sacred and necessary. It is neither, since the return on our investment is so low. First of all, financing education with property taxes is a scam when you look at the huge over-the-top school buildings and the duplication of effort caused by too many school districts. Taxes are the heroin of government and there is no greater example than the greedy and wasteful school districts. They need to get back to basic education and pitch the silliness of fancy buildings, sports, ...

Nobody here has mentioned the huge number of exemptions from ad valorem taxes. I own a house on a quarter acre lot and I pay many times the tax, that someone who owns hundreds of acres because they let weeds (native grasses) grow on their land of put out a feeder for deer. And, why should so-called religious groups be given a pass. There is an 80+ acre summer camp in the middle of Woodcreek that pays no property tax because it is run by a Zionist organization claiming a religious exemption. So much for the separation of church and state.

I just can not understand the reason for an ad valorem tax. Maybe you could justify a one-time tax on property when it’s sold but not every year forever and ever. Why should we pay an increasing tax on something we own that’s value we did not enhance? Its value is undetermined until we sell it. Tax us only on the increased value when we sell the property. A flat tax is way overdue!

1776 said...

Those clowns up at the Legislature will return home to their right wingnut ticker tape parades as heroes for cutting spending to the bone and no new taxes. What a laugh. Little will their herd of sheep realize they have passed on the largest local tax increase in Texas history, not to mention the thousands of classroom teachers who will have been pushed out on the street. NO NEW TAXES IS A BIG LIE1 WE WILL TAX YOU AND MARGINALIZE YOU UNTIL YOU STARVE TO DEATH IS THE NEW REALITY1 SO HELP US GOD. The eradication of the poor and middle class is in full swing. Do not forget, it is Perry and Republican lawmakers who are leading the charge.

Anonymous said...

There is no sales tax on real estate, but there is a sales tax on boats and cars. The Texas Public Policy Foundation published a study a couple of years ago which indicated property taxes could be replaced with an expanded sales tax. I would certainly be for that.

I also wonder how much school taxes would go down if we eliminated $1 million astroturf football fields and $4 million press boxes.

Peter Stern said...

Democrats will NEVER vote to expand the sales tax as they see it as a regressive tax that hits poor people the most. They are not totally wrong, as a sales tax will favor the wealthy who can better afford it.

Anonymous said...

Peter, I seriously doubt if the Republicans would let a sales tax replace ad valorem taxes on real property pass either. There is very little difference in the two parties as I see it except for abortion and license plates. I never met a politician that didn’t like taxes. Maybe the Tea Party might be the one to pass such a thing, but they don’t have a snowball’s chance in coming to power unless the national electorate re-elects “O” what’s his name.

Anonymous said...

Okay, let me see if I get this right. Rocky says more taxes, cut spending. Peter says less taxes, less spending. Sam says no you're both wrong, more taxes and more spending (in the right places of course). Merle just simply says we pay too much in taxes.

Well, let's see how this works nationally (and I as I like to say reflects locally) - the Democrats say don't cut taxes (nor do they have the 'nads to say raise them), and spend more NOW to save the economy. The Republicans say cut spending, and lower taxes.

We also had an anonymous in the mix who wants to repeal religious exemptions. No sales tax increase as that is a regressive tax that will harm the lower and middle classes.

You know, as stupid as it may sound, I think that whoever came up with idea of the "Fair Tax" is starting to sound smarter all the time. How about 10 or 15% across the board, no exemptions? Or if any, if you make below a certain amount. Let the feds, state, and local governments figure out how to survive on what they have coming in. When they realize that is all there is and there ain't no more, something will get the axe. Priorities will change when they find out that they can't print more money in DC to prop up a failing economy; and socialist schools fed the progressive bs from the NEA will finally have to either close or enter into the free market of competition. Survive or die. Ain't that how it works? Oh, but I am sure that this will then create heartburn for the bleeding hearts that someone is being "left behind". And then we'll decide to exempt school districts from the limited taxation; and then it will be health care; and then welfare; and then the financial sector; or the iron (rust) belt union workers, or the farmers, and so on we go, until we are right back into the same mess we're in now.

See how simple all of this really was?

Sam Brannon said...

"Sam says more taxes and more spending".

I almost fell out of my chair.

To clarify... Sam says less debt, less spending, less taxes.

Anonymous said...

Merle did a wonderful job on raising awareness on this problem. Merely raising property taxes will not fix the problems we have. School districts have major problems in terms of unfunded federal and State mandates. There are also the issues with the "Robin Hood" plan that continues having an impact. There are no easy answers to the school funding issue. We all want quality education, but how to achieve it in an equitable manner is a challenge.

Anonymous said...

Anon 7:05 AM, agricultural or wildlife management tax valuation is not a tax reduction, it is a deferral. When the property is removed from either of those valuations roll back taxes are assessed, which include interest, effectively raising the tax rate. Having gone thru that, it's a painfull experience.

If you think keeping property in those valuations is easy, I welcome you to come work on my place for a while

Rocky Boschert said...

A fair tax is to lower taxes on the poor and middle class - who are seeing their financial security decline - and raise taxes on the business elite and rich who are conveniently getting richer and controling more or the wealth during every new economic crisis. Do you people actually think that reality is simply a coincidence?

This state and nation is too complex and bifurcated economically to have a one size fits all tax structure and budget prioritization. Such narrow thinking just gives easy cover to the elite oligarchs who sit back and watch the now lower middle class fight among ourselves for the remaining piece of the bone (while they continue to eat the protein filled meat).

Sorry to be so blunt but it seems so many of you free markets ideologues are playing right into the hands of the rich corporate masters and their lobby money elected political supplicants, who have got you believing your economic interests are the same as theirs. Newsflash: It is not.

And, OK, I would gladly agree to a two level flat tax: 15% for individuals or families making under $200,000 a year, and 20% for anyone making over $200,000 a year. Most importantly, all corporate welfare, business tax write offs and overseas tax shelters are abolished pure and simple. And no corporation or special interest business lobby association can donate money in any way to political campaigns. Why, because the financial statements of the corporate sector is doing fine, thank you. I know, I invest in these companies professionally.

Finally, let me ask any one of you readers this simple question:

"If you were offered $12 million right now on one condition - that you pay $4 million to taxes - would you say NO?"

If your answer is NO, explain your thinking in this blog for all to see. I think many of us would like to read your rationale.

But I suggest you do not leave your name. You probably don't want the community to know who would be stupid or greedy enough to say NO.

Rocky B. said...

To Anonymous March 15 12:22 AM:

I, like Sam, prefer not to be misquoted or misinterpreted. You said: "Rocky says more taxes, cut spending."

Please read my last reply to your thoughts. I only support more taxes for the rich and corporate oligarchs.

Simple misquotes and generallzations - as you fell into - are part of the problem we all have with the media and both sides who spew out rigid ideology.

We all need to stop our foolish black and white thinking if we are going to solve any of our economic problems, either locally or nationally.

Col. Ghadafi said...

Anonymous March 14, 7:05 AM said:

"There is an 80+ acre summer camp in the middle of Woodcreek that pays no property tax because it is run by a Zionist organization claiming a religious exemption.

I agree wholeheartedly. Stop those Zionist hooligans from raising militant Jews while we give them tax deductions to do it.

Yes, may Allah be with you our American Taliban friend.

Peter Stern said...


What the GOP says and does are two different things, same as the Dummocrats.

It's the actions that speak louder than the ongoing mumbo jumbo.

So far, the actions on either side aren't worth a hill o' beans.

Anonymous said...

The tax code needs massive simplification. Set a floor, at or below which one pays no tax. Minimize deductions, change the law so benifits (luxury insurance, dividend, interest, capital gains) are all just income.

Keep the inheritance tax in place. Even Malcolm Forbes is in favor of that.

Anonymous said...

The "fair tax" as I understand it would be a national sales tax on consumer goods, coupled with the elimination of other taxes, such as income tax. The effect being to remove all tax liability from corporations, and place it all on individuals; with the expectation than corporation would do the right thing and lower prices.

I could be wrong; but if I'm even close to correct, I'll pass.

Rocky B. said...

Anonymous March 16, 10:12 AM
said about a fair tax:

"The effect being to remove all tax liability from corporations, and place it all on individuals; with the expectation than corporation would do the right thing and lower prices."

This statement is maybe the most naive fair tax solution I have heard recently. Not that I have any proof, other than almost 30 years investing in corporations - waiting for them to "do the right thing."

Now, if the corporation itself - which is by its legal nature embodied with a "sociopathic" profit mandate - is forced to divert their non-tax money to:

1) full health care is guaranteed for all employees and their family, including 6 months maternity leave, all pre-existing conditions (protected by privacy laws during the hiring process), and full salary disability income to all employees

2) forced to pay men and women with equal qualifications the same salaries,

3) any environmental problems created and determined by an independent group of goverment experts must be paid for in full (and they must compensate victims of their bad behavior with any loss of income and medical bills suffered by the victim),

4) any small business that is forced to close because the corporation has cut prices to a non-competitive level must be purchased by the corporation at fair market value calculated by an independent business appraisers,

5) the corporation must provide all retiring employees with ten years of past service or more a guaranteed income equal to 60% of their last year's salary for the rest of their lives - and a quaranteed salary of six months for "fired" employees under age 50 and one year salary for any fired employee over age 50, fired for any reason.

The only new problem this would create is how to enforce these conditions.

These conditions seem like a small price to pay for the corporate sector's unlimited use of US coomonweath assets and their growing monopolization of all goods and services - and their increasingly successful political campaign to control the economic lives of the US middle class.

Ironically, I bet with all those corporate "do the right thing" conditions as an alternative to taxation, the corporation would rather just pay a flat 20% tax rate. It would be less costly.

Anonymous said...

OK Rocky, I'm the same poster as at 10:06, if you're going to quote me, at least go to the punch line, "I'll pass." Hell yes that concept is a joke. There's not a single chance that any major corporation would do anything other than plow the increase revenue into CEO's compensation, or similar, nonproductive activities.

But that is the way I've heard "fair tax" pitched, prices will come down, blah blah lah.

But I rather like your corporate responsabilities. And I accept the apology in advance.

Anonymous said...

Ok Rock-o time for you to pull a rabbit out of your hat! Your either a full blown pinko commie or just full of sh*t. You are to blame for the corporations if you been investing in them for thirty years. Why don't you give away your wealth to those whom the corporations have harmed. Where do you stop? What kind of car do you drive? Where do you bank? What corporations have you invested in and you profited from? Did you give back your investors money when you made a bad investment, especially in corporations! How bout it bigsjot? You have a big mouth when it comes to spending other people's money, but you sound pretty high and mighty when it comes to screwing people by investing their funds in the same thing you call evil now.

Rocky B. said...

Sorry last Anonymous. i did misunderstand your "I'll pass" statement. After I sent in my blowhard response I finally figured out what you meant.

I will try to read more carefully next time and understand better when possible.

And kudos for your honest but gentle clarification. Keep writing and correcting me as needed.

It is always better to get it right the first time rather than explain it after the fact.

Anonymous said...

Rocky, no harm no foul. It was just kind of funny to me in the context of the thread. And I'll take full responsablitiy for my writing style, which in this case had to be tongue in cheek, otherwise I'd rant.

There's alway Ben & Jerry's as an example of a responsable corporation. I know there are investment funds/firms that specialize in socially responsable companies/investments.

Anon 10:12

Peter Stern said...

Good point, last Anon, regarding Ben & Jerry. Wish there were many more like that company.

Rocky Boschert said...

Annonymous March 16, 11:46 PM:

I believe I have read your one-sided "try to point out his hypocrisy" rants before. And if not yours, others like you who don't like my honest and accurate views.

FYI, I bank at A+ Credit Union, mostly drive a Honda Civic Hybrid, and buy everything from locally-owned small businesses when ever I can - even paying more if necessary.

I only shop at the big box retailers when I have no choice - because economically expedient and naive city and county officials have ignorantly allowed the big boxes to run most small Mom and Pop businesses out of town. In those cases - like with TV monitors - we have little choice anymore where we shop.

Moreover, I mosty invest my clients money in small cap and mid-cap stocks and bonds, intentionally shunning the often corrupted large publicly-traded companies that use their privileged power to buy and own the politicians - and try everything they can to monopolize the sector of the economy in which they operate.

Moreover, I will NEVER buy the stocks of companies like Monsanto, Freeport McMoran, BP, Massey Coal, and a whole list of other companies that engage in behavior that is either criminal or at least should be - if the politicians actually did their job of watching out for the citizens who voted for them. And that includes Obama and the Democrats.

So, I do try to walk the talk whenever I can, but sometimes I get lazy - and do act like a hyprocrite.

But most importantly, my clients have done much better than 90% of the nation's advisors during the very bad recession years of 2002 and 2008 - simply because I am not gullible and don't buy the Wall Street BS spewed out on CNBC and the mindless advocacy of the free markets ideologues. FYI, we do not currently have a free markets economy in the US.

For instance, when the markets were down an aggregate 63% when combining the two worst market years (2002 & 2008) so far this decade, my clients were down only 23% for the same combined two years; Hence I believe I clearly deserve my advisor fees because I am fortunate to be blessed with the intelligence (after many years of mistakes) and experience to know when and why we are being lied to about the stock market and our economic well-being.

In the end, I did not intend this response to read like an info-mercial, but people like the Anonymous I am replying to simply cannot understand how someone in my business can be ethical and thoughtful at the same time. But it is understandable, since it appears most money managers don't give a damn about how their responsibility to invest other's money can have a very negative effect on the long term health of both the US and global economies.

So, believe what you want Anonymous March 16, 11:46 PM. But you are write about one thing. Most people in my business are hypocrites and are not worth the money they are paid. Most intelligent people can manage their own money IF they take the time to study technical analysis and have a certain instinct of cynicism - and are willing to make a few mistakes along the way - and not be greedy in the process.

Anonymous said...

OK Rocky, I now believe you're my twin son of a different mother, "FYI, we do not currently have a free markets economy in the US. " I've been telling people that for years.

Or it could be that we are both wandering in the wilderness together.

Anon 10:12