No one likes to pay taxes. But since we’re going to pay them, we have a right to insist they’re fair.
Property taxes should be based on the true market value of properties. That’s what the Texas Constitution requires and it’s the only way a property tax system is fair. That simple statement is the basis for the appraisal system challenge the city of Austin filed in district court last month.
Our current property tax system, and those decrying Austin’s lawsuit, support an alternate view where the explicit goal is to allow some properties to be valued at something other than market value. This is fundamentally unfair.
The debate over the challenge is simple. If there are two comparable properties, one valued at market value and the other not, this is not fair. The city believes the remedy should be to value both at market value. Opponents of Austin’s challenge, sometimes those whose business it is to lower their clients’ taxes, argue the value discrepancy should be reconciled at the other-than-market value. But two wrongs don’t make a right. Our system should be uniformly fair, not uniformly unfair.
To be very clear, Austin is not seeking more tax revenue. In fact, it is quite the opposite. Our new City Council has just lowered tax rates — and Austin’s property tax bills — for the first time in at least 25 years. This challenge is not about how much we pay, but only about how we fairly apportion that tax burden between us.
What’s also unfair about the current system? Our property tax system allows the winner of a tax challenge to get reimbursed attorney fees, but defines who “wins” in a way slanted substantially in favor of a property owner. This unfairness is so great that many property owners file challenges because they know they can use the threat of this imbalance to force a resolution in their favor.
Additionally, Texas is one of only a handful of states that still prohibit learning what properties are actually selling for on the market. Sure, some piecemeal and selective data is available. But is it truly representative? Let’s be frank: When folks say they don’t want disclosure of sales data, isn’t it usually because, in many cases, the true value would be more than tax value?
The property tax system protects this unfairness by discouraging challenges to appraisals by cities. The system seems to require thousands of individual property owners to be named and served in such lawsuits. Since individual property tax valuations can’t be increased in the city’s lawsuit without property owners having a right to appeal, the law’s requirement causes confusion and is a waste of resources. Austin is challenging that part of the process, too.
This challenge to the state’s appraisal system is not partisan and the Austin City Council supported it unanimously. While the suit begins with a look at commercial properties, any outcome that increases fairness will provide new procedures for all classes and types of property.
It is unfortunate that the city of Austin found itself in the position of taking this action. Litigation is a tool of last resort. But after years of legislative inaction and a growing public perception of a lack of fairness, someone had to act.
Austin is not alone in seeing the need for action. There has been support voiced from all corners of the state, including elected officials in counties both blue and red, chief appraisers in counties both big and small, and newspaper editorial boards in other big cities. It is clear from this widespread and varied support that the appraisal system is not working.
Our goal through this action is to enable appraisal districts to do their jobs better and with greater accuracy. They need more data, more tools and an even playing field to complete their constitutionally-mandated task. Our state is growing and our cities are growing even faster. It is time that our property tax system grows up, too. Austin has acted and we are asking the courts to act.
Disclosure: Steve Adler is a major donor and former board chairman of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.