Texas policies that contribute to our current property tax crisis

Photo by Todd Wiseman

Texas is a prosperous state, and our government doesn’t waste a penny. So why are property taxes so high?

I started my political work in 2013 asking this very question. I knew something was wrong, I just didn’t know what. Our property taxes were going up, yet the state fired thousands of teachers. I smelled a rat and I started digging.

I discovered two features of state fiscal policy that contribute to our current property tax crisis.

First, in 1997, the Legislature passed the Equal and Uniform law which allows property owners to fight an appraisal if they can show that comparable properties are appraised at lower values. A good law in concept, it was poorly worded and it created an unintended loophole for the owners of large, industrial and commercial properties. If you have a complicated and expensive asset, and if you can afford a battery of lawyers, you don’t have to pay your fair share of taxes. For every dollar that’s underpaid (the largest appraisal districts told us $4 billion was missing in 2006 a homeowner has to pay an extra dollar. I have written extensively about this because closing the loophole is a major element of my reform agenda as lieutenant governor.

Second, in 2006, the state did a “tax swap” that blew a gaping hole in our state’s budget. Texans had recently staged a tax revolt, acting through their local school districts, by suing the state. Texans won and the state lost. So to satisfy the courts, the Legislature cut property taxes and created the business margin tax. The objective was to keep total tax revenues unchanged while providing relief for homeowners. But the new margin tax was a disaster. Carole Keeton Strayhorn, the state comptroller at the time, sent a letter to then-Gov. Rick Perry stating that the new margin tax “... is a staggering $23 billion short of the funds needed to pay for the promised property tax cuts over the next five years.”

Despite the gaping hole in our state’s budget, the Legislature passed the margin tax into law, knowing they could limp along for a few years, borrowing money to make ends meet and waiting for property values to increase and fill the revenue gap. And it worked. In fact, it worked so well that by 2013, property taxes had soared and the state cut the margin tax by 5 percent. Nobody noticed, so they cut it again the next year by another 5 percent. Still nobody noticed, so they cut it again in 2015 by a whopping 25 percent. Newly-elected Gov. Greg Abbott demanded it, and lawmakers in both houses happily provided it.

The structural deficit created by the failed tax swap in 2006, plus the additional cuts to the margin tax in 2013 and 2015, forced local property taxpayers to cover a greater share of public education. And the Equal and Uniform loophole forced homeowners to pick up a greater share of local property taxes.

“Conservative” in Texas-speak means higher taxes.

As we move forward, the property tax crisis is set to get much worse. The state’s current budget relies upon local property tax increases of $6.9 billion dollars (2018-2019 versus the previous two years), while the state will actually reduce its own school funding by $660 million over the same period.

And homeowners will continue to get hit doubly hard because they will shoulder an outsized portion of the increase in local property taxes due to the Equal and Uniform loophole.

If elected lieutenant governor, I will be honest about all this, which is the only way to solve the property tax crisis. I will work with the Legislature to close the big corporate loophole and recover the missing funds from owners of large, commercial and industrial properties. This isn’t raising taxes — this is simply enforcing the law. My hope is that this will recover enough revenues to begin addressing the property tax crisis and our chronically underfunding public schools. 

In sharp contrast to the honest reckoning Texans desperately need, state leaders sat shoulder-to-shoulder this week repeating the all-too-familiar deception that others are to blame for the property tax crisis. Their complete denial of responsibility tells me we’ll have higher and higher property taxes as long as they are running the state.

Mike Collier

Democratic candidate for lieutenant governor