Sunday, December 03, 2006

State panel trending the right way on property tax reform

I wanted to comment on this Chronicle article from a couple weeks back on the state's property tax reform task force. I'm happy to report that they seem to be trending in the right direction, and avoiding the major mistakes of places like California and Florida with the knee-jerk response of capping appraisals. First, the excerpts that heartened me:
The Dallas businessman said the task force is likely to recommend changes in state laws and the Texas Constitution to give voters more control over local government revenue growth through automatic rollback elections when tax coffers grow by more than 5 percent.

Citizens now have to collect signatures to petition for a rollback when revenue increases more than 8 percent.

Pauken said the change is almost universally opposed by city and county officials.


The task force also is considering increasing the homestead exemption, which reduces a home's taxable value and provides relief to homeowners.


The Legislature has voted down proposals to lower the cap on annual homestead appraisal growth to 5 percent from 10 percent, and Pauken said he's not sure the task force will recommend an appraisal cap.

Several business groups said the market should continue to be allowed to set valuations. "Appraisal caps are the least desirable" reform, said Bill Allaway, president of Texas Taxpayers and Research Association.

Dennis Patillo, chairman of the Texas Association of Realtors, said appraisal caps are bad public policy because they create "distortions in the market." Older housing stock becomes taxed at less than market value while new construction is taxed at full value.


Texas ranks 44th in the United States for combined state and local tax burden, according to the Tax Foundation, which studies tax policy.

I'm very glad they see the risks of appraisal caps, which I've written about extensively on this blog before. I'm in a bit of a rush tonight, so I'll just end with an email I sent to the task force that includes links to those previous posts:

While I agree there should be improvements, it is incredibly important not to make the same mistakes other states have made in this area. Many states, including Florida, Georgia, Michigan, and especially California have made crippling mistakes here (some articulated in the links below). Texas has some amazing competitive advantages vs. other states, and it would be a tragedy to fritter them away with poorly thought through tax reform. I have put together a list of the relevant links below. I apologize for the volume, but it is a complex topic that needs extremely careful analysis.

The most critical requirement is that assessments match actual market values. When they get out of sync, all kinds of market distortions happen. Increase exemptions or rollback tax rates instead of assessments. It's also important that new homeowners pay the same taxes as existing homeowners with a house of the same value. Again, if these get out of sync, there are all kinds of market distortions and problems that are created (many articulated in the links below).

Outside link on the perils of appraisal caps:

A very good idea here to help retired home owners:

Other posts on the risks:


At 9:26 PM, December 04, 2006, Anonymous Anonymous said...

Does anyone out there have links to any data on effects of legalized gambling away form gambling hubs like Atlantic City and Las Vegas? I don't personally gamble, but I am all in favor of voluntary taxes to ease the need for property taxes.

I like the idea of lifting the exemption and not using a cap. It seems a little more socially palatable to those on the left by helping out lower income people.

At 9:15 AM, December 05, 2006, Anonymous Anonymous said...

I would think that gambling would prey on the lower income class. It would be interesting to see a socio-economic breakdown of the folks that buy the Texas scratchoff and number pick'em lottery.


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