Have Property Taxes Gone Up, Really?

Dick Lavine, Senior Fiscal Analyst at the Center for Public Policy Priorities

Property taxes are the major source of support for local public services – schools, emergency services, roads, parks and libraries. They are also among the most unpopular of all state and local taxes. Many taxpayers complain that their property tax bill can go up, even if their ability to pay that bill does not. So let’s take a look at Texas tax trends, as measured by the growth in statewide personal income compared to the growth in the statewide property taxes. This comparison can show whether property taxes have, in fact, grown faster than the ability of Texans to pay them.

The chart below, based on data from the State Comptroller and the U.S. Census Bureau, demonstrates that, from 1993 to 2013, statewide personal income and the statewide property tax collections have grown at similar rates. Compared to 1993 levels (set at 1.0 in this chart), both property taxes and personal income have roughly tripled – reflecting population growth, inflation, and increased prosperity.

Texas property taxes, personal income,  Bettencourt taxes, Bettencourt Texas, public

You can see that property taxes dipped after the Legislature required school districts, which account for more than half of all property taxes, to cut their tax rates by one-third as part of the 2006 school finance bill. Growth in personal income slowed during the economic recessions that started in 2001 and 2008-09. But the general pattern of growth in both property taxes and personal income is similar over the past two decades.

Why start the chart in 1993?

In the mid-1990s Texas had finally recovered from a deep recession caused by the collapse of oil prices in the late 1980s and established the current tax structure, including raising the rates of major state taxes, such as the sales, motor-vehicle sales, and gasoline taxes. In addition, in 1993 the Legislature created the school finance system that controls school property taxes, including the “Robin Hood” provisions, also known as recapture.

Why pick statewide personal income?

Personal income – wages, salaries, dividends, interest, sole proprietor’s income – is the best measure of the ability of Texans to pay taxes. By comparing statewide personal income to statewide property taxes, we get the best picture of changes in the ability of Texans overall to pay the taxes necessary to provide the public services on which we all rely. Of course, in those areas where home values are increasing rapidly, an individual family’s tax bill can increase faster than family income. But, looking at the state as a whole, property taxes and personal income have grown at about the same rate over the past twenty years.

Why not use median household income?

Think about a city or county where the population has doubled. Property taxes would probably also double, reflecting the extra costs of providing services to twice as many people. But the amount of property taxes paid per household would stay constant – twice as many people paying a constant amount of money would generate twice as much money. So, even if median household income had not changed, the higher property tax collections would not take a greater percentage of the average household’s income.

What to do to ensure property taxes stay affordable:

  • Allow cities, counties and special districts to offer a flat-dollar-amount homestead exemption
  • Lower the interest rate charged on property taxes deferred by homeowners age 65 or older
  • Make clear in the Notice of Appraised Value how much property taxes are reduced by homestead exemptions, freezes, and caps on appreciation.
Comments
2 Responses to “Have Property Taxes Gone Up, Really?”
  1. BadMath says:

    You can use median income as a meaningful measure of ability to pay IF you compare it to median property taxes paid on a residential property. What you CANT do, if you also want to display a basic understanding of simple math, is compare median income to total property taxes. The whole reason you look at a median is to gain meaningful insights into distributions that are heavily skewed by outliers, which make inference using the sum (total) of the distribution very misleading (Hello! to a certain Texas Senate select committee). Alice Walton, Micahel Dell, Charles Butt, etc. all pay A LOT of property taxes, but I hardly think anyone would argue they decrease the average Texans ability to pay their property taxes. Comparing TOTAL property taxes to median HOUEHOLD income is also dishonest because one is substantially affected by commercial property and the other is not. Does Samsung, Circuit of the Americas, and JW Marriot coming to town drive up total property taxes? You bet. Does it do anything to Texas’s overall median income? Very little.

  2. Mary Bell Lockhart says:

    Now break this down. Do trend lines on state funding for public schools vs local school property taxes. Do trend lines on state funding of public colleges and universities vs cost of education vs trend in student loan debt. While we’re allowing corporate wealth to suck wealth out of Texas, the burden of funding public schools is shifting to locals and the debt for university students is soaring.

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