Time for Property Tax Reform by Jeff Stewart, CCIM
It is time to rethink property taxes. The current laws are finally placing an unfair burden on the shoulders of Texas homeowners. I have been slow to come around to this point of view, but the time has come to get a new perspective.
As a longtime builder/REALTOR and property owner, I have backed the industry line about property taxes. As a board member of several local and national trade organizations, I have lobbied for the system to remain the same. It now occurs to me that I was part of the problem and now it is time to look for new solutions.
As a Texan, I have always agreed with the privacy component of our State’s real estate law. Many other states require full disclosure of sales prices, but not Texas. We proudly argue that we are defending the privacy of property owners, when in reality we know that we are trying to keep actual sales figures out of the hands of the local county tax appraiser. So which is it really . . . privacy or tax values? Some of both, but the time may have come to give up a bit more privacy in the name of equitable taxation.
The cornerstone of property taxes is that the values be equitable. This is where I think we have failed. The Austin American Statesman and the Austin Business Journal routinely publish articles about multimillion dollar buildings that have sold. Occasionally the sale prices are made public because of the institutional buyer or seller. I have seen numerous cases where the sellers had recently gone to court to get a jury to lower the county appraised value . . . much lower than what they listed the property for when they were ready to sell. This is where the system is broken.
Recently property owners across Central Texas have been up in arms about the new appraised values. While the Travis County Appraiser told the Travis County Commissioners that values had increased an average of 16%, I can provide numerous examples of increases of more than 100%! Some may be accurate and some may not. That is where I see the main problem.
Thousands of taxpayers will no doubt protest the recent appraised values. Some may get satisfaction in the preliminary informal meeting with the tax office personnel. Others will continue on and present their case to the appraisal review board (ARB). Most homeowners will represent themselves and grudgingly accept the final ruling of the ARB because they cannot afford to do anything else. The large, well-represented, institutional investors, however, have the financial wherewithal to take the next step and go to court with hired guns and appeal to a jury. Almost no homeowner in our area can afford the expense of suing in District Court. That in of itself causes and inequity in the system. Realistically, small property owners do not have the same recourse.
As a commercial and residential broker, I regularly have out of state clients express shock at our property taxes. While we are attractive to outsiders for not having a state income tax, we are also getting a reputation for outrageous property taxes. We have largely done this to ourselves. The last few years almost every ballot has had some sort of property tax benefit for some special property owner: wildlife valuation, historical, family farm, retirees, wounded veterans, and so the list goes. No doubt, all have some good reason for our support; but the rest of us have to pick up the slack.
The time has come for more public discourse regarding a more equitable form of supporting our schools and local government lest we increase taxes to the point that some people cannot afford their current homes. Do not misunderstand . . . I do not have all the answers. I do think, however, that the first step should be full disclosure of sales prices. The next step would be to seek an additional form of revenue that is more broad-based and could provide some property tax relief, but does not create another expensive bureaucracy. Any such movement will have to come from the public. With the current political mindset of “no new taxes,” politicians are all too happy to proclaim that they have “held the line on taxes” knowing full well that increasing property values have increased taxes while giving them political cover.
Let the discussion begin!
Jeff Stewart, CCIM Broker / Associate
As an out-of-stater, I have to agree with your statement that the property tax situation in Texas is scary. My wife and I have been looking at relocating to the Austin area for a few years, but the property tax rates are crazy! I understand that there is no state income tax, but at least with income taxes, you know what you will be taxed from year to year, and everyone in the state is taxed at the same rate. I, for the life of me, cannot figure out how to make sense of the various/multiple taxing districts in Texas. You can be looking at one house that is taxed at nearly 3%, while the subdivision across the street is only taxed at 2.1% or lower! Here in Indiana, we recently imposed property tax reform, capping primary residences at 1%, non-primary residences at 2%, and commercial property at 3%. To offset the revenue, we raised sales taxes from 5% to 7%. Although we still have disputes over assessed values, it makes the tax bill more uniform and predictable…. It’s the unpredicatability of the Texas Property Tax bill arriving in the mail that makes the idea of moving there scary.
I am actually visiting this web blog for very first time and i must inform you that every single one of the blog posts are undoubtedly great. Keep up the great work. Will definitely come again.