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Legislator's Guide to the Issues 2015-16Local Property Tax Reform

The Issueexas property tax system is among the most burdensome in the nation. According to the ax Foundations

latest national rankings, the Lone Star States local governments collected approximately $1,557 per personin property taxes [in 2010], which ranks 15th highest nationally. Tat gure is up from $1,393 collected percapita in 2008 when the ax Foundation ranked exas property tax system ranked as the 17th most burden-some in the U.S.

In addition to exas comparatively high property tax burden, exans also contend with a real estate tax that is growingquickly compared to traditional measures like population and ination. Consider that from 1992 to 2010, the states popula-tion grew by more than 40% and U.S. ination increased by 55%; yet over that same period local property tax levies jumpedby 188%, according to the exas Comptrollers Texas, Its Your Money series.

Rising property tax bills negatively affect all exans by discouraging economic activity, distorting investment decisions, andaffecting employment creation. But one category of property taxpayer is affected by the states burdensome tax system morethan othersthat is, the exas homeowner.

Homeowners in exas have the greatest degree of exposure to the states property tax system. As compared to other real prop-erty taxpayersi.e. commercial, industrial, and otherssingle-family residences comprise the largest share of taxable valuein exas, which when combined with tax rates determines the total taxes that a property owner must pay. In 2011, single-

family residential properties constituted more than half, or 53.3%, of school districts total taxable value while commercial andindustrial properties were a much smaller percentage of the overall total. School districts levy more than 60% of all propertytaxes in the state.

In dollar terms, the 2010-12 average annual property tax paid by anowner-occupied dwelling in exas was $2,477, according to the U.S.Census Bureau. Tis compares poorly to the surrounding area (i.e.the South Region) and the nation where homeowners paid a 3-yearaverage annual tax of $1,411 and $2,091, respectively.

One public policy reform that state and local officials shouldconsider is enacting a hard-limit on the amount of increased taxrevenue that can be collected by a local governmental entity overthe previous scal year. Such a reform could be tailored to requirelocal voter approval for property tax rates that result in an increasein local property tax revenue in excess of 5% or population growthplus ination, whichever is less.

Under a proposal such as this, current homeowners stand to ben-et from a more restrained tax environment that decelerates thegrowth of the local property tax; prospective homeowners stand tobenet from a more affordable housing market; and the economy

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Texas Public Policy Foundation

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$1,411

$2,091

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Texas South Region U.S.

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Median Real Estate Taxes Paid, 2010-2012

Source: U.S. Census Bureaus American Community Survey

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stands to benet from a more robust labor market and increased business interest as companies seek out pro-growthfriendly states.

The Facts exas property tax system is among the most punitive in the nation.

According to the ax Foundation, exas property tax system ranks as the 15th most burdensome nationally.

According to the U.S. Census Bureau, the 2010-2012 average annual property tax paid by an owner-occupied dwell-ing in exas was $2,477. By comparison, homeowners in surrounding area (i.e. the South Region) and the nationpaid a 3-year average annual tax of $1,411 and $2,091, respectively.

Rising property tax bills discourage investment and create a drag on the states economic performance.

Recommendation

Require local voter approval for property tax rates that result in an increase in local property tax revenue in excess of5% or population growth plus ination, whichever is less.

ResourcesHomeowners and the Texas Property Tax by James Quintero, exas Public Policy Foundation (Aug. 2014).

2015 -2016 LEGISLATORS GUIDE TO THE ISSUES

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900 Congress Ave., Ste. 400, Austin, Texas 78701 | 512.472.2700 phone 512.472.2728 fax | www.TexasPolicy.com

http://www.texaspolicy.com/center/local-governance/reports/homeowners-and-texas-property-taxhttp://www.texaspolicy.com/center/local-governance/reports/homeowners-and-texas-property-tax