TEXAS TAX FIGHT2019

ROOTS OF THE CONFLICT

Where did all this start?

WHERE DID ALL THIS START?

WHERE DID ALL THIS START?

BULLOCK’S PLANSCOMPTROLLER BULLOCK: Sales tax on everything

RESULT: DID NOT PASS

LT. GOVERNOR BULLOCK: Personal income taxRESULT: DID NOT PASS

BULLOCK TAX LEGACYBullock’s observations shook up the Texas Tax World View:

1) The tax system is too heavily dependent on oil & gas and other tangible assets; and

2) It misses the (growing) service sector of the economy

NEXT BIG WHIFF: BUSHGovernor Bush’s 1997 Plan:1) Directly went after property tax2) Proposed buying down school property tax with a

revamped (and bigger) franchise tax and sales taxRESULT: DID NOT PASS

BUSH TAX LEGACYBush’s plan framed many tax fights that would follow:

1) Property taxes are Texas’ basic tax problem2) Reducing the school tax is the best target3) The franchise and sales taxes will be the primary

sources of replacement revenue

A HALF-DECADE OF WHIFFS2001: HB 3259 – sales tax/property tax swap2003: SJR 1 – sales and property tax/school tax swap2004: SJR 1 – sales tax/property tax swap2004: HJR 1 - sales tax and video lottery2005: SJR 38 – statewide property tax2005: HB 3 – franchise tax as payroll tax2005 (special session): HB 3 – franchise tax broadening

The New Millennium:

WHIFFWHIFF WHIFF WHIFFWHIFFWHIFFWHIFF

FINALLY, THE STATE SUPREME COURT SHOWED MERCY AND PUT THE TAX

SYSTEM TO DEATH…

…AND THE 2006 LEGISLATURE PASSED THE TEXAS TAX

REFORM COMMISSION PLAN TO BUY DOWN SCHOOL TAX WITH CIGARETTE AND REFORMED

FRANCHISE TAXES

AND HERE’S WHAT WE GOT

$0$5

$10$15$20$25$30$35$40

1999 2002 2005 2008 2011 2014 2017

billions

TEXAS PROPERTY TAXES BY TYPE OF TAXING UNIT

School Districts

Cities, Counties, and everything else

AND HERE’S WHAT WE GOT

$0$5

$10$15$20$25$30$35$40

1999 2002 2005 2008 2011 2014 2017

billions

TEXAS PROPERTY TAXES BY TYPE OF TAXING UNIT

School Districts

Cities, Counties, and everything else

There it is

SO THE EFFORT SHIFTED TO RESTRAINT

There are two basic levers lawmakers reach for to limit property tax:

1)Appraisal caps, and/or2)Tax levy limitations

WHY APPRAISAL CAPS ARE BADFirst, appraisal caps create a false sense of tax relief. They shift the burden around, but don’t affect the amount of the tax levy at all, which is what matters most.

Second, the burden shift falls onto people whose properties are not appreciating, including factories and oil or gas wells.

Finally, even within a single category, like residential property, appraisal caps create a last-in-loses tax penalty.

WHY TAX LEVY LIMITS ARE GOODFirst, tax levy limits address the real problem directly: they control how fast the overall tax burden can go up.

Second, they treat all taxpayers the same. Unlike tax exemptions or appraisal caps, a levy limit is uniform in that it provides a single, restrained tax rate for everyone.

Third, with the tax rate-setting process being an annual event, a taxing unit can submit a proposal to exceed the levy limit in a November election. The people choose.

And SO, TAX LEVY LIMITS SAILED RIGHT INTO LAW…

NOT

FROM 2007-2017

WHIFF

BECAUSE TAXING UNITS

LIMITS ON THEIR ABILITY TO IMPOSE TAXES!

HATE

WITNESSES AGAINST SB 2Allison, Jim (County Judges and Commissioners Association of Texas)Barton, John (Self; Justices of the Peace and Constables Association)Coffman, Chris (City of Granbury)Eckhardt, Sarah (Self)Elliott, Jay (Self; Falls county)Gray Moore, Holly (Self; City of Roanoke)Haehn, George (Self; City of Buda TX)Haynes, Adam (Conference of Urban Counties)Jackson, Bill (Harris County)Johnston, Robert (Texas Association of Counties)Lavine, Dick (Center for Public Policy Priorities)Lopez, Carlos (Justices of the peace and constables association of texas)Milligan, Maureen (Teaching hospitals of texas)Myers, Brynn (City of Temple)Reed, Charles (Dallas County Commissioners Court)Shuster, Joe (Pecos county)Stathatos, Jimmy (Self; Town of Flower Mound)Stout, David (Self; El Paso County)Suits, Stacy (Self; Travis County Constable Pct 3)Whitley, Glen (Self; Tarrant County)Abercrombie, Jay (City of Bullard)Ahrens, Mike (City of Mount Pleasant)Allred, Don (Oldham county)Anderson, Jessica (Houston Police Department)Berlanga, Hugo (City of PORT ARANSAS)Berlanga, Hugo (Nueces county)Bixby, Pamela (Self; League of Women Voters Texas)Booker, Juan (YAC)Boulton, Brad (City of lancaster)Boyer, Victor (San Antonio Mobility Coalition)

Breland, Sereniah (City of Pflugerville)Brodnax, Mike (Self; Rowlett police department)Brooks, Jalen (YAC)Campbell, Scott (City of roanoke)Canales, Barbara (Nueces County Commissioners Court)Chancellor, Isiah (Self; Lancaster Youth Ad Council)Chandler, Clayton (City of mansfield)Christensen, Laurie (International Association of Arson Investigators, Texas Chapter)Christensen, Laurie (Texas Fire Marshal's Association)Corker, Bryson (Self)Davies, Holli (North Texas Commission)Dawn-Fisher, Lisa (Texas State Teachers Association)Durant, Darleen (City of Mount Pleasant)Ellis, June (City of Buda, TX)Fisher, Tracy (Self)Ford, Yolanda (City of Missouri City)Francis, Will (National Association of Social Workers - Texas Chapter)Frederick, Pam (Self; City of Bullard)Fripps, Thomas (YAC)Fulton, Clayton (Self; City of Hurst)Giles, James (Self)Gutierrez, Bobby (Self; Justice of the Peace and Constables Association of Texas)Hamill, Joe (American Federation of State, County and Municipal Employees)Harris, Dwight (Texas American Federation of Teachers)Harrison, Rodney (Self; Town of Little Elm)Hatfield, Jacob (City of Mount Pleasant)Haverlah, Kirsha (Self)Henley, Paul (Self; City of Corsicana)Hill, Brandon (City of South Padre Island)Hinton, Amy (City of mount pleasant)

Howard, Neil (Self; City of Rowlett)Huckaby, Clayton (Self; Hays County ESD #8)Hunt, Karen (City of Coppell)Jackson, Rashad (Self; Youth Advisory Committe , Lancaster)Johnson, Noel (TMPA)Johnson, Sean (Self; City of Lancaster Texas)Kelly, Bill (Mayor's Office, City of Houston)Kennard, Karen (City of Port Arthur)Kidd, Bo (Buda Police Department)Klement, Leon (Cooke)Kovacs, Michael (City of Fate)Krudop, Walter (Self)Land, Mike (Self; City of Coppell)Lara, Rene (Texas AFL-CIO)Leach, Traci (City of Coppell)Levinson, Leila (Self)Love, John (City of Midland and Texas Municipal League)Marcus, Walters (City of Lancaster)Marez, John (Nueces County)Martinez, Mario (City of Brownsville)Mathew, Biju (City council)Mauldin-Jones, Opal (Self; City of Lancaster)Mays, Wes (Self; City of Coppell)Morris, Nina (Self; City of Lancaster)O'Brien, Kristen (Self; AFSCME Local 1624)Ortega Carter, Dolores (Self; County Treasurers Association of Texas)Oseguerda, Andrea (YAC)Palla, David (Self; City of Hurst)Pape, Paul (Self; Bastrop County Judge)

Pfefferkorn, Stacey (City of Round Rock)Phillis, Peter (City of Mansfield, Texas)Poovey, Curtis (Self; City of Richardson)Ramirez, Rudolpho (YAC)Reich, Elizabeth (City of Dallas)Roden, Gary (Self; City of Coppell)Russell, Claudia (City of San Marcos)Shannon, Melissa (Bexar County Commissioners Court)Shipp, Patrick (Self; Texas Fire Chiefs Association)Sims, Zerell (YAC)Smith, Keenan (Youth Commission)Spencer, Paul (Self; Town of Addison)Spivey, Jimmy (Self; City f Richardson)St. John, Becky (Self)Stringfellow, Rona (Self; City of Lancaster)Sullivan, Michael (Self; Farmersville Police Department)Swigert, Scott (Self; City of Mont Belvieu)Tagliabue, Tom (Self)Thomas, Damareon (YAC)Tittle, Gary (Texas Police Chiefs Association)Urbanski, Samuel (City of lancaster)Valadez, James (Self)Warndof, Donna (Harris County Commissioners Court)Wheeler, Julie (Self; Travis County Commissioners Court)Wilkison, Charley (Combined Law Enforcement Associations of Texas, CLEAT)Williamson, Matthew (Dallas Police Department)Wilson, Jeremy (Self; Town of Little Elm)Xie, Selena (Self; Austin EMS Association)Youngman, Chris (Fire Department)

And YET, SB 2 FINALLY PASSED. WHY?• A growing sense among Republicans that this might be their last solid majority in

the Legislature… and that another tax failure might actually enable a blue wave.

• Some Democrats who were sympathetic to taxpayers’ plight.

• Plain ol’ bad feelings from past sessions held against the cities and counties.

• A new Speaker of the House who was more aggressive on the issue.

• A more-engaged Governor Abbott, stepping out with a bold plan.

• An active business community walking point.

SO, WHAT IS IN SB 2?• Light and Heat.• Lowering (and renaming) the rollback rate from 8% to 3.5%.• Requiring an automatic election to exceed 3.5%, instead of a petition for election.• Requiring “real-time tax notices” so that taxpayers can see and react to what

taxing units (not just appraisal districts) are proposing.• Requiring taxing units to have websites, to accept input on budget matters by

email, and to show the contact information for all governing board members.• Increased oversight by the Texas Comptroller.• Special Appraisal Review Board panels in counties of 1 million or more for

properties including commercial property, utilities, industrial, and multifamily.

And WHAT ABOUT SCHOOL DISTRICTS?• SB 2 applies to everything BUT schools. HB 3 covers school districts.• For school tax matters:

• A 7% tax rate reduction (“compression”) in the taxes levied last fall, paid for by the state.

• Ongoing, annual rate compression, paid for by the state, to limit to 2.5% the amount that rising appraisals automatically turn into rising taxes.

• Lowers the $1.17 M&O cap in virtual perpetuity.• For the 2020-21 biennium, provides $5 billion property tax relief.• Reduces “Robin Hood” recapture payments by 47%.• Raises the state’s share of funding to 45% from the previous 38%.

• Increases public education spending by $6.5 billion.

So, ARE WE DONE WITH TAX REFORM?• YES. As far as the fight over limitations over tax increases, it is done. • NO. As to whether the taxpayers/voters are going to be satisfied, possibly NO.

• Tax limitations are not tax reductions. Many property owners’ taxes will continue to rise, albeit at a lower rate.

• Many property owners, especially homeowners, will not be satisfied until their appraisals are hard-capped and their taxes lowered permanently.

• MAYBE. Whether the state can afford its increased school program spending and its new, perpetual responsibility to annually compress school taxes remains to be seen.

TEXAS TAX FIGHT2019