One of the major subjects being debated in Austin is Property Tax relief. The focus of the arguments seems to be how much the tax RATE can be raised each year without voter approval. The Governor has set a goal of a 2% raise.
Sounds pretty good. But be careful. The Property Tax one pays is derived using two components; the tax RATE and the assessed value of the property.
Each year every property is assessed to determine its value. This is done by the independent Central Appraisal District following the policies established by the Legislature in Austin. One of these policies is that all assessments must be based on “market value” of the property. Once an assessment has been made, then each taxing authority establishes its individual tax RATE that will be charged per $100 of assessed value.
For example, assume last year a home was assessed a value of $200,000. The total tax RATE (city .48, county .39, and school district $1.44) totaled $2.31 per hundred of assessed value. This would equate to a tax bill of $2000 times $2.31 or $4,620. If the tax RATE was limited to a 2% raise for the next year, the tax bill would be$2000 times $2.31 times 102% or $4,712; an increase of $92.
But wait, the 2% raise only applies to the tax RATE; it does NOT address the assessed value. And since appraised value is based upon market value, look what happens. Using the same example, because of the strong economy, counties like Rockwall, Collin, and Denton are seeing home values increase 10-15% per year. The same $200,000 house next year will be assessed with a 10% increase, or now its value is $220,000. Using the same tax RATE of $2.31 the tax bill is now $2200 times $2.31 or $5,082; an increase of $462.If the tax RATE would also rise by the 2%, the tax bill would then be $5,183; an increase of $563 over the previous year.
See the problem. The 2% solution may work for counties with little or no growth in terms of market value. But for those counties experiencing a healthy growth in market value of homes, the current debate in Austin is simply missing the larger issue.
Rockwall County Judge (Retired)