There’s a wonky and fascinating (even fascinatingly wonky) story in the Dallas Morning News today about a Republican-led effort in the State Legislature to rewrite the taxation rules for local governments. In short, some state lawmakers have been making the case that local property taxes are rising at an extraordinary rate compared to state household incomes. They want to enact a bill which would cap how much local taxing jurisdictions could raise taxes as well as trigger rollback elections if a local property tax hike exceeds 4 percent (currently if a tax hike exceeds the 8 percent rollback rate, citizens can petition for an election).
To push the bill, which was authored by Houston Republican Sen. Paul Bettencourt, lawmakers shared 50 hours of testimony gathered from public hearings around the state, thus proving the undisputed fact that getting homeowners to complain about their property taxes is about the easiest thing to do in politics. More impactful was a chart that showed property tax rates rising much faster than median household income.
At first glance, the chart tells a clear and powerful story. While Texans’ property taxes have risen at astronomical rates, median household incomes have all but flat-lined. However, the DMN dug into the numbers and found that the chart was comparing apples to oranges:
Here’s why it doesn’t work: As population and construction of new homes grow, so does the total amount of property taxes collected. That amount also grows as home values increase, even if the tax rate, the cents on the dollar that localities levy, remains unchanged.
Meanwhile, median household income, the paychecks of one family at the center of the state’s income spectrum, may not grow very much.
The Dallas Morning News conducted several analyses — using local, state and federal data — and could find no factual basis for Bettencourt’s claim, nor could three economists who independently reviewed the newspaper’s findings.
The economists characterized Bettencourt’s math an “apples to oranges” comparison, as did the mayors of Frisco and Arlington and the director of the Texas Municipal League, which lobbies on behalf of cities.
So, what’s the big deal, right? This isn’t the first time a politician tweaked the data to help get his bill approved. And who wants to defend tax hikes anyway?
Well, the impact of the law, if passed, could be devastating for local governments who are already struggling to find enough revenue to provide city services, paying police, and maintaining streets. This law would only hogtie them further, while allowing corporations off the hook for shouldering their fair share of the tax burden:
Under the plan, homeowners would see slower growth in their tax bills but so would multibillion-dollar companies. That’s because Bettencourt’s bill does not specifically target relief for struggling homeowners but instead would tamp property tax growth across the board.
Asked about horror stories in other states, where tax growth caps led to some cities leaving road medians unmowed or buses unrepaired, Bettencourt bristled at the idea that city and county roads or police departments would languish if officials can’t tap into tax revenues.
Texas voters can also raise taxes through an election if they want to, he said, and they do so often when school districts go to a referendum for more money.
“It’s not like there’s a ratchet-down effect that people would be afraid of,” he said.
But Arlington Mayor Jeff Williams, calling the committee’s conclusions “erroneous,” says a ratchet-down effect is exactly what would happen.
He says if an economic downturn hit, the city would struggle to maintain services and retain good cops and other employees who could make more money elsewhere. To keep services as they are, and to keep the total tax collection steady, the city would need to raise the tax rate.
Although raising the tax rate isn’t technically the same as raising taxes, if overall dollar collections are flat, the political reality is it sure looks like a tax rase.
“I don’t think anybody wants to come to a referendum asking to raise taxes,” Williams said.
Maher Maso, the mayor of Frisco, was especially critical of Bettencourt’s committee hearings, which he said were designed to get voters “up in arms and tell them what their opinion is.”
“Someone made the decision to use this as misdirection,” he said. “It’s very frustrating that they’re making an issue out of something that isn’t an issue. It’s a destructive proposal to the health and success of Texas cities.”
Read the whole story and check out the DMN’s comparison charts here.
