Thursday, May 30, 2024 May 30, 2024
68° F Dallas, TX


The revolting future of property taxes.

A TIME BOMB is ticking away, deep in the heart of the Texas tax code, and unless something is done to defuse it, the explosion that will be heard statewide early next year will be only the first foray in what legislators fear will be a full-scale tax revolt.

At issue is the “Peveto Bill,” named (unfortunately for the political aspirations of its author) after Rep. Wayne Peveto of Orange. No one, especially a politician, wants to have a tax revolt named in his honor.

For those of you who have not been paying attention to your taxation legislation lately -and we’ve not yet been able to locate anyone who has -some basic background is in order.

Taxing authorities in Texas, as in most states, traditionally have relied heavily on property taxes -both business and residential-to pay their bills. Historically, homeowners in Texas generally have had their property undervalued. The discretion and subjectivity that accompany all appraisal activity have provided what one tax expert calls “rough justice” for the homeowner. Business property, on the other hand, has, as a rule, been appraised at close to market value. Homeowners, in other words, have not been paying “their fair share” -but they’re about to.

While such separate and unequal taxa-tion between business and residential property might be politically popular, and decidedly humane, it is at variance with the state constitution, which in 1876 mandated that the taxation of all property be “equal and uniform.”

What the Peveto Bill does, in effect, is bring Texas into conformity with its own constitution. If Rep. Peveto hadn’t acted, it’s a virtual certainty that the courts would have. Nevertheless, even if “Peveto” is good constitutional law, it is terrible public policy, and a brief look at Dallas’ recent tax revaluation experience will illustrate why.

Within the last year, Dallas became the first major city in Texas to conform to the Peveto Bill’s key provisions. What Dallas did, in effect, was assess all the property on its tax rolls at 100 per cent of market value and apply the same tax rate to all classifications of property, both business and residential.

What Dallas did not do, as is still commonly believed, is raise its property taxes. No more dollars came into the city’s coffers. It simply “equalized” its tax roll, the end result of which was a massive shift of the tax burden from the business sector to the homeowner.

The result was convulsive. Residential property taxes increased on average 37 per cent. Taxpayers formed citizens groups, (most notably the TEA Party) to protest, and the heat got so hot at city hall that the head of the tax department resigned. Eventually, only after a long and costly educational campaign led by David Mc-Atee of the SOS Committee, Dallas voters turned back a tax amendment that would have severely limited the city’s ability to raise funds and provide essential services.

Imagine, then, if you will, the nightmare of nearly every city and town in Texas simultaneously undergoing what Dallas recently underwent. That is exactly what will happen if the Peveto Bill goes into effect next year.

Under the bill, it is estimated by the Texas tax office that the homeowner’s share of the property tax burden statewide will increase by 27 per cent. In some cities, most notably Houston, homeowners can expect beiween 300 and 400 per cent increases in their assessments. The problem in such booming metropolises is that tax officials have been able to undervalue residential property for years, allowing businesses and the expanding economy to take up the slack. All of that will change under “Peveto.”

In Dallas the effects of the bill will be somewhat softened in the short run because both the city and the school district came into conformity during last year’s revaluations. Nevertheless, still at odds with “Peveto” are Dallas County, the Dallas County Community College District, and the Dallas County Hospital District, as well as taxing bodies in all suburbs. When they come into conformity, the likely result will be an additional shift in the tax burden from businesses to homeowners.

So concerned are state legislators about the disastrous consequences of “Peveto” – both financial for the homeowner and political for themselves – that they are rallying behind a state constitutional amendment, cosponsored by Reps. Lee Jackson of Dallas, John Sharp of Placedo, and Peveto himself. The amendment would derail the harmful consequences ot the original Peveto Bill by providing substantial tax relief in the form of a homestead exemption to the homeowner.

While the provisions of the amendment are complex, the legislation would, in effect, exempt the first 40 per cent of a homeowner’s assessment from taxation the first year, 30 per cent in 1983, and 20 per cent in 1984, and thereafter. No exemption could be less than $5000, and all the new exemptions would be in addition to those already in place for the elderly and the disabled. The implementation of the exemptions would be optional on the part of the individual taxing authorities.

The amendment is largely the brainchild of Rep. Lee Jackson and outgoing City Councilman Steve Bartlett, both of whom are emerging as the best and the brightest legislators to come out of this city in some time.

While about 80 state representatives have already voiced support of the proposed legislation, its future is still uncertain. Because the root of the problem is the constitution itself, nothing short of a constitutional amendment will do, and that requires a two-thirds vote of both houses of the Legislature and approval of the voters in November. While sponsors of the amendment believe they have the 100 necessary votes in the House, passage in the Senate appears more problematical.

Further, there is not universal agreement that the proposed amendment is yet fine-tuned. Some legislators would like to see a higher exemption, some businessmen a lower one.

Nevertheless, while ad valorem taxation can be argued in the Legislature ad infini-tum, it is unarguable that, given the extraordinary inflation in the value of Texas homes and the shift in the burden of taxation, some sort of homeowner relief is urgently needed. Unless a constitutional amendment emerges from this session and is approved by the voters, all homeowners will suffer, and the incumbent legislators responsible for the consequences will pay the bill.