Top-notch political analyst and TSCPA friend Harvey Kronberg covered the Texas Taxpayers and Research Association’s (TTRA) annual meeting last week. In-depth analysis of the discussions is available on Kronberg's Quorum Report, well worth the subscription for those interested in behind-the-scenes info from Austin.
In the item below, Harvey reports on a discussion from the TTRA meeting that should be of particular interest to TSCPA members: insiders' analysis of the property tax relief package passed during the 2007 legislative session.
POLITICIANS OVERSOLD PROPERTY TAX CUTS SAY PANELISTS
For most, tax savings will be a fraction of what they were told
A panel of lobbyists at the Texas Taxpayers and Research Association’s annual meeting yesterday called last session’s property tax relief package "oversold" by politicians and its effects of relief for taxpayers fleeting, at best.
Despite the promise the recent property tax relief package was the biggest in the country - or possibly the world or the universe, the panelists joked - it is unlikely to deliver long-term relief, either in taxes or in avoiding another school finance court challenge, the speakers agreed during an afternoon panel session on property tax relief.
Asked whether the new tax package had accomplished the property tax relief promised, Jim Ramsey of CenterPoint Energy said the tax package was working just as it was intended to do, which was to buy down the tax rate for a temporary period of time.
"If your definition of ‘working’ is a permanent solution, clearly it’s not. It’s not a permanent solution, even if it was championed that way by some politicians," Ramsey said. "I think anyone who expected this to be $2,000 in tax relief to the average homeowner was clearly asking too much."
Do the numbers, Ramsey said. The school tax burden is 60 percent of the total bill. The tax rate cut applies to maintenance and operations, which is 90 percent of the total school district tax bill. If you look at the statewide average, that means that the 50 cents shaved off the school district tax rate amounts to only 18 percent of the total tax bill.
"Those tax cuts certainly were welcome, but most people probably expected it was going to be bigger than that," Ramsey said. "A couple of years of value increases, and those tax cuts are carved away."
And as John Nichols of Dow Chemical Company pointed out, if history serves as a yardstick, that tax increase won’t last more than six years. The increase in taxes between 1999 and 2004 was about 50 cents. And, beyond that, the margin tax revenues will only cover 60 percent of the current tax cut. That puts pressure on state revenues to "backfill" the current promised property tax cuts, even as the growth in the Texas economy and real estate market may be leveling off.
"My prognosis is that, in the future, possibly as close as the next session, we’re probably going to see the business taxpaying community asked to pick up more of the tab," said Nichols, who did agree that the margins tax had been good to capital-intensive industries like his, especially from the perspective of those already paying franchise tax.
George Allen of the Texas Apartment Association said last year the property tax cuts had little impact on his industry, which has been hammered by significant value increases, especially in Harris County. He added it remains to be seen whether property tax benefits will flow through and may depend on how his people fare in contesting appraisals. Allen said it was impossible to see real benefits from property tax relief until meaningful appraisal district reform was addressed by the state. He added that the new margins tax would have a dramatic impact on his industry because of the inclusion of partnerships - a typical business structure in the apartment industry.
Those pressures are combined with the current inequities of the school finance system, which were outlined by Dan Casey of Moak Casey. The current system is carrying $6.4 billion in "hold harmless" funding - what it will take to keep all school district budgets whole under the current finance system - which is a sign that formula funding must be addressed. Did last session’s margins tax add a great deal of discretion to school district budgets? Not much, given inflationary pressures, was Casey’s opinion.
Moderator George Christian pointed out that continued compression of tax rates by the state is somewhat dependent on surpluses and the general economic performance of the state. The buy-down also is based on the wave of increased property values in the state that, under the current formula, benefit the state far more than the local district.
Casey added that the current $8.5 billion surplus won’t last long, and added that his sense is that the current tax promises are a "do or die" proposition for most lawmakers.
Asked what appraisal reforms were necessary, Allen said it was not simply - contrary to popular expectations - sales price disclosure. TAA, of course, is opposed to sales price disclosure. The goal, instead, should be same fairness and equity in the system across appraisal districts, Allen said. Property owners need to sense they are getting a fair shake and a true distance between taxing districts and appraisal review boards.
TAA supports many of the reforms suggested by a recent task force: a truly independent regulatory body rather than self-policing for appraisal districts; proper specialization for appraisal review boards, especially dealing in commercial property; and increasing the arbitration limit from $1 million to as high as $25 million.
Nichols suggested the only way to guarantee that property tax cuts are going to work is to limit the amount of revenue growth that local taxing jurisdictions have, even if such limits have led to a serious gnashing of teeth among local government officials. Cities and counties that intend to exceed a rate of growth, plus 5 percent, should be required to seek approval of the voters, Nichols said. Otherwise other controls won’t work.
"You’ve got to limit, somehow, the demand for revenue," Nichols said.
Ramsey said there was no way avoiding the fact that the state relies too much on property tax for almost every form of government. Anything done by government now only extends the life of an overtaxed system. Ramsey said he found the Texas system one of the most equitable in the country, but that didn’t negate the fact that the only way to provide long-term relief was to find a new revenue source for taxation.
Recent Comments