PUBLIC HEARINGS HELD THROUGHOUT SUMMER 6/30/08

Texas lawmakers, REALTORS® gathering input for ’09 session

State Rep. John Otto, chairman of the Interim Select Committee on Property Tax Relief and Appraisal Reform, is holding a series of public hearings across Texas this summer. The first hearing was June 17 in Austin. The last is scheduled for Aug. 19 in Houston. A Senate subcommittee, chaired by Tommy Williams, is also studying tax reform. And the 90,000-member Texas Association of REALTORS® (TAR) has its own Tax and Appraisal Task Force wrapping up work over the summer as well. The mutual goal of these efforts is to provide meaningful input to the legislative process when the Texas Legislature convenes for its 81st session in January 2009. Among the TAR task force’s charges:

• Review the office of comptroller to determine whether adequate oversight exists as it relates to franchise taxes, value studies, and appraisal districts.
• Examine the continued use of local property taxes to fund public education and begin to develop a long-term plan to wean the state off of the local property tax structure.
• Examine the states’ current sales and use tax structure.
• Review current practices of appraisal districts and determine whether a fair and uniform system exists for property owners across Texas.
• Examine the issue of appraisal caps on residential homesteads.
• Review the binding-arbitration process created by the Legislature in 2005 to help homeowners challenge their property appraisals, and determine its effectiveness.

As a group, Texas REALTORS® work in the public-policy arena to help reduce the state's heavy reliance on property taxes and promote public policies that benefit homeowners.

APPRAISAL REFORM GAINS FOOTHOLD 6/11/07

Texas REALTORS® push pro-taxpayer agenda

Many Capitol insiders place the blame for the failure to pass comprehensive appraisal reform squarely at the feet of chief appraisers across Texas. Many chief appraisers lobbied heavily to derail bills aimed at enhancing the appraisal process in favor of taxpayers. The Texas Association of REALTORS® advocated for extensive reforms in the appraisal process used to tax real property. The association's plan of reforms follows in-depth research by its Appraisal District Procedures Task Force and Gov. Perry's Appraisal Reform Task Force. Many of these reforms were filed as a package of bills by Rep. John Otto during the 80th Texas Legislature, which adjourned May 28. These reforms were met with considerable resistance from taxing entities and chief appraisers, but Texas REALTORS® were successful in seeing the majority of first-stage reforms gain passage. Here’s a list of appraisal-reform bills that passed the legislative gauntlet in 2007:

• HB 3490 by Otto, relating to the authority of a chief appraiser to appeal from an order of an appraisal review board determining a taxpayer protest
• HB 3492 by Otto, relating to determining taxable value in the comptroller's property value study
• HB 3495 by Otto, relating to the contents of the notice of the meeting at which the governing body of a taxing unit will vote on a proposed ad valorem tax rate that will result in a tax revenue increase
• HB 3496 by Otto, relating to the deadlines for the delivery or filing of certain ad valorem tax notices
• HB 3249 by Truitt, relating to the Sunset Advisory Commission's schedule of agencies to be reviewed that moved the Board of Tax Professional Examiners review to 2009

tAX SAVINGS NEGATED 5/29/07

Majority of school-bonds pass

Approximately $6,299,961,011 of $7,321,831,011 proposed school bonds passed in elections held across Texas May 12. Voters in more than 100 school districts were faced with decisions on paying for new facilities and upgrades to existing ones. In some areas, approved school bonds will significantly raise property taxes, negating much of the savings passed by the Texas Legislature during a special session in 2006. Texas REALTORS® took no position for against any particular school bond, but did educate consumers that approving school bonds does increase property taxes. View a list of which bonds passed and which ones failed.

TAX SAVINGS 5/15/07

Texans vote for tax relief for seniors, disabled

Voters overwhelmingly approved an amendment to the Texas constitution that will provide property-tax relief to homeowners 65 years and older and homeowners who are disabled. Proposition 1 passed easily, with almost 88% of those who cast ballots voting in favor of the measure that will extend property tax cuts to older homeowners and those with disabilities. Because of the constitutional language of the existing tax freeze provided for those two groups, school property-tax relief approved by the Texas Legislature last year could not be passed on to those homeowners. The change to the Constitution will provide much-needed relief to many people on fixed incomes who can benefit greatly from the savings. The actual savings for each homeowner depends on several factors, including the appraised value of the home and the length of time that the homeowner’s taxes have been frozen.

MORE REFORM NEEDED AT CAPITOL 4/30/07

Constitutional amendment would provide tax relief to seniors, disabled

Voters have a chance to approve an amendment to the Texas Constitution that will lower property tax bills for homeowners who are 65 or older and those who are disabled. Last year, the Legislature passed sweeping tax reform that cut school property-tax bills by approximately one-third. Unfortunately, due to the constitutional language of the existing tax freeze provided for homeowners who are 65 and older and those who are disabled, this tax relief could not be passed on to those two groups. The proposed amendment will appear on the May 12 Constitutional Amendment ballot as follows: "The constitutional amendment authorizing the Legislature to provide for a reduction of the limitation on the total amount of ad valorem taxes that may be imposed for public school purposes on the residence homesteads of the elderly or disabled to reflect any reduction in the rate of those taxes for the 2006 and 2007 tax years." Voting for the amendment will provide tax relief to many Texans who desperately need it. Early voting begins April 30 and ends May 9.

MORE REFORM NEEDED AT CAPITOL 4/12/07

Local bond elections threaten to eat up property-tax cuts

Last year, Texas lawmakers passed the most comprehensive tax-reform package in decades. One of its key components gave Texans much-needed property-tax relief, reducing the maintenance and operations portion of school taxes by approximately one-third over two years. The largest of the reductions is scheduled for 2007, but some school districts are looking at this as an opportunity to pass large bond initiatives, thereby diminishing the tax-savings benefit to homeowners. Texas REALTORS® are not opposed to school bonds, but they are concerned with the way they are being marketed. Some school districts claim that voting yes will not raise your property taxes, while others are even saying that your taxes will go down. This is only partially true. If you vote yes, you’ll probably pay no more in property taxes than you paid previously, but you definitely won’t see the full decrease. School bonds may be necessary and worthwhile. In many cases, they’re a great investment in our schools and our kids. But there is no “free money.” There is no “swapping” of taxes. Every decision to approve a school bond has a tax cost associated with it that property owners will pay.

MORE REFORM NEEDED AT CAPITOL 1/07/07

80th Texas Legislature to address appraisal reform

Texas REALTORS® were instrumental in passing property-tax reform during the spring 2006 special session. In addition to closing the loopholes on the business franchise tax and implementing a broad-based, low-rate business activity tax, the 79th Texas Legislature gave property owners an approximately one-third reduction in school property taxes. This is the largest property-tax reduction in the state’s history. As a result, Texas homeowners will begin to realize meaningful savings in 2007. While definitely a step in the right direction, it certainly doesn’t solve the entire problem. With the Jan. 9, 2007 opening of the 80th Texas Legislature, lawmakers have the opportunity to finish the job with comprehensive property-appraisal-system reform. This is critical to achieving meaningful, long-term tax relief for Texas homeowners. The 90,000-member Texas Association of REALTORS® advocates for homeowners and other owners of private property in Texas, and has a 10-step plan for appraisal reform.

TAX SAVINGS 10/23/06

Where is my property tax cut?

As Texans receive their 2006 property-tax bills, many are wondering one thing: How much have I saved in property taxes now that the Legislature cut school property taxes? The amount of the tax savings is NOT the difference between a person's 2006 and 2005 tax bills. In some cases, a property owner's taxes may be about the same or even higher than last year. That's because other factors come into play. For example, a higher appraisal increases tax amounts. Also, a city, county, or other taxing authority may have raised rates, causing the homeowner's overall tax bill to go up. Keep in mind that these actions would have occurred regardless of whether school taxes were cut. To figure your true savings compared to what your tax bill would have been this year without a school-tax cut, most homeowners can use the following formula: Take your appraised taxable value minus any exemptions and divide that number by 100. Multiply that result by 0.17. (The tax cut for 2006 for most school districts was 17 cents.) The school tax rate in 2007 will drop another 33 cents for most school districts. To figure your 2007 savings, use the same formula, but replace the 0.17 with 0.50 (50 cents total).

AT THE CAPITOL 5/19/06

Legislature passes largest property-tax cut in Texas history

Texas REALTORS® and homeowners are celebrating the Legislature’s successful special session, which ended earlier this week with significant property-tax cuts and a fairer way of funding public schools. As a result, your property taxes will go down 17 cents per $100 valuation this fall, and another 33 cents next year. Texas homeowners will save $500 or more a year because of the property-tax reductions—the largest in state history. Also, the Legislature reformed the state’s broken franchise tax, which 15 of 16 Texas businesses weren’t paying because of easy-to-exploit loopholes. Now, more businesses will pay a smaller margins tax, a low-rate, broad-based method of funding Texas schools. These legislative changes are expected to satisfy the Texas Supreme Court’s June 1 deadline for fixing flaws in the state’s school-finance formula. In addition, Texas teachers will receive a $2,000-a-year pay raise. The 80,000-member Texas Association of REALTORS® supports public policies that benefit homeowners and do not harm the economy, and applauds legislative leaders’ actions.

AT THE CAPITOL 5/15/06

Legislature meets 30-day challenge with time to spare

With one day left in a 30-day special session on school finance, Texas lawmakers were wrapping up after passing a legislative package that reduces property taxes, reforms public-school funding, and gives Texas teachers a $2,000-a-year pay raise. Senators and representatives from both political parties feel they’ve finally found the once-elusive solution to school-finance reform. There’s nothing like the pressure of a final deadline to motivate. Lawmakers were laboring under a June 1 Texas Supreme Court deadline to correct an unconstitutional statewide property tax and give school districts more discretion in setting funding rates. Lt. Gov. David Dewhurst expressed confidence that the court would find legislators’ work satisfactory. The property-tax cuts, which the Texas Association of REALTORS® strongly supported, will help more Texans achieve the American Dream of homeownership and help current homeowners stay in their homes. A series of bills forming the legislative solution were based largely on recommendations by the governor-appointed Texas Tax Reform Commission.

AT THE CAPITOL 5/11/06

Senate passes property-tax relief, education finance reform

Yesterday, the Senate passed the two remaining pieces of a legislative package that lowers your property taxes and reforms public-school funding. With the special session ending next Tuesday, May 16, lawmakers appear to have met the June 1 Supreme Court deadline for giving local school districts more funding discretion while correcting an unconstitutional statewide property tax. At issue was the current $1.50 per $100 property-tax ceiling, the effective tax rate of most school districts in Texas. Last year, the Texas Supreme Court ruled that the $1.50 cap created a de facto statewide property tax, which violates the Texas Constitution. Passage of HB 1 corrects this problem. Local property-tax rates will be lowered by one-third over two years, giving school districts some breathing room while giving homeowners a much-needed tax break. Despite home prices that are lower than many states, Texas ranks only 42nd in homeownership. The Texas Association of REALTORS® believes that lowering property taxes will help more Texans achieve the American Dream of homeownership, while giving current homeowners the freedom to stay in their homes. “This is a great day for Texas and Texans,” said Dennis Patillo, chairman of the Texas Association of REALTORS®. “Our governor and legislators have shown true courage and leadership, doing the right thing for homeowners, schools, and the economy.” HB 1, as passed by the Senate, includes a $2,000-a-year pay raise for Texas teachers. Senators also passed a $1-a-pack increase in the cigarette tax, which will help pay for the property-tax cuts and education funding. All that remains is for the House to concur with Senate versions, and the governor’s signature on the handful of bills comprising the legislative package.

AT THE CAPITOL 5/8/06

Education finance reform slips off fast track in Senate

Part of a legislative package that reduces property taxes and reforms the state’s business tax got bogged down in the Senate Finance Committee last week. Legislators are under a June 1 Texas Supreme Court mandate to fix the state’s system of financing public schools, which relies too heavily on property taxes. With the rest of the Perry plan sailing through the current special session, the progress of HB 1 came to a grinding halt, with senators disagreeing over details that some believe are not germane to the mandate. Last year, the Supreme Court ruled that Texas’ current school-finance formula creates a de facto statewide property tax, which is unconstitutional. For several years, the Legislature has tried repeatedly to address inequities in the state’s school-funding system. This time, with a court-ordered deadline looming, the job is almost done. Unfortunately, bickering in the Senate could derail reform efforts once again.

AT THE CAPITOL 5/3/06

Tax reform bills pass Senate, now en route to governor

Two major pieces of tax-reform legislation—property-tax cuts and a new business tax to pay for them—passed the Texas Senate earlier this week. The measures are now on their way to Gov. Rick Perry’s desk. The Legislature, which for several years had been unable to reform the state’s education-finance system and correct an unconstitutional statewide property tax, appears poised to achieve both goals with time to spare before a June 1 Supreme Court-imposed deadline. Two other bills that are part of the tax-reform package, including a $1-a-pack increase in the cigarette tax, are still working their way through the process. All non-smoking Texans will realize net tax savings once the tax-reform package is enacted, legislative studies show.

AT THE CAPITOL 5/2/06

Full Senate passes tax reform legislation

Senators continued the no-nonsense tone of the special session, passing major tax reform legislation that will level the playing field for Texas businesses. The Senate is expected to follow up today by passing the second major piece of the Perry plan—property-tax cuts that will save the average Texas homeowner $700 a year and bring the state’s flawed school-funding system into compliance with a June 1 Supreme Court deadline. The Senate Finance Committee is scheduled to take up other bills sent over from the House, including an increased cigarette tax to help offset property-tax reductions.

AT THE CAPITOL 5/1/06

Senate committee passes major tax reform bill

The Texas Senate Finance Committee moved quickly late last week, passing several key pieces of legislation sent over from the House. On Friday, the committee passed intact a major business tax overhaul bill that closes loopholes allowing 15 of 16 Texas businesses to escape paying the current franchise tax. The plan includes several protections for small businesses:

• Sole proprietorships and general partnerships are exempt from the tax.
• The plan doubles the exemption amount from $150,000 to $300,000, meaning that businesses that would otherwise be required to pay the tax are exempt if total revenues are $300,000 or less.
• Businesses can deduct either the cost of goods sold or employee compensation (including benefits and owner’s compensation).
• Property taxes for the business would go down, as would property taxes for the home of the business owner.

Legislative leaders are working to comply with a Texas Supreme Court deadline of June 1 to fix the state’s current school-funding system, which over-relies on property taxes. The business tax overhaul will replace revenue lost from property-tax reductions. Property taxes in Texas are some of the highest in the nation, which is one reason that Texas ranks only 42nd in homeownership rates in the U.S.

AT THE CAPITOL 4/25/06

Property-tax reform passes initial hurdle

Texas legislators took an important step yesterday toward providing long-overdue tax relief to property owners. The House passed HB 3, which would overhaul the state’s franchise tax and close a loophole many Texas businesses used to avoid paying tax in the past. About $3.8 billion raised by the business tax—along with a substantial chunk of the state’s surplus—would be used to fund $6 billion in property-tax cuts. Dozens of proposed amendments to the bill either failed or were withdrawn by those who proposed them. The measure passed on a bipartisan vote by a count of 80-69 and now moves on to the Senate for consideration.

AT THE CAPITOL 4/24/06

Cornerstone legislation up for crucial House vote today

HB 3, perhaps the best hope for meaningful property-tax relief in the current special session, is up for vote in the Texas House of Representatives today. HB 3 revises the franchise tax provisions in Texas to ensure that each business that is subject to the tax pays its fair share. Under the new plan, the primary franchise tax rate will be lowered from 4.5% to 1%. Employers will then have a choice of deducting the cost of goods sold or labor and employee benefits costs to calculate their state tax obligation. This will bring an estimated $3.8 billion to the state from businesses that currently avoid paying the franchise tax. Detractors of HB 3 are not paying the franchise tax now, and would prefer that homeowners continue to unfairly shoulder the burden of funding Texas schools. However, a broad cross section of the business community has pledged its support for the Texas Tax Reform Commission’s recommendations, which HB 3 embodies. HB 3 will close current loopholes that allow businesses to escape paying any state taxes at all. It also enables meaningful and long-term property-tax reductions for homeowners and business owners alike.

AT THE CAPITOL 4/17/06

More than 2,000 attend property-tax rally on Capitol steps

More than 2,000 Texas REALTORS® and other citizens concerned about high property taxes gathered at the Capitol today to cheer Gov. Rick Perry, former state Comptroller John Sharp, and Dennis Patillo, chairman of the Texas Association of REALTORS®. All three spoke in favor of the Texas Tax Reform Commission’s legislative recommendations for lowering property taxes and reforming the state’s business tax to provide fair and stable funding for Texas schools. “Fact is, in Texas we pay some of the highest property taxes in America,” Perry told the crowd. “And millions of homeowners pay that price. So do a great many of the employers. Property taxes are too high, and they’re costing Texas jobs when businesses decide to go somewhere else. They cost consumers money, in terms of higher prices. They cost millions of Texas families the dream of owning that home. All of that is about to change, because we’re going to pass this piece of legislation—and pass the largest property-tax cut in the history of Texas.” Perry said the plan would provide a $6 billion property-tax cut for Texas homeowners and business owners. Sharp, Perry’s former political opponent whom the governor appointed to head the tax-reform commission, said, “We have an opportunity that I believe will not come again. I believe if this Legislature, in this special session, does not address this problem … If you don’t do it now, it won’t get done.” Patillo, who served with Sharp on the governor’s commission, said: “This is absolutely the time to put partisan politics and political ambition aside.” Patillo elicited loud responses from the crowd when he posed a series of questions.

“Do you think it’s time for the Legislature to provide permanent tax relief—now or never?”

“Now!”

“Do you think it’s time for the Legislature to pass this broad-based business activity tax—now or never?”

“Now!”

“Do you think it’s time for the Legislature to act—now or never?”

“Now!”

AT THE CAPITOL 3/31/06

Property-tax reduction rally set for April 17 at Texas Capitol

The Texas Association of REALTORS® is organizing an April 17 property-tax reduction rally to coincide with the opening of the latest special legislative session on school finance. More than 2,000 Texas REALTORS® and other citizens concerned about high property taxes and equitable school funding will hear Gov. Rick Perry speak on Capitol grounds. Texas REALTORS® support the governor-appointed Texas Tax Commission’s recommendations for lowering school property taxes and creating a low-rate, broad-based business tax to fund public schools. The commission’s plan, released in mid-March, closes current tax loopholes so more businesses pay their fair share. It also would enable more Texas families to achieve their dreams of homeownership, while giving current homeowners a much-needed tax break. “This is our great chance,” said Perry, “a once in a generation opportunity to lay aside politics in pursuit of shared prosperity. I ask legislators of both parties to join me in that pursuit.” The governor is expected to address Texas REALTORS® and other rally participants at approximately 11 a.m. April 17, weather permitting, on the south lawn of the Capitol grounds in Austin. All citizens are welcome to attend the property-tax reduction rally.

AT THE CAPITOL 3/29/06

Texas’ largest association supports tax panel’s approach

Gov. Rick Perry held news conferences in Austin and San Antonio today to unveil the Texas Tax Reform Commission’s plan for lowering property taxes and improving school funding. The governor’s 24-citizen commission, chaired by former state Comptroller John Sharp, worked long and hard on a plan that will give Texans much-needed property-tax relief while ensuring a stable and fair funding source for public schools through a new, broad-based business tax. Texas’ current school-finance system relies heavily on property taxes—some of the highest in the nation and one of the main reasons Texas ranks a dismal 42nd out of 50 states in homeownership. The 80,000-member Texas Association of REALTORS® supports the governor’s and commission’s approach. “The state’s tax burden has rested squarely on the shoulders of private-property owners for much too long,” said Benny McMahan, Texas Association of REALTORS® CEO. “These tax changes proposed by the commission spread the burden fairly and will make it possible for more Texans to become first-time homeowners.” The commission’s plan will now go to the Texas Legislature, which begins a special session April 17 on school finance.

AT THE CAPITOL 3/22/06

Tax commission to issue school-funding recommendations

Newspaper reports indicate that the Texas Tax Reform Commission is likely to recommend the Legislature reduce local-school property taxes, enact a new business activity tax to replace the current franchise tax, increase the cigarette tax by $1, and transfer $1 billion from reserves. The commission’s school-funding proposal would not affect state or local sales taxes. The Texas Association of REALTORS® likes the commission’s approach because it reduces property taxes and spreads the tax burden across many businesses in different industries—and does not further raise the barriers to homeownership in a state that currently ranks only 42nd out of 50 states. Chaired by former state Comptroller John Sharp, the commission’s charge from the governor was to propose new alternatives for creating a broad-based, fair, and stable source of revenue for Texas public schools. The Legislature is under a Texas Supreme Court-imposed deadline of June 1 to fix the state’s current school-funding system, which relies heavily on property taxes. Gov. Rick Perry recently announced a special legislative session convening April 17 to deal with school finance. Texas REALTORS® will be monitoring events closely as legislative negotiations get under way.

AT THE CAPITOL 3/17/06

Gov. Perry convening special session April 17

Gov. Rick Perry announced today that he will call lawmakers back to Austin on April 17 for a special session on school finance. Lawmakers will be under the gun to meet a court-imposed deadline to deliver a new way of funding Texas public schools. Last year, the Texas Supreme Court ruled that the current $33 billion school-funding system is unconstitutional because it relies on a de facto statewide property tax—and gave the Legislature until June 1 to enact a plan that meets constitutional muster. This will be the Texas Legislature’s fourth special session on school finance in three years. Should lawmakers fail to satisfy the court’s requirements, it could mean that Texas’ 1,037 public schools will see funding delays next fall. The 80,000-member Texas Association of REALTORS® has consistently advocated lowering property taxes for Texas homeowners, while supporting fair and equitable funding methods for public education.

AT THE CAPITOL 1/9/06

Court ruling means Legislature will be under deadline pressure

The Texas Supreme Court-imposed June 1 deadline to fix the state’s current school finance system likely means that Gov. Rick Perry will call a special legislative session in March or April. Last year, the governor appointed 24 citizens, including 2006 Texas Association of REALTORS® Chairman Dennis Patillo, to serve on the Texas Tax Reform Commission. The commission is conducting public hearings around the state to explore new alternatives to funding Texas schools. Last session, the 80,000-member Texas Association of REALTORS® supported the Legislature’s efforts to lower property owners’ taxes in the state while providing a more equitable solution to public school funding. Texas ranks just 45th out of 50 states in homeownership. Texas REALTORS® contend that high property taxes are partly to blame for the low ranking.

AT THE CAPITOL 8/20/05

Second special session ends without resolution on school funding, property taxes

The second special session of the 79th Texas Legislature ended just as the first did—without agreement on how to reform public school finance. Beginning with the regular session, which opened in January and ended May 30, and then extending through the summer with two 30-day special sessions, lawmakers were trying to lower Texans’ property taxes while providing a new way to pay for our schoolchildren’s education. A lower court had already ruled the system unconstitutional, and the Texas Supreme Court is reviewing the case now. “I have not ruled out another special session down the road—should the Legislature find the collective will to finish its work,” Gov. Rick Perry said in the Austin American-Statesman. “But for now, it is abundantly clear that no such will exists.” With no legislative solution, the high court may dictate how Texas schools will be funded. Ironically, a previous court order established the current system. Texas REALTORS® have consistently supported efforts to provide a fair and equitable solution to public school funding while lowering property taxes, so long as the solution did not involve a replacement property tax, such as a real estate transfer tax.

AT THE CAPITOL 7/29/05

Efforts to lower Texans’ property taxes appear dead for now

The surprising failure of House Bill 3 earlier this week signaled an apparent failure of half of the Texas Legislature’s goal—the property-tax relief half. HB 3 would have cut Texans’ local school property taxes and replaced the loss in revenue with increased sales taxes. Article 3, section 34 of the Texas Constitution says, “After a bill has been considered and defeated by either House of the Legislature, no bill containing the same substance shall be passed into law during the same session…” Texas law also stipulates that tax bills must originate in the House, so the Senate cannot introduce an alternative tax proposal. For these reasons, many legislators believe this issue is dead for the remainder of the current special session. However, some lawmakers vowed to move forward with the other half of school finance reform—the education funding piece. Meanwhile, the Texas Supreme Court is reviewing the constitutionality of the state’s current school funding system, the so-called Robin Hood plan that shifts local school property taxes from wealthy school districts to poor ones.

AT THE CAPITOL 7/21/05

First special session ends with no deal; second special session begins

The first special session of the 79th Texas Legislature ended yesterday with no agreement on how to pay for Texas schools. Gov. Rick Perry immediately called another special session, beginning today, to finish the job. Because House and Senate leaders were very close at the end, some believe the elusive solution to school finance reform could finally pass the Legislature this time around—perhaps as quickly as one week. At issue is how much money is needed for the Texas public school system and how to pay for it. House and Senate plans have differed in the amount of sales tax increases and how to tax businesses to offset much-needed property tax reductions. The current school funding system in Texas, declared unconstitutional by a state district court and now under review by the Texas Supreme Court, relies disproportionately on property taxes. The 70,000-member Texas Association of REALTORS® believes that high property taxes are partly to blame for Texas’ dismal ranking of 42nd out of 50 states in homeownership. Texas REALTORS® have consistently supported lawmakers’ goals of providing fair and adequate school funding while reducing Texans’ property taxes, so long as the solution does not replace one property tax with another, such as a real estate transfer tax.

AT THE CAPITOL 7/12/05

Senate passes its solution; on to conference committee

The Texas Senate passed its plan to pay for lower school property taxes in the wee hours Monday, setting the stage for a conference committee to negotiate differences with the House version. At 3:15 a.m., senators finally approved their version of HB 3, which—like the House counterpart—would lower school property taxes for Texans. Key differences between the Senate and House approaches: The Senate plan does not lower school property taxes by as much as the House version, but it also does not raise the state sales tax by as much. The House plan raises the state sales tax by a full penny (from the current 6.25% to 7.25%); the Senate version raises it by one-half cent (to 6.75%). The House version cuts the maximum school property tax rate (for maintenance and operations) from the current $1.50 per $100 in assessed value to $1.23 by this fall; the Senate, to $1.30. Provisions in the Senate plan to expand business taxes to partnerships and provide for even deeper property tax cuts through a statewide referendum were dropped through late-night amendments. “The Senate and House versions of this bill are close,” said Lt. Gov. David Dewhurst after Monday’s Senate vote. The special session ends July 20, and legislative leaders are under pressure to reach compromise on a school funding and property tax solution. The 70,000-member Texas Association of REALTORS® has consistently supported lawmakers’ efforts to lower property taxes as long as the solution does not involve a replacement property tax, such as a real estate transfer tax.

AT THE CAPITOL 7/7/05

House approves plan to pay for lower school property taxes

By one vote, the Texas House of Representatives passed a plan yesterday to pay for proposed local school property tax cuts. The measure appeared to have failed by one vote, but passed by the same margin (73-72) on a recount when House Speaker Tom Craddick cast the deciding vote. On the same day, the Texas Supreme Court began hearing arguments in a challenge to the state’s current school funding system. Texas’ school funding system relies heavily on local property taxes. At issue is whether the current system violates the Texas Constitution. Ironically, the current system was mandated by a court decision. Texas Attorney General Greg Abbott and his lawyers contend that the Legislature, not the courts, should decide public school funding, because the state constitution does not allow the courts to weigh in on issues of fairness and adequacy – two central issues to the school finance conundrum. The House plan relies on business and other taxes and a 1 cent increase in the state sales tax to pay for local school property tax cuts from the current maximum $1.50 per $100 in assessed value to $1.23 this year and $1.12 next year. Because tax bills by law must originate in the House, the Senate could not advance its own plan until now. Two weeks are left in the current special session, and lawmakers hope to accomplish in this timeframe what was elusive during the 140-day regular session in the spring. The 70,000-member Texas Association of REALTORS® has consistently supported lawmakers’ goals of providing fair and adequate school funding while reducing property taxes, so long as the solution does not replace one property tax with another, such as a real estate transfer tax.

AT THE CAPITOL 6/30/05

House tax plan emerges from committee looking similar to governor’s

Gov. Rick Perry’s approach to reforming school finance and bringing property tax relief to Texans appears to have won over key members of the House. The House tax-writing committee approved a plan yesterday that’s very similar to the governor’s plan, which he had unveiled on the opening day of the current special session, June 21. Unlike the previous House tax package, HB 3 from the regular session, this new plan does not attempt to change the business tax structure in Texas. However, it does expand the current franchise tax so more businesses will pay it. In Texas, many businesses escape taxes through various loopholes. This is an attempt to close most of the loopholes. Regarding cuts in school property taxes, the new plan cuts the maximum rate to $1.23 this year and $1.12 next year from the current $1.50 per $100 in valuation. To pay for the school property tax cuts, the plan would raise the state sales tax by 1 cent, which is a departure from the governor’s proposal, which called for a smaller 0.7-cent increase. A proposed full-penny increase in the sales tax was a major sticking point with the Senate during the regular session that ended May 30. The full House of Representatives is expected to vote on the measure sometime after July 4. The 70,000-member Texas Association of REALTORS® has consistently supported lawmakers’ goals of providing fair and adequate school funding while reducing property taxes, so long as the solution does not replace one property tax with another, such as a real estate transfer tax.

AT THE CAPITOL 6/22/05

Governor unveils plan for school finance, property tax relief

Gov. Rick Perry unveiled his plan yesterday – the first day of the 30-day special legislative session – to fund Texas schools and give Texans much-needed property tax relief. Last Saturday, Perry vetoed the state’s $35.3 billion education budget, saying it did not provide adequate funding for public schools. Although legislators had passed an education budget during the 79th regular session that ended May 30, they were unable to solve the dual challenge of education funding and property tax reductions. A judge had already ruled the state’s current school financing system, which relies heavily on property taxes, to be unconstitutional. Perry wants $1.9 billion in additional school funds and $7 billion in property tax reductions, which would be financed mostly by higher and expanded sales taxes. House and Senate plans differ in the amount of sales tax increases and how to tax businesses. The governor’s new plan does not attempt to change the state’s main business tax. The 70,000-member Texas Association of REALTORS® has consistently supported lawmakers’ goals of providing fair and adequate school funding while reducing property taxes, so long as the solution does not replace one property tax with another, such as a real estate transfer tax.

AT THE CAPITOL 6/21/05

Legislators return to Austin to finish school funding,
property tax relief

Texas Gov. Rick Perry vetoed the education budget, saying it fell short of adequately funding public schools. He also called a special legislative session, which convenes today at noon, to revisit lawmakers’ most pressing issue – school finance. The 79th regular session ended May 30, when lawmakers failed to reach consensus on school finance and property tax reductions. The state’s system for financing public education, the so-called Robin Hood plan, had already been declared unconstitutional by one court and was scheduled to be reviewed by a higher court this summer. Many citizens and various groups, including the 70,000-member Texas Association of REALTORS®, believe the current system relies disproportionately on property taxes. “This issue has been studied and debated long enough,” said the governor in a weekend news conference. “For all the successes of this past session, job number one was left undone. They (legislators) need to come back to Austin and get it right.” Texas REALTORS® have consistently supported lawmakers’ goals of providing fair and adequate school funding while reducing property taxes, so long as the solution does not replace one property tax with another, such as a real estate transfer tax.

AT THE CAPITOL 5/31/05

Time runs out on property-tax relief, school finance

Texas House and Senate leaders were unable to reach a compromise on property-tax relief (House Bill 3) and school funding (House Bill 2) before time ran out on the 79th Texas Legislature. The 140-day regular legislative session ended May 30. Lawmakers were attempting to fix the school-finance system deemed unconstitutional by a state court and deliver billions of dollars in property tax relief. The House version of HB 3 would have cut local school property taxes by one-third, paying for the property-tax cut largely through a 1% increase in the state sales tax. The Senate version provided for a smaller reduction in local school property taxes but also with a smaller increase in the sales tax. The 70,000-member Texas Association of REALTORS® supported the Legislature’s efforts to lower property owners’ taxes in the state while providing a more equitable solution to public school funding. Texas ranks just 45th out of 50 states in homeownership. Texas REALTORS® contend that high property taxes are partly to blame for the low ranking. Unless lawmakers are called back to Austin for a special session, the school funding issue will now be decided by the Texas Supreme Court, which is scheduled to hear an appeal this summer of a 2004 ruling that the state’s current school finance system is unconstitutional.

AT THE CAPITOL 5/11/05

Senate passes its version of HB 3; conference committee next

The Texas Senate cleared a major hurdle to property-tax reform, passing its version of House Bill 3 in the wee hours. Senators scrapped part of the original plan, a statewide property tax that would have further reduced local school property taxes but would have required a constitutional amendment. The measure that ultimately passed the Senate 21-10 around 1:45 a.m. Wednesday still provides property-tax relief for Texans. Under the plan, the maximum school property tax rate would be $1.15 per $100 in assessed property value. The maximum rate currently is $1.50 per $100 in property value.

A conference committee will now try to hammer out differences between the House and Senate versions of HB 3. “We applaud senators’ actions in voting for property-tax relief,” said Lance Lacy, chairman of the Texas Association of REALTORS®. “We hope the conference committee will finish what the 79th Legislature started—giving Texans a much-needed break on their property taxes, providing a fairer funding method for our schools, and putting Texas in a better position to create jobs and boost the economy.”

Read news release: Texas REALTORS® applaud Senate
efforts on House Bill 3 (PDF)

AT THE CAPITOL 5/10/05

Senate Finance Comittee version of HB3
reduces taxes for poorest Texans

Last week, the Senate Finance Committee unveiled a committee substitute to House Bill 3, the property-tax reduction bill. The Senate version, SJR 38, is designed to have a phased-in approach over two years. No official fiscal implications or tax-equity analyses were available when this legislation was introduced. However, it does appear to have an economic impact similar to that of other legislation that the Texas Association of REALTORS® studied earlier in the session. It creates a net increase of $6.8 billion in annual total expenditures, an increase of $1.2 billion in Texans’ personal income, and 23,658 permanent jobs.

This Senate version of HB 3 would apply the franchise tax to all Texas businesses, excepting sole proprietorships and partnerships that gross less than $300,000 per year. For a single business, the bill would lower the tax rate from 4.5% to 4%, and that amount would be applied to 15% of a business’s payroll and all of the yearly net receipts. SJR 38 would raise the payroll component to 25%. The bill also raises several other taxes, including a 75-cent-per-pack sales tax increase on cigarettes, and a 25% sales tax increase on other kinds of tobacco and alcohol. It would also raise the sales tax in the state by 0.25 cent on the dollar. If SJR 38 is approved, the overall sales tax increase would be 0.5 cent.

The bill includes savings for the poorest Texans, giving a 20% reduction on sales tax for purchases made with the Lone Star Card. Other Texans would see savings on property taxes through a 20-cent cut per $100 valuation on the local property-tax rate. Further property-tax relief would come if Texans were to approve SJR 38, which would eliminate local property taxes and replace them with a state property tax, set at $1.10 per $100 valuation. If the Legislature approves SJR 38 including the statewide property tax, it would require a constitutional amendment, triggering a statewide referendum of voters. The Texas Association of REALTORS® has been a strong supporter of property-tax relief for Texans throughout the current 79th Legislature.

AT THE CAPITOL 5/04/05

Texas Senate unveils its version of HB 3 to
finance lower property taxes

The Texas Senate this week revealed its plan to finance lower property faxes—its version of House Bill 3. The Senate Committee Substitute to HB 3 reduces property taxes by $0.20 per $100 of valuation for 2005, if your school district rate is at the $1.50 level for maintenance and operations tax. The rate would drop another $0.20 per $100 of valuation in 2006 to $1.10. However, school districts would have a local-enrichment option in 2005 of $0.04, so the total school maintenance-and-operations rate in 2006 could be up to $1.14.

Because the Senate plan incorporates a statewide property tax as part of its solution for school funding while lowering total property taxes, it would need two-thirds approval of both houses and a statewide voter referendum. It must first pass the full Senate. Then it would go to a conference committee to work out a compromise with the House version.

AT THE CAPITOL 5/02/05

HB 1006 would cap local property-tax increases

A measure that has cleared the House, House Bill 1006, is also important for real property-tax reform. HB 1006, if passed by the Senate, will fix the underlying cause of appraisal creep.

HB 1006 by Isett as passed by the House and currently pending in the Senate provides that when a local taxing jurisdiction’s tax rate exceeds the previous year's tax by the greater of: 1% plus the current consumer price index (CPI) rate or 5% (minus new growth and construction), a petition election to approve the tax rate may be called by collecting signatures of 10% of voters based on the last gubernatorial election. If citizens do not gather enough signatures for the petition election or do not circulate a petition, the new tax rate can be enacted.

As passed, HB 1006 is a major victory for Texas property tax payers and sends a signal that the Legislature’s will is to ensure that any property tax reduction will be long lasting.

HB 1006 would deter the blank-check mindset. This truth-in-taxation measure demands taxing accountability, giving voters a say in local taxing decisions affecting their pocketbooks.

It's important to understand that, in contrast, property appraisal caps do not lower property taxes; they only create inequities by forcing newer homeowners to pick up the tab for an ever-increasing tax liability. HB 1006 provides the mechanism for true tax relief by providing a mechanism for capping annual tax increases.

Read more about HB 1006.

AT THE CAPITOL 4/01/05

Property-tax reductions in HB 3 important to homeowners

We also supported House Bill 3 because it gives property owners much-needed tax relief. Is HB 3 perfect? No. Will the Texas Senate offer a different solution to solving the school-funding problem? Yes, it already has. But HB 3 and its Senate companion are important steps in school-finance reform, because Texas property owners have been paying a disproportionate share of taxes.

If the property-tax-reduction provisions of HB 3 ultimately pass the Legislature, Texas homeowners will save $5.4 billion a year. That's significant.

To figure how much HB 3 will save you annually in property taxes, simply multiply the assessed value of your home by 0.5%. For example, on a $200,000 home, the annual savings would be $1,000.

Tell your friends you support HB 3 because:

HB 3 is the biggest single tax cut in the history of Texas.

To offset the property-tax cut, HB 3 and HB 2 provide a more fair and equitable funding mechanism for our public schools, with $3 billion in increased funding but with accountability.

HB 3 is good for Texas homeowners, good for the Texas economy, and good for our schoolchildren.

To further promote a fair funding system, Texas REALTORS®
also support two ideas.