This report covers the responses Ways and Means received for their RFI Charge #2, relating to possible methods of property tax relief. The RFI for this charge can be found here, and the full list of responses can be found here.

 

The HillCo report below is a summary of information intended to give you an overview and highlight of the various topics included in the responses. This report does not cover the entirety of each response, but aims to provide an overview of the testimony submitted.

 

Dick Lavine, Every Texan

  • Defines property tax circuit breaker as a program that “reduces property taxes that exceed a certain percentage of someone’s income”
  • Texas does not have this kind of program, allowing property taxes to rise faster than ability to pay
  • Asserts cost for circuit breaker programs is far less than uniform rate reductions or increases in exemptions
  • Recommends 5% income in property tax payment as the cap for Texas
  • Recommends adoption of absorption over limit on a sliding scale, where the state would absorb a percent of taxes unable to be paid based on % cap
  • Recommends setting a maximum income for qualification in the circuit breaker program
  • Recommends tailoring law to also provide benefits for renters
  • Recommends examination of rebates for property taxes
  • Notes Texas’ lack of personal income tax
  • Recommends creation of separate rebate/credit against future taxes system for circuit breaker program

 

Chandra Kring Villanueva, Every Texan

  • Overviews the property tax relief included in HB 3; bill made a future commitment to property tax reduction at a huge cost to the state
  • M&O property tax rate will continuously be reduced, on a path to eliminate M&O; will need a new state revenue to fund schools
  • HB 3 made no promises for future adjustment for inflation
  • State will be using limited resources to keep tax rates low in high wealth districts rather than on addressing the biggest area of educational needs
  • Should abandon the “problematic” individual school district tax rate compression and freeze the Tier I M&O property tax rate for all districts at the current level

 

Campaign for Tobacco-Free Kids, Tobacconomics, American Cancer Society Cancer Action Network

  • Current state cigarette tax is $1.41 per pack, 29th among 50 states and District of Columbia
  • Annual health care expenditures related to tobacco use are $8.85 billion
  • Recommends raising tax on cigarettes by $1.50 per pack, total tax of $2.91 per pack
  • Projects $624.34 million in new revenue from this increase
  • Provides table summarizing projected reductions in smokers and health care costs associated with smoking and tobacco use
  • Recommends against smaller tax increases due to corporations’ ability to offset small tax increases
  • Recommends state also tax other tobacco products (OTPs) such as e-cigarettes, at 60% of wholesale price, linked to main per-pack tax rate on a per-package or per-dose basis
  • Provides explanation of how all numbers and data were sourced/calculated for the report and table, acknowledges potential gaps in projections/research
  • Provides additional links to other fact sheets and resources for tobacco taxes and usage rates

 

Bob Popinski, Raise Your Hand Texas

  • Overviews impact of HB 3 on school district property tax revenue
  • Notes negative impact of 2.5% compression of taxes on tax rates and revenue
  • Refers to this tax relief as unsustainable without other revenue streams
  • Recommends legislature first discuss additional revenue streams to pay for tax relief and school investment during COVID before discussing further methods of tax relief

 

Colby Nichols, Texas Association of School Administrators

  • Recommends legislature explore diverse sources of revenue based on the idea that the economy ebbs and flows
  • Notes that dependence on one source of revenue is unstable
  • Acknowledges complexity of situation

 

Dr. Vance Ginn, Texas Public Policy Foundation

  • Texas has the 7th highest local property tax burden in the nation; result of excessive spending
  • 2017, Texas provided an estimated $42 billion in exemptions, exclusions, and discounts to the final sales tax base; created higher burden for those taxed
  • Property taxes should be eliminated; provides the following two options to do so:
  • Recommends a “sales tax swap;” would replace school M&O property taxes with final sales taxes by broadening the sales tax base
  • Need to continue excluding items taxed by other taxes, funded primarily by taxpayer dollars through government expenditures, or that would make the system like a value added tax
  • Could look at which sectors to tax in the state’s gross state product; could result in a combined state/local sales tax rate increase from 8.25% to 9.88% with a broadened base
  • Should address possible changes in sales tax collections by lowering rates to make it revenue neutral and enact strict local spending limits
  • Recommends a “buydown option;” state would limit the increase of general revenue-related funds per biennium and use 90% of the resulting surplus to buy down school districts’ M&Os until they are eliminated
  • M&O property taxes would be frozen as the state provides an increasing portion of government school funding; elimination process would take about a decade
  • Need to pass a constitutional amendment either upfront with the swap or at the end with the buy down that prohibits school districts from imposing an M&O tax
  • SB 2, lowered rollback rate trigger, should be built upon and trigger should be lowered further

 

Adam Haynes, Texas Conference of Urban Counties

  • Approves of HB 3 increasing flat-dollar exemption to $35,000 per homestead
  • Recommends committee pass legislation, like HB 490/House Joint Resolution 57, granting counties the power to offer homestead exemptions as a percentage or flat rate
  • Legislature should add above exemption as a county option, similar to Ch. 11 of Tax Code
    • Set a ceiling of $100,000 and floor of $25,000, providing that all homeowners receive relief
  • Recommends legislature ensure that counties limit the homestead exemption to either current method of using a percentage basis or a specific dollar amount
  • Approves of Legislatures previous efforts to insert procedural protections to end passing unfunded mandates on to state agencies, should continue and be expanded to cover counties during 87th Regular Session
  • Modifying bill expenditures should be funded by the state; if not, county is not required to implement
    • Provides recommended language for any bill impacting expenditure of funds at county level
  • Recommends adding expenditures associated with a Public Defender’s office to the definition of “indigent defense compensation expenditures” in Section 26.0442 of Tax Code
  • Recommends changing system of paying for state prisoners at county expense
  • Recommends the legislature mandate TDCJ to retrieve prisoners within 21 days of confinement at county facility
  • TDCJ should use state appropriations to reimburse counties for each prisoner held more than 21 days and is not transferred
  • TDCJ should provide psychotropic stabilizing medications for prisoners while confined in county facilities
  • Recommends requiring comparable properties to determine median value have reasonable similarity to property having value adjusted
  • Appraisal ratio of property being adjusted should exceed median level of appraisal of reasonable representative sample of comparable properties and same appraisal district by 10%
  • Recommends requiring court judgement which is readjusting the appraised value of a property reflect the level appraisal of similar properties in same appraisal district
  • Recommends requiring Comptroller to set standards for adjusting appraised value of unique properties (industrial, petrochemical refining and processing, etc.)
  • Recommends requirement that an appraisal district or review board that prevails in court should receive attorney fees, not exceeding $20,000
  • Sales price disclosure for commercial and industrial properties will enhance ability to meet mandate for equal and uniform taxation of property
  • Recommends applying SB 2 standards to state revenues:
  • 5% cap on increase in sales tax revenues used as general revenue for state expenses; any above should be set aside to Sunshine Fund
  • Revenue to Sunshine Fund should be used to fund increased state aid for public education and property tax relief; 60% for public education and 40% for tax relief
  • Recommends amending definition of debt rate to provide option for taxing units to consider 10% of their last year’s rate as debt rate in company with the pay-as-you-go method
  • Voter-approved debt should remain property tax based
  • Legislature should provide an amendment allowing voters to add a local sales tax option replacing property tax levies

 

Texas Tobacco Control Partners

  • Increasing the price of cigarettes through tax is effective and will raise revenue for the Property Tax Relief Fund
  • $1.50 per pack tax increase will approximately raise $624 million in annual state revenue
  • Higher cigarette taxes reduce smoking, draws in revenue, and is popular with public opinion

 

Monty Wynn, Texas Municipal League

  • Supports increased local option homestead exemption
  • KP-215 states that a city more than likely lacks authority to increase a homestead floor of $5,000
  • Legislation should authorize a city to raise a floor of the homestead or flat dollar amount exemption would make them more useful for cities and taxpayers

 

Jim Allison, County Judges & Commissioners Association of Texas

  • Local taxpayers should not be required to meet state mandated services through mandated property taxes
  • Using terminology such as “county may” instead of “county shall” empowers people to be responsible and use their voice more
  • Voters should have the option to adopt sales tax, severance tax, motor fuel tax, vehicle registration fees, and other revenue sources to lower property taxes
  • Taxpayers and their counties should be given the option to grant a flat dollar homestead exemption
  • Appraisal process should be reviewed and revised to present a more equitable tax system, including sales price disclosure

 

Maureen Milligan, Teaching Hospitals of Texas

  • Committee should refrain from reducing roll back rate for hospital districts
  • Hospital districts need to maintain the resources to provide services and care in communities
  • Lack of access and fear of seeking primary care services is negatively impacting health status of those with chronic conditions

 

Texas Conservative Coalition Research Institute

  • Should raise more revenues through state sales tax and using the additional revenue to “buy down” property taxes
  • States regressivity of sales taxes can be mitigated by granting exemptions for consumer items
  • Should cut property tax bills or add additional constraints on the growth of property taxes
  • Policymakers should consider the danger of setting sales tax too high
  • Legislature could broaden state sales tax base by repealing various exemptions and exclusions from current law sales tax
  • To provide the property tax relief which HB 4621 would have, would need to eliminate or curtail exemptions and exclusions equal to roughly $25 billion over five years
  • Legislature should ensure formerly exempted items from local sales taxes should continue to be exempted
  • Raising state sales tax could raise revenue to compress property tax rates resulting in a net tax increase