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Tax Season
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5 min read
Once upon a time, in a land far, far away from California, Texas—before it was even called Texas, had a property tax system that was set up to be fair and equitable. It even provided for property tax exemptions. One day, the evil emperor decided to rescind a particularly generous 10-year tax exemption for early Texas colonists and increased tariffs on goods entering from the United States. These new taxes and other laws helped spur the battle for Texas independence.
We Texans, to this day, still love our independence, and as recently as five months ago, we voted to continue to keep government out of our pockets by fortifying the ban on any potential state income tax. Texas is currently one of only seven states that has no state income tax. As a result, Texas relies very heavily on property taxes to fund local services such as police and fire protection, schools, hospitals, and road infrastructure.
Property taxes in Texas are assessed by local taxing jurisdictions in the county, city, school, or other districts they provide services to. Generally, those taxes stay in the jurisdictions in which they are assessed. According to WalletHub, Texas has the seventh-highest tax rate in the nation.
Though county appraisal districts seem to be the most popular target (just ask your local chief appraiser), many are partly to blame for rising property taxes, including property owners!
The seven “dwarfs” in the Texas property tax fairy tale
Understanding how all of the different character “personalities” and their protective posturing fit together will help to understand how a property owner can get some semblance of control of their property taxes. The cast of characters include:
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Texas Legislators: The wise leaders (like “Doc”) who give careful thought to our tax problems but are seldom very good at fixing them. They create the laws that govern the property tax system.
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Texas Comptroller of Public Accounts: The Comptroller’s office is the “Bashful” one of the group. They are the shy, hardly heard office that does not set values, collect property taxes or set tax rates. They oversee the administration of the property tax system and evaluate the performance of appraisal districts.
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Appraisal Districts: They really aren’t “Dopey” at all, but they do like to hide behind the proverbial curtain and tell taxpayers it’s not their fault your property taxes are rising; they just do appraisals. Central Appraisal Districts (CADs) are charged with appraising property values at 100% of market value as of January 1. CADs don’t set market values, but they are supposed to accurately reflect it.
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Appraisal Review Boards (ARB): The ARB rarely agrees with anyone and generally comes up with their own value conclusions. Instead of remembering that the appraisal district has the burden of proof in an ARB hearing and must provide clear and convincing evidence to support its opinion of value if these standards are not met, the ARB is supposed to rule in favor of the taxpayer. If you’ve ever been to an ARB formal hearing, you have seen how “Grumpy” the board can be when it comes to reducing property values.
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Local Taxing Units: Tax units don’t get “Sneezy” all the time, just at times like budget and tax rate public hearings when they don’t want anyone to know that they too are one of the guilty parties responsible for raising taxes. They decide how much money their tax units will need to be able to pay for providing public services. After receiving property values from the appraisal district, taxing units set budgets, and then the tax rates that will generate the revenue needed to provide those services.
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Tax Assessor – Collectors: Tax Assessors are more than “Happy” to send the tax bills, collect the loot, and distribute to the taxing units. Tax offices don’t set values, set tax rates, or make laws so they are happy that they are not to blame.
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Property Owners/Taxpayers: Property owners tend to be “Sleepy” about protesting values and voicing their opinions at budget and tax rate meetings. Nearly 85% of homeowners in Texas do not protest their property value! Taxpayers indicate “market value” during the buying and selling negotiation process and the purchase/sale prices they agree on.
What can you do to make sure this fairy tale has a happy ending?
The best way to ensure you aren’t overpaying is to take action! Don’t just complain; do something about it! You can start by getting involved in the process. Here’s how:
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Become educated on the property tax system and where you can have the most impact. Complaining to the appraisal district about property taxes will fall on Quasimodo’s deaf ears and may diminish the respect they give to your appeal. Complain about inaccurate appraisals and be able to demonstrate what they got wrong or did not know.
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Make sure the appraisal district has the correct description of your property. In most cases, they have never set foot on your property and may have only seen it on Google Earth.
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Probably the most important thing a property owner can do is to protest the value every year. There could be compounding benefits by doing this.
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Take some time to learn basic appraisal methodology and learn how the appraisal district makes comparable adjustments.
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Make your voice heard when taxing units are setting budgets and tax rates. Send letters, emails, or show up and speak at public meetings. Most of the people making these decisions are elected officials and rely on the voices of constituents in their kingdoms.
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Be reasonable in your expectations. With no income tax, governments have to come up with the money somewhere. Nearly every legislative session, lawmakers consider replacement of the property tax or at least lessening the dependence on it. Those alternatives usually get watered down or fail along the way before sine die. For the foreseeable future, property taxes are here to stay. But let’s also be honest with ourselves. Some of us tend to develop multiple personalities when it comes to our own property values. One voice tells us we want our property to sell for the highest amount possible, so much so that we can spend thousands of dollars sprucing it up to fetch the highest bidder. Are we naturally inclined to accept the lowest bid when presented with multiple offers? Probably not. But wait, now it’s tax time and it’s time to hear from the other voice in our head. Maybe it’s better to have our property appraised at the lowest possible market value because that means lower property taxes. Maybe my neighbor’s broken-down clunker parked on his front lawn isn’t such a bad thing after all?
The problem is not necessarily in the tax system itself. We can’t just put the process on auto-pilot and expect the system to take care of us on its own. The real problem is poor execution on some of the legal framework, poor “mass appraisal” methods that don’t take into account problems that may exist with your property, lack of necessary adjustments to sales prices, ARB’s who tend to favor appraisal districts, and tax units who continue to raise tax rates when they should be lowering them. In fact, when properly administered, it’s my opinion that Texas has the fairest property tax system in all the land, and over my 29 years in the tax business, I’ve done property tax work in most of them. We can rewrite this property tax fairy tale to have a happy ending, but we must be willing to put time and effort into putting up a battle or hire a knowledgeable and experienced property tax professional to do it for you. Or, we could kiss our taxes goodbye and live happily ever after.
The information contained in this blog post is for informational and/or educational purposes only and does not constitute legal advice. SWBC Ad Valorem Tax Advisors is not a law firm nor is Gary A. Rivas a licensed attorney. Readers should keep in mind that property tax situations are unique, each with their own set of facts and circumstances and readers should seek professional advice specific to their circumstances from SWBC Ad Valorem Tax Advisors, other tax or real estate professionals, or a licensed attorney competent in their subject matter.
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