Texas’ Legislature has provided taxpayers a powerful grassroots tool to fight excessive taxation. But taxpayers’ right to petition for relief is in jeopardy unless the Texas Supreme Court acts.
Before adopting a tax rate in a given year, taxing entities (like counties and cities) must use a statutory formula to calculate the “rollback rate,” which is basically the tax rate that would allow the entity to maintain its current level of operations plus eight percent. If the government adopts a tax rate “that exceeds the rollback tax rate calculated as provided by [Tax Code chapter 26],” then voters can petition for a rollback election under section 26.07. But what happens when a government unit (perhaps fearing a rollback petition) “inadvertently” miscalculates the rollback rate, and then taxes citizens at a falsely inflated maximum rate, while at the same time denying them the right to petition for a rollback?
Unfortunately, a recent decision by the San Antonio Court of Appeals misinterprets the law and denies taxpayers any relief. The Texas Supreme Court now has the opportunity to correct this serious error, if it accepts the case.
Maverick County “inadvertently” omitted $3 million in sales tax revenues when calculating its rollback rate for 2016 — resulting in a falsely-inflated maximum rate — and then taxed citizens at the highest rate possible without triggering the right to a rollback petition. Maverick County’s own documents prove that Commissioners Court knew of the omission four days after adopting the tax rate, but they withheld the corrected figures from the public.
Voters submitted thousands of valid signatures demanding a rollback election anyway. Maverick County officials refused to recognize the petition, forcing one of the taxpayer activists, Ethelvina Felan, to court. The trial court found that the county had made a “good faith” mistake, the tax rate exceeded the real rollback rate, and ordered a rollback election.
The Court of Appeals reversed, in an opinion that is the first in Texas on this question. The court focused on another statute, Tax Code section 26.04(g), that provides a certain remedy in a case of bad faith miscalculation (allowing an injunction to prevent the adoption of a tax rate in the first place). However, the legislature never said the specific and extreme remedy available to “a property owner” in a case of bad faith miscalculation—section 26.04(g)—is supposed to trump the right of “qualified voters” under section 26.07 to petition for a rollback election any time the government “adopts a tax rate that exceeds the rollback tax rate calculated as provided by this chapter[.]”
The upshot is that the Court of Appeals took a statute meant as an additional and extreme tool for taxpayers fighting bad faith misdeeds of government officials to effectively repeal the right to file a rollback petition in cases involving miscalculations. And in a case like Felan’s — where a blatant miscalculation results in excessive taxation but one cannot prove it was done in bad faith — there is no remedy under section 26.04 or 26.07.
If the state’s Supreme Court does not take this case and correct the error, Texas taxpayers are at the mercy of clever government officials flubbing calculations, so long as they do not openly admit to doing it on purpose.
This is an outside commentary submitted and published with the author’s permission. If you wish to submit a commentary to Texas Scorecard, please submit your article to [email protected]