Texans seeking to stop rising property taxes should ask their local officials to adopt the “effective” tax rate. Otherwise, local officials are likely to “double-dip” by collecting more money from the existing tax base, while collecting new revenue from new properties added to the tax rolls.
The justification for adopting the lower, “effective” tax rate is simple: growth should pay for itself. Local governments should rely on new tax revenue from new taxpayers to pay for the services they demand, as opposed to gouging existing residents and businesses just because their properties rise in value.
In contrast to propaganda from local government-interest groups such as the Texas Municipal League, growth is not a justifiable excuse to increase tax burdens. And adopting the effective rate won’t result in “budget cuts,” as critics falsely claim.
On August 7th, state law requires localities to publish two rates: the “effective” rate and the “rollback” rate. Understanding these terms is crucial for Texans and officials seeking to protect taxpayers from abuse.
The “effective” rate is the rate levied for annual budget operations that would collect the same total revenue from the same Texans taxed in the previous year. In other words, the rate is low enough to fully offset appraisal increases year over year, preventing tax increases on the existing tax base.
The “rollback” rate is the revenue limit set by the state. Adopting it would result in an eight percent increase in budget revenue from the same Texans taxed in the previous year. In other words, it amounts to an eight percent tax increase on the existing tax base for government operations.
Regardless of the rate adopted, governments will always receive increased revenue from new properties added to the tax rolls. And taxes used to finance a locality’s operating budget are separate from taxes levied for debt service, which are additional burdens for all taxpayers.
For more information on understanding effective and rollback tax rates, read our previously published article titled Taxpayer Guide to Property Taxation. Similar information can also be found at the Texas State Comptroller’s website.
The time for citizens to engage is now—the law requires local officials to adopt next year’s budgets and tax rates by September 2016. Don’t miss out on your opportunity to make your voice heard.