Taxpayers need predictability when it comes to future tax obligations. Lawmakers should lower the current appraisal cap to prevent dramatic or sudden adjustments in a property’s taxable value.
A county appraisal district in Texas may not increase the appraised value of a homestead by more than 10 percent in a given tax year. This limit should be lowered.
Although appraisal caps do not limit the tax bill Texans end up paying, they help prevent local officials from hiding tax increases in high-growth environments.
Sharp appraisal spikes often allow local officials to dramatically increase tax burdens while keeping rates flat. Many high-growth areas allow governments to cut rates and raise their “effective” tax burdens.
The “effective tax rate” is the rate at which the government entity would collect the same revenue as the year before – from the same properties – after taking into account all appraisal changes. If appraisals rise dramatically, entities can lower their tax rate but still levy a burden significantly higher than the effective tax rate.
Appraisals caps are a protection against extraordinarily high growth on the tax-valuation on properties during boom times.
Although property tax burdens are ultimately determined by local taxing entities – since they are given appraisal adjustments prior to setting their tax rates – lowering appraisal caps would prevent sudden appraisal hikes on individual property owners.