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How We Have High Property Taxes in Texas

By: Curtis Reddehase

Why do so many people blame the county appraisal districts in Texas for increasing market values and raising property taxes in the state? The current property tax system in Texas grew out of major legislative reforms passed by the Texas Legislature in 1979. That year, the passage of Senate Bill 621 enacted sweeping changes to a 140 year old property tax system that up until then had not had major revisions. The new laws established one central appraisal district in each county; required appraisal of property at full market value and created a single appraisal review board in each county, replacing individual taxing unit boards of equalization. The Texas Legislature also provided a definition of market value and required that the appraisal districts must appraise taxable property, specifically residential property, at full market value. Property Tax Code Section 23.01 requires that the appraisal districts appraise property at its market value as of January 1. Section 1.04 defines market value as the price at which a property would transfer for cash or its equivalent under prevailing market conditions if: (A) exposed for sale in the open market with a reasonable time for the seller to find a purchaser; (B) both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and (C) both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other. Using this definition, the appraisal districts look at properties in the county that sold closest to January 1. A property's selling price is a good indicator of market value; however, it is not the only factor the district considers when determining value. The district may take into account the sales date, the size of the parcel and square footage, the property’s location and condition, and any other special amenities. If real estate values are increasing in an area, a person’s property value may increase as well. The definition of market values does not allow the appraisal district to use foreclosure sales, short sales, court-ordered sales, sales between family members and other property transactions that don’t strictly meet the terms above to be used to determine the appraised value of property for taxation. So, do the county appraisal districts set market value or do buyers and sellers set market value? I think the answer is obvious, but many people still insist that these government agencies set market values regardless of actual economic conditions existing in the market place. Local taxing units assess and collect property taxes. Taxing units may include cities, counties, school districts, or special districts such as college or road districts. Thus, anyone owning taxable property located within a city would pay city taxes, plus school and county taxes. In addition, if the property also lies in a special taxing district, such as college district, those taxing units would also tax the property. Local elected officials set our tax rates. If these local taxing units are increasing their budgets, as almost all have done, tax rates and taxes will go up. So, is it fair to blame the county appraisal districts for tax increases or is the real culprit the ever increasing demands on the local taxing units to provide more services to more people at higher costs? Again, the answer seems obvious.

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