Why Are Property Taxes so Much Higher in Texas ?

Property taxes are skyrocketing in Texas. As of 2017, Texas had the 4th highest property taxes in the United States out of 50 states and D.C., according to SmartAsset.com. Illinois and several Northeastern states also top the list.

SmartAsset.com lists the average Texas property tax rate at 1.94 percent of the property’s appraised value. That is high when compared to the national average of 1.21 percent.

The bottom line is this: Texans pay roughly a third more in property taxes than the national average. The amount in proportion to income is rising, making it harder than ever for property owners to find the money to pay.

Why are Texas property taxes so much higher than other states? There are three main reasons. The first has to do with where Texas gets its tax revenue. The second is about who sets property tax rates in Texas. The third is about rising home appraisal values.

Texas Depends too Much on Property Taxes

While Texas property taxes are among the highest, the state’s overall tax burden is average. Texas is one of just seven states to have no state income taxes. Additionally, the sales tax is comparatively low.

Local governments need funding for public services like schools, libraries, road maintenance, emergency services, etc. If they are not getting the money from income or sales tax, they naturally rely more on property taxes to fund these programs. This drives the cost of property taxes above average.

Property tax reform in Texas would likely mean redistributing the tax burden. That could be in the form of implementing a state income tax or raising sales tax.

If local services received some or more funding from these forms of taxation, local communities could decrease their reliance on property taxes.

Texans are quite happy to have no income tax, however. They are unlikely to vote to add one, even if it would mean tax relief on their annual property tax bill.

Texas Property Taxes Are Set Locally

Property taxes in Texas are also high because they are set locally. The state of Texas does not determine what you owe on your property tax bill, local taxing authorities do.

This keeps the power over your property taxes in the local community. Unfortunately, it also makes it difficult for state officials to regulate or influence.

Texas government officials are well aware how unhappy their voters are with the outrageous cost of property taxes. However, there is little they can do to influence property taxes.

Because the taxes are determined locally, the state government cannot tell the local government how much they can and can’t tax. State government could pass a bill to tighten regulations on tax hikes.

Or, they could pass a law that allows residents to vote on local tax increases. Neither of these ideas has made it through state Legislature, however.

Another thing that state officials can do to decrease local property taxes is increase state funding for the biggest item on the property tax bill: public education.

According to a 2017 article by the Texas Tribune, the state of Texas has decreased its funding for public education from 45 percent to 38 percent in the last ten years.

Texas educates 1 in every 10 kids in the U.S., according to ForABetterTexas.org, making education a huge cost and a huge responsibility. If the state took back responsibility for that dropped percentage, local schools districts could lower their property tax rates.

Home Appraisal Values Are Rapidly Increasing

Another reason property taxes are higher in Texas is because the average appraisal value of property is rising. That means that every year, property owners in Texas are seeing an increase in their home’s value.

The percentage of their property taxes may not increase, but the price of the bill will. This increases the county’s overall tax revenue.

Dave Lieber, The Watchdog columnist for Dallas News, did a story on increasing property taxes in 2016. He reported that many homeowners saw an increase of 9.9 percent in their home’s value that year. This was because the state put a cap of 10 percent on annual increases.

When Lieber contacted the new owners of the home he sold the year before, they reported a 30 percent increase from Lieber’s 2015 appraisal. Apparently, this cap does not apply to new homeowners. It also does not apply to commercial property.

If you feel your home has been overvalued for tax purposes, you can protest. We will talk more about how to do this in another article.

The Cost of Delinquency Has Risen

You probably know that you will face penalties and interest if you fail to pay your property taxes on time. Do you know how high the cost of delinquency is, though?

Since Texas does not have a state income tax, local governments rely heavily on property tax income. This makes up the majority of their tax revenue.

When residents do not pay their property taxes, however, local operations like schools, roads, and emergency services can suffer. The higher property taxes rise, the less able people are to pay.

In recent years, Texas raised the cost of delinquency in hopes of getting people to pay on time. They passed laws that increased penalties and interest rates.

This means that nowadays, the cost of delinquency in the first year alone can reach 47 percent of your original tax bill. While this may have motivated some to pay their bill, it has led to heavier burdens for those who were already unable to pay the original amount.

About the Author: Direct Tax Loan is the largest online platform in the United States that connects top property tax lenders with residential and commercial borrowers. Regardless of where you are located in the state of Texas or Nevada, we’ll be thrilled to connect you with reputable lenders and help you pay off your property tax bill.