Bill Caption

Relating to ad valorem taxation.

Fiscal Notes

The bill would prohibit an appraisal review board from determining the appraised value of a protested property to be an amount greater than the appraised value of the property as shown in the appraisal records. As a result, taxable property values could be reduced and the related costs to the Foundation School Fund could be increased through the operation of the school finance formulas. Additionally, the Comptroller's office reports that administrative costs to implement provisions of the bill would total $1,241,000 per year starting in fiscal year 2020 and require 18 FTEs

Bill Analysis

HB 2 would reduce the rollback tax rate from 8 percent to 2.5 percent, and trigger an automatic election if the rollback rate exceeds 2.5 percent for certain taxing units.  The 8 percent rollback would remain for special taxing districts, defined as a taxing unit other than a school district, for which the maintenance and operations tax rate proposed for the current tax year is 2.5 cents or less per $100 of taxable value in addition to other exempted districts such as emergency services, hospitals etc.  The bill would additionally not apply the automatic election trigger for school districts or districts which have seen tax increases following qualified natural disasters. 

HB 2 would also rename the effective tax rate to "no-new-revenue tax rate" and the rollback rate to “voter-approved rate” for better understanding.

Next, HB 2 would create a new website to allow any property owner in the state to look up their customized proposed tax rate, no-new-revenue tax rate, and rollback tax rate for each taxing unit. This bill also re-formats the tax notice to be more understandable by taxpayers.

Finally, HB 2 would establish Appraisal Review Boards in counties with a population of one million or more for commercial properties that exceed $50 million in value. It would also create the Property Tax Administration Advisory Board to oversee the entire appraisal process.

No county or municipality budget for the 2020 fiscal year would be able decrease first responders’ compensation due to a reduction in the rollback rate.

Vote Recommendation Notes

Texas Action supports HB 2 for promoting private property rights, individual liberty, and limited government. The heavy burden of skyrocketing local property taxes has forced many Texans out of their homes and businesses. HB 2 would slow the growth rate by imposing a 2.5 percent property tax revenue trigger—possibly preventing property taxes from doubling but every 29 years. The rollback rate was set at 8 percent during a time when inflation was much higher, necessitating a higher election trigger for taxing units. Since inflation is at a much more stabilized and lower rate, the rollback trigger should also be reset.

The name changes to "no-new-revenue tax rate" and “voter-approved rate” would also make the process more transparent and easier to understand for property owners and local officials. This bill would also give constituents a louder voice in the property tax process and make local leaders more accountable. 

Although Texas Action recommends supporting HB 2, it could be improved by removing the special tax unit exemption and making it applicable to school districts. The 2.5 percent rate should be applied uniformly to allow all Texans to benefit, whether they live in a certain taxing district or not.  Additionally, while slowing the growth rate is commendable, high property taxes are already overly burdensome and need to be reduced.

To be clear - this bill is about controlling the growth of property taxes but does not provide actual tax relief by reducing the current tax burden.  In other words, restraint instead of relief.  We support HB 2 and encourage the legislature to also pass significant and meaningful property tax relief.