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Texas Lawmakers Talk Appraisal Caps as Home Values Swell

State lawmakers discussed the possibility of curbing property taxes by using surplus state funds and restricting the annual growth of a home’s taxable value. But some worry it would shift the burden onto taxpayers.

(TNS) — As Texas homeowners reel from skyrocketing appraisal values, state lawmakers on Thursday floated ideas to curb their tax bills by using surplus state funds and further restricting the annual growth of a home's taxable value.

The proposals began taking shape as members of the tax-writing House Ways and Means Committee peppered experts with questions about how to use billions in unspent federal COVID aid, along with a projected budget surplus of $12 billion.

Though Texas lawmakers have not started filing bills, the hearing provided a glimpse at how they may aim to rein in property taxes when they reconvene in January.

The issue has been front and center in recent legislative sessions, particularly in 2019 when lawmakers restricted cities, counties and school districts from collecting more yearly property tax revenue. The legislation has forced local governments to lower their tax rates, slowing the growth of tax bills amid Texas' booming housing market.

Further limiting the rise is a state law that caps year-to-year increases of a homestead's taxable value at 10 percent. On Thursday, state Rep. Morgan Meyer, a Dallas Republican who chairs the committee, asked about lowering that to 5 percent.

Some who testified Thursday advised against trimming the cap, arguing it would shift the burden onto other taxpayers.

"We don't think appraisal caps that take existing value off the rolls necessarily provide meaningful relief," said Dale Craymer, president of the Texas Taxpayers and Research Association. "There's a concern that all that does is — with property tax being a zero sum game, if you're going to raise that money from one set of taxpayers, that means it's the other set of taxpayers that have to pay it."

Craymer argued the effect would mirror what happened after the city of Austin last year doubled its homestead exemption, providing relief to homeowners but raising the tax burden of renters and businesses, who were forced to make up the difference.

Several lawmakers discussed dipping into the state's budget surplus to buy down school property taxes, effectively replacing local revenue with state dollars. State Comptroller Glenn Hegar has projected that Texas will have $12 billion in reserves when the current budget cycle ends in August 2023, thanks to an economic rebound from the COVID-19 pandemic. An official from Hegar's office suggested the surplus could end up even higher.

Meyer said he would want the "buy down" tax relief, also known as compression, to remain in effect beyond next budget cycle — though he did not say how the state would cover the continuing cost.

"Insofar as we do compression, we need it to be permanent," Meyer said. "I mean, if you're going to provide tax relief, it has to be lasting."

Additionally, state lawmakers will decide next year how to dole out $3 billion in leftover federal aid from the American Rescue Plan Act, a $1.9 trillion COVID relief package adopted by Congress last spring. The Legislature spent about $13 billion of Texas' $16 billion federal allotment, setting aside $3 billion for unspecified property tax relief.

Chandra Villanueva, a policy analyst for the left-leaning think tank Every Texan, urged the committee to instead use the federal aid and budget surplus to ensure schools remain fully funded amid declining enrollment and attendance, measures that determine their funding levels.

Villanueva added that lawmakers, in passing their landmark property tax and school finance bills in 2019, did not include a plan to help school districts replace the "lost revenue" imposed by tighter property tax caps. Additionally, she said state public education funding has failed to keep pace with inflation and other costs, leaving schools underfunded.

"If we have $12 billion of surplus, we should first look at how do we improve our school funding, so that all of our teachers can afford houses," Villanueva said.

(c)2022 the San Antonio Express-News. Distributed by Tribune Content Agency, LLC.
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