Voters to decide on big school tax cut
Last updated 8/1/2023 at 7:57pm
Texas voters in November will decide on a proposed state constitutional amendment that could drastically lower school taxes for homeowners and small business owners or landlords.
The Texas Senate, Texas House of Representatives, and Governor Greg Abbott have approved the bill for the amendment. Under the amendment, the homestead exemption for homeowners would go up to $100,000, meaning the homeowner could subtract that much from the taxable value. For instance, if a home is on the tax rolls for $125,000, the school tax rate would be used for only $25,000.
Homeowners 65 and older, along with the disabled, are eligible for another $10,000 exemption. That means a senior citizen homeowner would get a total of $110,000 removed from a home's property appraisal for the school tax.
A homestead exemption is issued by a county tax appraisal office to people who register a property as their main residence. It is illegal to have two properties with a homestead exemption. Homestead, senior citizen, and disabled exemptions are filed through the local appraisal district.
Chief Appraiser Scott Overton with the Orange County Appraisal District said the new exemption will apply only for school taxes, and not for cities, the county, or special districts. Those entities each set a tax rate and homestead exemption rate.
In addition, the proposed tax plan would limit appraised value increases to 20 percent a year on non-homestead properties valued at $5 million or less. That would help lower property taxes for small business owners and landlords that do not qualify for a homestead exemption.
In addition, the proposed law will eliminate some of the franchise fees some businesses pay.
Another change will be on how members of the appraisal districts' boards of directors area elected.
The state appraisal district system was set up in the late 1970s by the state legislature under the "Peveto Tax Bill," named for its sponsor, Wayne Peveto, an Orange lawyer who represented Orange County in the Texas House of Representatives.
Each appraisal district provides a standardized property appraisal. Before the law, each school district, city, or county could do their own appraisals, often at varying values.
Currently, the boards of directors for each appraisal district are appointed by the taxing entities in each county. Each entity gets an assigned number of votes and then the city councils, county commissioners court, and school districts use their votes to choose appraisal board members.
Under the proposed system, the voters, in a general election, will choose three members of each appraisal district's board. Each term will be for four years.
Overton said the Orange County Appraisal District currently has a board with five members. The state reports the average district board has nine members. He said OCAD will adjust its board to nine members with three elected. The soonest general election for that could not be until November 2024, at the earliest.
Industrial properties and large commercial properties will not be affected by the proposed changes.
Texas has some of the highest property taxes in the country, but the state has no corporate tax and no income tax. Forty-three of the 50 states, along with the District of Columbia, have personal income taxes.
School taxes are usually the highest taxes in Texas. The legislature this year had a $13.3 billion income surplus as sales taxes soared with inflation and post-pandemic spending. The school property tax bill was passed after the state house and senate agreed to send about $7.1 billion of that surplus during the next two years to school districts, so they could lower property taxes.
The state money will be used by the districts to offset the loss of income from the local property taxes.
The state money to the school districts will be used only for maintenance and operations, also known as "M&O." Those monies are used for daily operations, utility bills, staff salaries, and maintenance. Each school district has a separate fund for bonded debts that are used for new buildings and facilities improvements. Voters must approve those bond projects with the understanding their taxes will be increased.
The local taxing entities are currently preparing budgets and tax rates for their upcoming budget year. The tax bills are usually mailed in October.
However, with the proposed constitutional amendment to lower school taxes will be in November. If voters approve those changes, school tax bills will need to be recalculated and mailed out again by the office of Orange County Tax Appraiser-Collector Karen Fisher's office.
Property taxes are due each year in Texas on January 31.