Laws, Loopholes, And Property Taxes

James Quintero and Hixon Frank

Millions of Texans lost their jobs due to the COVID-19 pandemic. Yet some large, liberal cities are dangerously close to raising taxes in a big way—possibly in violation of state law.

In the 2019 session, the Texas Legislature passed Senate Bill 2 which limited how fast local property tax revenues could rise without voter approval. Property tax revenues for cities, counties, and certain special districts cannot rise by more than 3.5% each year without voters first giving their permission.

Included in Senate Bill 2 was an exception to this rule for when certain disasters occurred. It allowed taxing units to effectively revert back to the old system and raise taxes by up to 8% without voter input. The spirit of the law was meant to address hurricanes, tornados, earthquakes, and other natural disasters.

But now, some officials are citing the economic damage suffered from the government-imposed lockdowns as justification to evade the new limit. That’s wrong on a few different levels. And it isn’t sitting well with certain state lawmakers, two of whom are now openly discussing imposing retroactive penalties for local governments that try for the loophole.

There are plenty who appear poised to do so too. Bryan, San Marcos, and Austin are among those rumored to be considering using the disaster loophole. But there are good actors too.

The Dallas City Council strongly rejected a recent proposal to increase property taxes up to 8%, defeating it by a vote of 12-3. Councilwoman Cara Mendelsohn said, “If we were to pass this resolution and we were to increase taxes even close to this amount, we would be creating the next disaster for Dallas.”

Also, the Longview City Council voted against a similarly massive property tax hike. Several concerned citizens called their city council members to express their concern about the tax increase, and the council responded well.

Instances like Dallas and Longview are important to highlight. Despite being advised (wrongly) that massive tax increases are an option, some local officials recognize it is neither appropriate nor prudent to do so.

We are, after all, still in the midst of a job-killing pandemic and the worst recessionary times in modern history. The last thing Texans need right now are big tax increases. Especially when those huge hikes come in controversial (and likely unlawful) ways.

Source: Texas Public Policy Foundation

Read more on Texas property taxes

• Thought SB2 Would Help Lower Your Property Taxes? Doesn’t Look Like It. SMTX City Council To Consider 8 Percent Tax Rate
• Property Owners Should Be Proactive About Potential Tax Hikes During COVID-19 Economic Downturn, Policy Group Says
• Analysis: Rising Property Values — And Taxes — During An Economic Slump
• Governor Abbott Urges Local Governments Against Increasing Property Taxes For Texans