When Greg Abbott was running for governor, he said he wanted to limit property taxes. On Wednesday, he signed Senate Bill 2 into law, which is meant to do just that. The measure caps the rate of annual property tax growth in Texas at 3.5 percent, down from 8 percent previously. Local governments seeking to raise taxes by more than 3.5 percent must get voters to approve it. The aim is to slow the rate of tax hikes so people won’t be taxed out of their homes or businesses. But will it help, or could it actually hurt communities?
ARC Specialties of West Houston is a small company that makes big industrial robots. Company president Dan Allford says property taxes on his buildings are a huge expense.
"I checked it, and annually it's about $5,000 per employee," Allford says. At 55 employees, that works out to $275,000 a year. "Every year, we end up having to protest the taxes, because there's a huge rate increase every year, and this takes time and money."
Allford says that, if he doesn't have to worry about how high his taxes are going to climb every year, he'll be able to invest more in his business. That includes hiring more people.
"The point of this legislation is to allow everybody to not to have to go through the expense and cost of fighting these taxes each year," he says. "Because it's not only costly to us business owners. It's costly to the state."
Texas has a reputation of being a low-tax state. But it actually has one of the highest effective property tax rates in the nation, close behind New Jersey and Illinois. Anything that can bring Texas down in the rankings makes it a less expensive place to do business.
But what about ordinary homeowners?
At a modest bungalow in Houston's Sunset Heights neighborhood, retired teacher Lisa Bidelspach sounds skeptical. "I'm really searching on literature that will tell me more about what's going to happen to our taxes."
Bidelspach says that when she bought her home, nearly 30 years ago, her annual tax bill was less than $1,000. She says last year, it was more than six times that, and that was after filing a successful protest.
"As far as the tax relief, our taxes are not going to go down," Bidelspach says. "I'm hoping they will slow down a little bit. Because at this rate, by the time my taxes lower when I get [to] 65, I'll be paying close to almost $10,000."
Bidelspach says she's gone back to work as a substitute teacher to help pay the bills, but that even that might not be enough to cover her property taxes if the law doesn't provide the relief it promises. Her message to lawmakers? "If you truly want to help us," she says, "let's revisit this and see what actually happened to us with this law. And you say that it's tax relief? Well, let's see if we got a tax relief."
None of this is surprising to Ed Emmett, senior fellow at Rice University's Kinder Institute for Urban Research. The former Harris County judge says that people do need relief from property taxes. And they will get some – from the school finance reform law, which reduces property taxes statewide by a net $5 billion.
But as for SB 2, Emmett says, "Make no mistake: the so-called property tax reform bill doesn't lower anybody's property taxes at all."
Emmett says the way the state went about trying to provide relief will do more harm than good, because property taxes are the sole source of revenue for county governments.
"Harris County has almost 2 million people who live in unincorporated Harris County that they're responsible for, the county's responsible for providing infrastructure and services," Emmett says. "Dallas County has less than 10,000. How can you apply the exact same, one-size-fits-all formula for two counties that are so different?"
Emmett says if the state wants to provide real relief, it will need to come up with another funding source to offset the loss in property taxes – something lawmakers tried, but failed, to do in the session that just ended.