It's the Same in Every State -- Bad Property Tax Administration
Texas Property Taxes: The Unfair Deal
by Jim Hightower and Tim MahoneyLatest figures of the Census Bureau show that Texas' ad valorem levies add up to 3.4 percent of the average Texan's income, which makes the Lone Star state's property tax burden only 29th in the nation.
This hardly means that all is well with Texas' property tax structure, however -- it's not by a long shot. Governor Briscoe, Speaker Clayton and some of their fellow travelers prate about putting limits on local and state tax increases, but they deliberately skirt the real issue that's agitating people all over the state -- namely, that our property taxes are applied with gross unfairness.
As a general rule, those Texans who possess the most valuable properties get away without paying their full share, while less well-to-do Texans are made to take up the slack by paying a higher effective rate than their rich neighbors.
If the property tax were applied fairly, this chart would show a perfectly flat, level line. Instead, the property tax assessment is higher for poorer properties!! This corruption is present in most of the states. Correcting it offers an easy way to ma ke the property tax fairer and draw more revenue for public spending needs -- and current law requires that this be done. But our public servants are failing.
Not only is such discrimination unfair, it is illegal. The Constitution of 1876 is blunt and to the point: "Taxation shall be equal and uniform."
There's more. The Constitution also says plainly that "All property in this state, whether owned by natural persons or corporations, other than municipal, shall be taxed in proportion to its value." Yet at least $600 billion worth of Texas property, most of it owned by wealthy individuals and corporations, goes entirely untaxed. That untaxed sum is three times the value of property now on the tax rolls.
While the state's top officials have given it a big, collective wink, local property tax administration has become a hodge-podge of overlapping jurisdictions, inadequate assessment techniques, and old-fashioned discrimination. Property taxes account for some 25 percent of governmental revenue in Texas, but it is hard enough for the average citizen just to sort out who is submitting the bills, let alone penetrate the mysteries of how they were computed. In addition to the state's ad valorem levy, there are property taxes imposed by about 2,700 separate taxing jurisdictions, including 254 counties, 780 cities, 1,091 school districts, 348 water and utility districts, and 246 other special jurisdictions covering everything from hospitals to roads.
The most reliable study of ad valorem levies in Texas was conducted by the Legislative Property Tax Committee in 1975. It analyzed appraisals in 35 randomly selected school districts to get a representative sample of statewide practices, and its results were not encouraging to any who believe in fair taxation.
Overall, property appraisals in these districts areraged only 60 percent of actual market value (one district appraised property at an average of only 11 percent of true value, while even the best district averaged only 81 percent).
But these averages don't really give an idea of the proportion of property value that is allowed to escape taxation. Based on reports from all Texas school districts, Craig Foster of the Intercultural Development Research Association figures that $219 billion worth of real and personal property (excluding intangibles) is carried on today's tax rolls. Foster, who directed the 1975 LPTC study and has 15 years' experience in this field, has made his own projections that peg the actual market value of taxable property in Texas (also excluding intangibles) at $464 billion. In other words, because of undervaluation, assessors exclude from the tax base over half the value of even those properties they take the trouble to inventory.
It would be one thing if everyone were getting a fair share of this tax bonanza, but LPTC's 1975 study found that the more expensive the property, the more it was undervalued, while the smaller property owners in each category had the highest appraisals. The same pattern of systematic discrimination holds true today.
Foster told the Observer that discrimination is sharpest among single-family residences. It is the rule rather than the exception, he says, to find $30,000 homes in Texas appraised at 80 percent of actual value, while $100,000 homes are on the books at only 50 percent. The same goes for commercial property -- in the 35-district survey, the smallest, locally owned stores were appraised above market value (typically at 110 percent), while the biggest commercial outlets, including national chain stores, got away with valuations capturing only 65 percent of their real worth.
Similarly, small hometown industries generally pay close to the full fare, receiving 95 percent appraisals in 1975, but the giant industries are not even paying half their fair share. Says Foster: "The worst abuse of the valuation process is in the industrial category at the level of $200 million to $2 billion market value -- it's not uncommon to find valuations as low as 40 percent of actual value."
Foster's findings document precisely the property tax inequities that have been recognized in a general sense for decades.
This article is excerpted from the Texas Observer of July 21, 1978, during the height of the "Proposition 13" movement by land speculators.
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