A Texas Property Tax Appraisal Cap Primer

Not everyone lives in Texas. Sad, but true. And, as PlaywriterGirl pointed out to me recently, not everyone knows the complete situation of everything about which I write on my blog. Again, true. (She used different words, though.) Therefore, I, Mr. Light Bulb, being of sound mind and body (hold the crass remarks, please), will now attempt to create a primmer of sorts that will assist those outside the great state of Texas (and those within who are not completely familiar) in understanding the admittedly bone-headed property tax system we have in Texas. Are you ready? Here we go.

Every piece of property is appraised by a county appraisal district. I don't know exactly how this is done, mind you, but I'm certain that some employee of the appraisal district looks at representative homes in an area and enters a dollar amount valuation for each home. In Harris County (where I live) this is done by the Harris County Appraisal District. On this web site, you can find a home's appraised value (or valuation) if you click on "Record Search", then "Real Property", then "Address Search" and enter the address of the home in question.

A local taxing authority sets a tax rate for its services. Where I live, there are three taxing authorities: the Cypress-Fairbanks Independent School District, my water district, and Harris County. For instance, a school board can vote to set the tax rate at two cents of tax for every one dollar of appraised value, or a tax rate of .02 . But that's just one taxing authority; the water board and the county get to do the same thing.

Taxes are then calculated and collected by the local taxing authorities. The calculation is the appraised value times the tax rate. For example, if my home were appraised at $100,000 and the school board sets a tax rate of .02, my school tax would be $100,000 x .02 = $2,000.

So far, so good, right? Pretty straight forward. But here's the part that not a lot of people know about.

The appraised value of a home can be increased by as much as ten percent each year. If my home was appraised at $100,000 last year, this year the appraiser can set an apprised value of my home for as much as ten percent more than last year, or $110,000. We call this ten percent limit the Appraisal Cap.

Now, Mr. Light Bulb, don't you want the value of your property to go up, up, up? Isn't that a good thing?

It would be a good thing if I could sell the property for that amount. But I know of no property that generates a guaranteed ten percent increase in value each and every year. What's more, because the valuation can increase each year by ten percent, the tax on that property can increase every year by ten percent. $110,000 x .02 = $2,200. So let's take this to a logical conclusion, say seven years from now.

Year	Valuation	Tax Rate	Tax
Purchase	$100,000	.02	$2,000
1	$110,000	.02	$2,200
2	$121,000	.02	$2,420
3	$133,100	.02	$2,662
4	$146,410	.02	$2,928
5	$161,051	.02	$3,221
6	$177,156	.02	$3,543
7	$194,872	.02	$3,897

Beginning to see the light here? In seven years, your property taxes have the ability to nearly double. For those of you knowledgeable in the financial sector, you'll recognize this as the Rule of 72. According to this rule, something that grows at 10% per year will double in 7.2 years. Just for grins, let's look at year eight.

Year	Valuation	Tax Rate	Tax
8	$214,359	.02	$4,287

Sure enough, there's your greater-than-double tax a mere eight years after purchase of your home. But there's still one more piece of the puzzle to make the picture crystal clear.

As you can see there are two entities who have my property tax destiny in their hands. Well, more than two actually, but two types of entity: the taxing authority and the appraisal district.

Well, Mr. Light Bulb, this IS a democracy. Why don't you vote out the current taxing authority and vote in new ones?

Sure, I could do that. But why? They haven't done anything to raise my taxes. Look at that chart again. Exactly how many times did the taxing authority have to raise the tax rate in order to receive a greater amount of tax each year? Answer: exactly zero. Each year the tax rate remains .02 . When constituents ask them why their taxes are rising, they readily answer "well, I didn't vote to raise your taxes." And they are 100% correct. They didn't vote to raise the tax rate. Rising appraisals did that for them.

Fine then, Mr. Light Bulb. I'll be more specific: why don't you vote out the appraisal district people?

Yes, indeed, we finally get to the rub. Why don't I vote out the appraisal district people? Answer: because they are appointed, not elected. As a voter, I have no say in who gets appointed to the appraisal district. I can protest my appraisal, but I cannot make any direct change to the make up of the appraisal district. So now we have the complete picture. The elected politicians are blameless when it comes to rising taxes because they do not have to increase their tax rate in order to receive a ten percent increase in tax revenues each year. The appraisal district is not elected, so no one can stop them. Plus, their standard answers are "Don't you want a more valuable house?" and "Aren't you happy that your home is worth more this year than last year?" Sure, I'd be happy to have a more valuable house each and every year. Go ahead and fill out that check right now. Make it out to Mr. Light Bulb. Hey, where you going? I thought so.



So perhaps now those of you who might have been a little lost each time I mention "Appraisal Cap" or "Property Taxes" and the name of a certain governor derisively in the same sentence will better understand why I do so. As Governor, Rick Perry had every opportunity to lead on this issue for years. He had every opportunity to get something done about it in the latest special session. But he didn't. Instead he twisted legislative arms in order to pass the largest tax increase in Texas history. And only now, in late August, months before his possible gubernatorial re-election vote in November, does he address the appraisal cap problem—with a Task Force. An appointed, un-elected, responsibility shucking task force. Yet another reason among many that Rick Perry will absolutely not be getting my vote for governor on November 7.