Gov. Abbott calls for more restrictions to prevent local taxing entities from raising rates
AUSTIN (Nexstar) — Texas Gov. Greg Abbott is calling on the state legislature to provide more property tax relief for homeowners, but he took it a step further and is now asking the state to pass a law that will make it harder for a local taxing entity to raise its rates.
The governor said the state-funded tax relief only works if local entities do not raise their rates.
“No approval, no new taxes,” the governor said during his State of the State address on Sunday. He said a taxing entity, like a school district or a city, must get two-thirds approval from voters to increase its voter-approval tax rate.
Jennifer Rabb, the president of the Texas Taxpayers and Research Association, a nonprofit that researches fiscal policy, said it is true that local taxing entities will backfill the tax relief.
“When the state buys down property taxes they initially go down, but then they go back up again,” Rabb explained. She agrees with the governor that there should be a supermajority requirement if a taxing entity wants to increase its rate above what the state allows.
Currently, a taxing entity may not raise its revenue by more than 3.5% from the year prior, known as the voter-approval tax rate. If the entity declares an emergency then that limit raises to 8%. When an entity decides to raise it higher than that threshold, it must go to an election for a majority of the voters to decide.
The governor’s proposal would mandate a taxing entity get at least two-thirds approval from voters to move forward with the increase. It would be the same for bond elections, which do play into raising tax rates as well.
How many bond elections get over 2/3 support?
Our newsroom looked into the state data from the bond elections in the past six years. What we found is only 34.7% of the bonds that were approved by voters actually made it past the two-thirds threshold.
One recent example of a bond election that passed, but would have failed if this requirement was in place, was the affordable childcare proposition passed by Travis County voters in 2024.
The proposition raised tax rates to help increase the amount of childcare for families. The proposition passed clear over the simple majority with 59.44% of the vote but fell short of a supermajority.
Mark Strama, a former state lawmaker, believes a supermajority is too high of a threshold. He spoke about the affordable childcare proposition to KXAN.
“To say that that’s not a mandate from the people of Travis County to invest in childcare, which is one of the critical drivers of affordability in this community, I think that’s bad public policy.”
What does a taxing loophole look like?
Rabb also agrees with the governor that there are some local loopholes in the way property tax rates are calculated. One of those loopholes lives inside the no-new-revenue tax rate, Rabb said.
The no-new-revenue tax rate is the rate at which the taxing entity will make about the same amount of revenue as it did the year prior. Inside that rate is an allowance for “new improvements” already “baked in,” Rabb said. An entity can raise its rate to account for the new improvements, such as new homes being built.
But Rabb said her organization has found the new improvements are not always equal. For example, Rabb explained, “If you add 100,000 new rooftops, that’s a lot more people who need schools and roads and all the things that government provides. If you add an equivalent dollar amount of a new factory or a plant, that does not need as much government services.”
What’s next?
Currently there are no bills filed in the Capitol that match the requirements laid out by the governor. He made property tax relief an emergency item, allowing the legislature to take action on the matter as soon as it can. Normally, the legislature would have to wait for 60 days to pass legislation.
State Rep. Brian Harrison, R-Midlothian, filed HB 217, which would require taxing entities to get at least 60% approval from voters in a tax rate increase that is above the voter-approval tax rate.
