While the editorial in Sunday’s Victoria Advocate regarding the property appraisal process was spot on, the problems and challenges of our system are much broader and deeper than the secrecy behind real estate sale prices. Any rational person must agree that there is no fairer way to value any property than to examine an actual sale transaction. What someone is willing to pay for a property is the only true assessment of its financial value.
Unfortunately, our current and historic property tax structure also requires the arbitrary increasing of the “value” of a property on an annual basis after such a transaction. But how can a property change in value if there is no transaction to document and confirm such change?
If you purchase a property for $200,000, let’s say, then that is what it is worth to you forever. For an appraisal district to later say that property is worth $250,000, or $300,000, or more, is ludicrous. There has been no transaction to validate that assessed value. So, you are stuck with a higher tax bill, regardless of your ability to pay that bill. It is not uncommon for appraisal districts to increase “valuations” on individual properties by 15-20 percent or more from year to year, thereby increasing your taxes by that same percentage. But what is the likelihood of your income increasing by that same percentage? In most cases, zero.
So, our current property tax system levies taxes, with no regard to the taxpayer’s ability to pay. Think about it; every other tax you pay is directly proportionate to your apparent ability to pay it. Make no income, pay no income tax. Buy no gas, pay no gas tax. Don’t buy anything, pay no sales tax.
But this inequity in property taxes respects no such relationship. Lose your job or retire and cut your income dramatically, your property appraisal and, therefore, your taxes continue to rise. This is taxation without representation at its most basic.
I propose that there could be a much more equitable system with three simple steps:
1. Eliminate the secrecy of real estate transactions as the Advocate editors have suggested.
2. The assessed taxable value of any property could then be based on an actual transaction amount – and should be frozen at that amount unless there is a value-impacting transaction to follow, i.e. a building permit for an improvement, a cash-out refinance or a sale.
3. Create a reasonable tax on each real estate transaction equal to a percentage of the “gain” on the sale, i.e. the actual sale price minus the price paid for the property at the last transaction.
This should be a completely bi-partisan issue. All taxpayers, regardless of your political leanings, are being crushed equally. And retired people are being hit the hardest, as your property taxes continue to rise even after you dramatically decrease your income in your golden years.
The Texas Legislature accomplished a few positive tweaks to the system in this recent session but did not go far enough.
Sen. Kolkhorst and Representative Morrison, please show us you have genuine concern for your constituents and work hard to initiate a complete overhaul of our property tax system in the 2021 legislative session.