By Susan Combs, Texas Controller of Public Accounts
Thousands of cities, counties, special purpose districts, school districts and transit authorities in Texas levy property tax or sales tax. Revenues from these taxes are used to fund law enforcement, fire departments, hospitals, schools, libraries, parks, roads, utilities, economic development and many other locally operated public services. Although Texas has no state property tax, Texas law authorizes local governments to assess and collect property taxes. The local property tax is the largest single funding source for community services. The Texas Constitution and other state laws provide caps on local property tax rates. In the case of school districts, rates for maintenance and operations and debt service are separately capped. Although there are some exceptions, most districts must adopt a maintenance and operations rate not exceeding $1.17 per $100 property value and a debt service rate not exceeding $0.50 per $100. The constitutional property tax rate cap for Texas cities, towns and counties is $0.80 per $100 property value.
These taxes generate revenue for general, permanent improvement, road and bridge, and jury funds. The Constitution also permits the Legislature to authorize an additional property tax for maintenance of public roads by a county, not to exceed $0.15 per $100. The rate caps vary for Texas special purpose districts with property tax authority. Texas’ truth-in-taxation laws can limit year-to-year tax rate increases. Any entity wanting to set a tax rate above the rollback rate (which caps an increase in revenue) could face an election if a sufficient number of taxpayers choose to protest it. In addition, school districts must hold elections to impose tax rates that exceed rollback rates. Taxes are further limited for property owners who qualify for homestead, over-65 and military-related exemptions. Local taxing entities may impose sales
What Triggers Tax Levy Growth?
Higher property values and the increased number of entities — particularly special purpose districts — collecting tax are contributing factors to the significant growth in local property tax levies. The growth of school district levies slowed in 2006, when the Texas Legislature increased state funding and lowered the maximum local tax rate to reduce the tax burden on property owners. The increase in city and county levies from 1992 to 2010 reflects a statewide increase in the number and value of properties in Texas. However, the addition of more than 500 special purpose districts, combined with the increase in Texas property values, contributed to that sector leading others in the growth of property tax levies. Although SPDs are not found in every Texas county, these districts typically levy taxes on valuable development property to pay for infrastructure or to fund services in unincorporated or developing areas. Municipal utility districts (MUDs), for example, may exist in areas where city services are not available.
How Much Tax Is Assessed?
Texas local property tax is levied on taxable real and personal property, including land, residences, commercial real estate, business personal property, interests in producing minerals, industrial complexes and other property defined in law. The population of Texas counties varies dramatically, with some counties having millions of residents and others having several hundred or, in the case of Loving County, fewer than 100. In sparsely populated counties, the value of nonresidential taxable property (such as the value of producing oil and gas interests and pipelines) may vastly exceed the value of residential property; thus, property tax levies per capita are disproportionately higher in sparsely populated counties than in counties with a more typical residential/non-residential balance of taxable property.
Who Levies the Tax?
Property taxes are based on the rate of taxation set by local entities in Texas and assessed on property according to values set by county appraisal districts. These values and tax rates are reported to the Comptroller’s Property Tax Assistance Division; however, actual property tax collections by local entities are not reported to the Comptroller. The maps in this report provide a general guide to the total number of local property taxing entities in each county and the per capita property tax levy in 2010. Generally speaking, the more densely populated Texas counties have the most taxing entities. Local property taxing entities have increased in number over time to fund infrastructure and taxpayer services. The biggest increase in property taxing entities in the past two decades has been.
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