Remember: The property “tax rate” is meaningless by itself

Pratt on Texas - copyright Pratt on Texas all rights reservedIt is property tax setting time for local governments in Texas which means it is time I remind you that the “tax rate” they set is meaningless by itself.

A tax rate is simply a percentage of something. If I tell you something is up ten percent, that is a meaningless statement unless you know what that something is. A local property tax rate is a percentage – it is a percentage expressed as x-percent of each one hundred dollars of valuation set by the appraisal entity.

Often local officials say they didn’t raise the tax rate, or the percentage (think of “tax rate” as “percentage”), or that they raised it only slightly. They compare the previous percentage figure to the coming percentage, or tax rate, figure they’ve set. This is utterly meaningless as to how much they’ve raised or lowered taxes and the media not only reports it this way but often does a calculation reporters seem to believe equals the change in taxes.

The local tax rate being set is only meaningful when applied to the total appraised values of property in the taxing district. It has no meaning when applied to what the tax rate was before in a previous year. The appraised values change each year and thus leaving the tax rate, the percentage, the same isn’t keeping taxes the same if property values have risen or fallen.

Don’t let them fool you by talking “tax rate,” you need do know if the “tax rate” is above or below the Effective Tax Rate, the No New Revenue Rate, to know if it’s a tax increase or not.

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