Whether you call it the Effective Tax Rate or the No New Revenue Tax Rate, Texans must remember that, in general*, higher property value appraisals do not raise your property taxes; that is done solely by local government officials.
Each year, after new appraised values are set, each local government which levies a property tax must calculate and publish the No New Revenue tax rate. That figure, which reflects appraisal changes, keeps their tax take equal to the previous year’s take, in aggregate, over their taxing district from existing properties. (New development and significantly improved property falls outside of this calculation.**)
Last year’s tax rate, so often talked about, is meaningless in relation to the new rate set each summer by local governments. For example, if your city’s appraised values increased five percent, the No New Revenue, or Effective tax rate is lowered to produce the same revenue from those same properties as was taken the year before.
Don’t be fooled.
Only a vote to adopt the No New Revenue tax rate is voting for no tax increase.
And, only a rate set below the No New Revenue rate is a tax cut.
* Certainly an individual’s appraised value may increase (or decrease) more than the average increase (or decrease) across a taxing district. If an individual’s property value, for taxing purposes, increased more than the average across the taxing district, even adoption of the No New Revenue tax rate may result in higher taxes for that taxpayer but the taxing entity’s (school district, city, county, hospital or special services district) officials would not have voted to raise taxes. It is in these specific cases that the fight is with the appraisal entity. How to Protest Your Property Appraisal
** Local officials often play the “rising costs” or inflation card saying that if they adopted the No New Revenue tax rate they’d actually have to cut services as the same revenue would not keep up with rising costs. That is dishonest in the sense that the No New Revenue tax rate means no new revenue from properties that were taxed in the previous year and that have not seen improvement. New development and improved properties are not part of this calculation which means that the taxing entity can adopt the No New Revenue tax rate and still enjoy much new property tax revenue from new development and improved properties. Additionally, many entities also collect sales and franchise taxes too which may provide significant new revenue.
About those appraisals and your property taxes
Each year, after new appraised values are set, each local government which levies a property tax must calculate and publish the No New Revenue tax rate. That figure, which reflects appraisal changes, keeps their tax take equal to the previous year’s take, in aggregate, over their taxing district from existing properties. (New development and significantly improved property falls outside of this calculation.**)
Last year’s tax rate, so often talked about, is meaningless in relation to the new rate set each summer by local governments. For example, if your city’s appraised values increased five percent, the No New Revenue, or Effective tax rate is lowered to produce the same revenue from those same properties as was taken the year before.
Don’t be fooled.
Only a vote to adopt the No New Revenue tax rate is voting for no tax increase.
And, only a rate set below the No New Revenue rate is a tax cut.
* Certainly an individual’s appraised value may increase (or decrease) more than the average increase (or decrease) across a taxing district. If an individual’s property value, for taxing purposes, increased more than the average across the taxing district, even adoption of the No New Revenue tax rate may result in higher taxes for that taxpayer but the taxing entity’s (school district, city, county, hospital or special services district) officials would not have voted to raise taxes. It is in these specific cases that the fight is with the appraisal entity. How to Protest Your Property Appraisal
** Local officials often play the “rising costs” or inflation card saying that if they adopted the No New Revenue tax rate they’d actually have to cut services as the same revenue would not keep up with rising costs. That is dishonest in the sense that the No New Revenue tax rate means no new revenue from properties that were taxed in the previous year and that have not seen improvement. New development and improved properties are not part of this calculation which means that the taxing entity can adopt the No New Revenue tax rate and still enjoy much new property tax revenue from new development and improved properties. Additionally, many entities also collect sales and franchise taxes too which may provide significant new revenue.
See many other commentaries which explain how Texas property taxes work by click here.