Commissioner Adrian Garcia’s proposed tax relief is bad public policy

I received the following press release from Harris County Precinct 2 Commissioner Adrian Garcia:

COMMISSIONER GARCIA PROPOSES PROPERTY TAX RELIEF FOR SENIORS AND INDIVIDUALS WITH DISABILITIES

Plan will provide much needed relief to Homeowners from Harris County Property Taxes

Harris County, TX — TODAY, Harris County Commissioner Adrian Garcia announces will be putting an item on the next Commissioners Court Agenda (May 19, 2020) to extend the Harris County Homeowners Property Tax Exemption for seniors and disabled homeowners. The plan would eliminate county property tax liability for seniors 65 years of age and older as well as disabled homeowners and disabled military veterans, with homes valued at $260,000 or less. Qualifying homeowners with homes valued at $260,000 or more would save at least $350 next year (and annually going forward) on their property tax bills.

This is the first update to the Homeowners Exemption since 2008, and according to a Budget Management Department analysis commissioned by Commissioner Garcia’s office in 2019, the plan would be revenue neutral. The exemption also eliminates tax liability for Harris Health and Harris County Flood Control for homeowners qualifying for the exemption. If the plan is approved, it would take effect for this year’s tax bills.

“I hope my fellow members of Commissioners Court will approve this plan to increase these exemptions without delay. This would be the first time in twelve years that we will have brought meaningful tax reform to Harris County homeowners, and given that seniors and homeowners are particularly vulnerable during the COVID-19 pandemic, we need to step up and help right away. In addition, the added exemption is long overdue to negate the adverse impact of rising appraisal values is having on families across Harris County,” said Commissioner Adrian Garcia, “I’m proud to be the first Commissioner to submit this in 12 years and put money back into the pockets of hardworking families, many who have been directly impacted due to COVID-19.”

ADDITIONAL BACKGROUND:

In 1984, the Over-65/Disabled Exemption amount was increased to $156,240 and the homestead exemption was established at 40%. The most recent update to the exemption was in 2008.

I wasn’t surprised by the release because Commissioner Garcia had talked about it on the last two weekly conference calls with elected officials. As most of you know, I am Mayor of the City of Shoreacres, which explains my participation in those calls. On yesterday’s call, I noted my opposition to the proposed exemption increase, pointing out that these types of property tax exemptions simply transfer the tax burden from one set of taxpayers to another. In this case, the proposed increase transfers money from those least able to afford it to those far more capable of affording it.

The press release states that the proposal is revenue neutral. That is simply not the case. Any reduction in tax revenue is by definition not revenue neutral. The commissioner and his team are relying upon future growth of property appraisals on those taxpayers not included in the exemption to offset the reduction. In effect, Commissioner Garcia is repeating the talking points of the Republican Party and the TaxMan, Paul Bettencourt, saying that appraisal creep does increase total revenues for governmental entities.

As I pointed out to the commissioner, just last year he and the other two Democrat members of the court voted to increase property taxes by 12% and were stopped only because the two Republican members of the court refused to attend the meeting in which the vote was to be taken, denying the Democrats a quorum and blocking the increase. The idea that the court would now propose an exemption increase that would be revenue neutral is not credible.

But the larger point is that this is poor public policy and is a transfer of wealth from those least able to afford housing to those far more capable of affording housing. Let’s take a look at what actually happens if this proposal passes.

Currently, the Harris County tax rate is comprised of five governmental bodies with separate rates for each:

So the total tax rate before any exemption for a property owner in Harris County is $0.61670/$100 in appraised value. Zillow says that the median home price in Harris County is $202,143. I’ll round their number to $200,000 to make it easier. Here is a matrix of the current situation regarding homestead exemptions in Harris County:

As it stands today, if a person 65 or older owns a median appraised home in Harris County, they pay no Harris County property taxes. A person under 65 pays $ 986.72 per year or $ 82.23 per month. A renter pays $ 1,233.40 per year or $ 102.78 per month.

Good deal if you are 65 or over, right?

So what happens if this proposal is passed by Commissioners Court? Note that the astute among you will notice that I used $ 286,000, not $ 260,000 as indicated in the release. That is because on the call yesterday, Commissioner Garcia clarified that it would be a total of $ 286,000 by combining the 20% and $228,500.

If the proposal passes, if a person 65 or older owns a home appraised 43% higher than a median valued home in Harris County, they would pay no Harris County property taxes. A person under 65 would pay $ 1,411.01 per year or $ 117.58 per month. A renter would pay $ 1,763.76 per year or $ 146.98 per month.

GREAT deal if you are 65 or over, right?

But let’s be real, those appraisal amounts aren’t realistic. So let’s see what happens if we apply the median value to the under 65 homeowner and a much lower value for the rental property.

With this model, the under 65 homeowner pays $ 986.72 per year or $ 82.23 per month on a median valued home while the renter pays $ 801.71 per year or $ 66.81 per month on a lesser valued home while the 65 or over pays nothing while living in a far more expensive home. Presumably a much nicer home, although gentrification can, in some cases, mitigate that.

Want to know what at what home values each category of housing pays equal amounts of property tax? Here you go:

Do you see how these types of exemptions transfer wealth from the poor to the better off? The couple living in Galena Park, working two jobs to support their kids, having scrimped and saved to buy a starter home is paying the exact same amount of property taxes that a person owning a half-million dollar home is. The migrant family living in a run down rental is paying the exact same amount of property taxes that a person owning a half-million dollar home is. Do the millionaires and billionaires living in River Oaks really need another $425 a year at the expense of the examples above?

That is not good public policy.

This example demonstrates the problem of using property taxes to fund government. Politicians looking for votes deem one part of society winners and the others losers. They focus on low hanging fruit instead of forcing large businesses to have fair appraisals, further increasing the tax load on the housing market.

I don’t expect that Commissioner Garcia will pull his agenda item simply because I think it is bad policy. Once a press release is sent out, a politician typically doesn’t change his or her mind about an issue. Besides, the fact is that homeowners 65 or over vote at a higher rate than the under 65 or renters. And this is, as they say, politics.

But I do know that these types of wealth transfers from the least to the most is the antithesis of Commissioner Garcia’s entire political philosophy. It is also the antithesis of the political philosophy of County Judge Lina Hidalgo. Perhaps by writing this, I can help them remember their philosophy in the future. As a society, we cannot continue to favor the fortunate over the less fortunate.

And yes, I am still a conservative. Republican? Meh.

Overall, I’ve been impressed by the leadership of Judge Hidalgo and Commissioner Garcia during the current coronavirus plague. They were out front while Republicans were hiding in the backrooms. Judge Hidalgo’s executive orders were well ahead of Gov. Abbott’s. You know, the ones he back-flipped on when someone was actually jailed because of his orders?

And Commissioner Garcia has consistently, since the early weeks of the epidemic, offered support to the local communities in his precinct. The picture at the top is just one result of his efforts – he rounded up people to donate masks to first responders for each governmental entity in Precinct 2. He was out front in setting up mobile testing in our precinct and in getting the county to set up a space for the homeless to isolate themselves and be tested. It was his leadership that paved the way for a county wide program to assist small businesses.

Republicans need to step up their game. Childish antics like the one Sen. Paul Bettencourt and Rep. Tom Oliverson put in place aren’t leadership. All they are doing is building their email list to get reelected so they can continue to take responsibility away from local government. You know, the government closest to you?

So yes, I think this particular proposal by Commissioner Garcia is bad public policy and I hope that in the future, he will think about it when he is attempting to change public policy. And I think he will, because I know that increasing opportunity for everyone is in his heart.