The Taxing Issue of Rollbacks

The Senate takes up the issue of local revenue, and the locals aren’t happy.
Thu March 28, 2013 10:15 am

During last week’s vote on the Senate budget bill, most members were effusive in their praise of Tommy Williams, a Republican from The Woodlands and the chair of the Senate Finance Committee.

On Monday, however, Williams had to face a tougher crowd. “I’m sure we’re gonna have a lovefest on this bill today,” Williams said after introducing SB 144 to the subcommittee on fiscal matters, to a round of laughter. “All of the objections that I’ve ever heard on this … I’m trying to accommodate all of these and still, I’m not feeling the love.”

At issue was the rollback tax rate, which is the figure by which Texas’s city, county, school, and special districts can raise property taxes annually, and Williams’s bill would cut it from 8 percent to 5 percent. (Dan Patrick, a Republican from Houston, has a similar bill, SB 102, but it adds the provision that tax increases greater than 5 percent would be allowed if approved by voters. Currently, 7 to 10 percent of citizens, depending on the amount by which taxes were raised, must petition for a vote if taxes are raised above the rollback rate.)

In other words, as Williams’ bill notes, the rollback tax rate is effectively a revenue cap. That’s why Texas municipalities are up in arms. Representatives from more than twenty city and county governments, from cities as big as Dallas to towns as small as Sweetwater, testified against it. Clayton Chandler, the city manager of Mansfield, observed that capping revenue increases “could be devastating” for city service programs, particularly in places where the population is increasing at a faster rate than the taxes.

A related complaint from witnesses was that the state provides hardly any money for municipalities. According to a 2012 survey by the Texas Municipal League, 37 percent of municipal general fund revenue comes from property taxes, 27 percent comes from local sales tax, and the rest comes from a variety of sources such as fees, franchises, and court fines. Little to no funding comes from the state. In other words, if cities need more funds, they have to raise them by themselves. By taking the rollback tax rate down to 5 percent, these bills would limit cities’ ability to do so. And unless state legislators radically reverse


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