Know the “effective rate” to judge local tax rate changes

It’s local budget time and all over Texas I see the distortions of city and county elected officials ignorantly passed along by local members of the media. Time and again I read quotes of officials talking about how they are giving local taxpayers a break by either slightly lowering the or not raising the tax rate.

The problem with most media reports is having no mention of the effective tax rate which must be calculated and published by each local government before a budget and new tax rate is set.

The Comptroller’s office describes it this way: “The effective tax rate would provide the taxing unit with approximately the same amount of revenue it had the year before on properties taxed in both years. For example, if property values go up, the effective tax rate goes down. Comparing property tax revenues from one year to the next year tells you whether there will be a tax increase.”

Most often what I see are local official not raising the tax rate or even lowering it slightly but it coming in above the new effective rate. That, my friends, is a tax increase. Legally, practically, and every way you cut it, any tax rate set above the effective tax rate is a tax increase but, how would you know? In only about five percent of media reports do I ever find a mention of the effective rate. More often reporters let officials mislead the public by simply reporting the old tax rate versus the new with no mention of the effective rate.

When looking at proposed new tax rates, all that matters is the newly published effective tax rate, that’s what you compare to and only that to determine if taxes are going up or down.

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