Part 1: Winning Against a Corrupt Texas Property Tax System
In this series of articles, I want to examine the corrupt Texas property tax system. Despite the corruption, I want to demonstrate how an average homeowner can protest their property taxes and win.
But first, a little background in this Part 1. In Part 2 we’ll get into the mechanics of filing and winning a protest.
Texas law guarantees all property owners the right to appeal the appraisal district’s appraisal of their property. This is an essential right and is part of a necessary system of checks and balances. Your protest forces the government to prove their case. In fact, the burden of proof rests on the appraisal district. Even when a protest is not successful with a tangible reduction in property taxes, every protest is important to building a culture of accountability and transparency. They must know that we will challenge their appraisal of our property.
We’d like to think that every property in every county is carefully and methodically appraised in person by an experienced professional. But this is rarely the case. Most districts hire an outside firm to help conduct “mass appraisals.” These have sometimes been called “drive-by” appraisals or even “fly-over” appraisals. But in truth, they’re not even as reliable as someone driving by your house making a quick appraisal.
The Texas Comptroller explains:
Before appraisals begin, the appraisal district compiles a list of taxable property. The list contains a description and the name and address of the owner for each property. In a mass appraisal, the appraisal district then classifies properties according to a variety of factors, such as size, use and construction type. Using data from recent property sales, the appraisal district appraises the value of typical properties in each class. Taking into account differences such as age or location, the appraisal district uses typical property values to appraise all the properties in each class.
That’s a long-winded way of saying that appraisals are done in mass by taking limited data, building a computer model, and then appraising all properties in mass. You read that correctly. Valuations are increased by computer algorithm, not by a human making a rational determination. Errors abound. People get hurt. Sadly, I suspect very few of these errors ever get caught and ever get corrected.
In May of 2019, Forney, TX Mayor Rick Wilson filed a class action lawsuit against the Kaufman Appraisal District Chief Appraiser, Sarah Curtis. The problem that precipitated the lawsuit was the doubling or tripling of some values, putting a huge burden on families and businesses.
“On it’s face, the District’s valuations is not equal and uniform as required by the Texas Constitution as such an increase far exceeds the present fair market cash value of those properties as a whole. The District’s Chief Appraiser and Deputy Chief Appraiser have admitted that thousands of properties are incorrectly appraised as a result of the system utilized to value the properties,” the petition says.
As reported by the Dallas Morning News, the lawsuit claims Chief Appraiser Sarah Curtis acknowledged mistakes were made, but insisted that the burden for fixing the issues be placed upon taxpayers.
The lawsuit alleges that Curtis and her deputy “have admitted that thousands of properties are incorrectly appraised as a result of the system utilized to value the properties.”
The lawsuit continues, “Rather than correctly appraising properties in the first place, the chief appraiser prefers to force Kaufman County property owners to disrupt their lives and spend money pursuing individual protests and ignore those owners unable to do so.”
Unfortunately, the corruption is not merely limited to a few mistakes in various appraisal districts. Rather, it is systemic.
An Inherently Corrupt System
Yes, the Texas property tax system is inherently corrupt. I said it. And it is true. I don’t mean to say that every individual or even a majority of individuals are acting corruptly, although some certainly are.
Rather, the system is rigged in a corrupt fashion.
When you complain about your property taxes to your local mayor or county judge, you’ll likely hear them say, “Well, we don’t do the property valuations. That’s the appraisal district.”
If you complain to your appraisal district, they’ll say, “Well, we don’t set the tax rates. We just value the property.”
If you complain to your State Representative or State Senator, they’ll likely say, “Well, we don’t have anything to do with property taxes. None of your property taxes is a state tax.”
And each of these statements, in isolation, is true. The local elected officials don’t set your property’s value. The appraisal district doesn’t set the tax rates. And the state doesn’t get any money from property taxes.
But I’d argue that the system is a deliberately rigged scam whereby each entity can claim perfect innocence and pretend to the taxpayer that their hands are fully and completely clean.
But if we look a little closer, we see that the Texas Property Tax system is a fundamentally corrupt system.
An Incestuous Partnership to Defraud Taxpayers
While local officials pretend full innocence for the problem of soaring property taxes in Texas, their hands are most certainly in the cookie jar. They do set tax rates. They do continue to collect more money every year from your pockets and spend more money every year. From your local city taxes, to your county taxes, to your school district taxes, to a host of other taxes, you can be guaranteed that they spend more and collect more every single year without fail.
Here’s a game they play. They hold their tax rate steady for a few years. During this time they brag that they have prevented any sort of tax increase on the voters because they are “conservative” and of course they deserve your vote in the next election. But in truth, they have collected more and more revenue every year — even with a flat tax rate. How? Simple: because their partner in this corruption is the appraisal districts.
Here’s how it works: the tax rate for a given taxing entity is a certain rate of taxes per $100 of valuation.
For a moment we’ll ignore exemptions like the Homestead Exemption. If your house is valued at $100,000 and the tax rate is $0.51 per $100 of assessed value, then essentially you divide the $100,000 by 100 and multiply the result by $0.51.
In many locations, you’ll pay a city tax, a county tax, and a school tax — at a minimum. You may also pay a water district tax, a hospital tax, a college tax, etc.
In Forney, TX where I live, the total tax rate per $100 of assessed value is about $2.58. That means, on a $100,000 house you’ll pay about $2,580 in property taxes each and every year. In fact, your taxes will generally go higher and higher each year, unless frozen with an over-65 exemption.
Now, here’s the game that is played.
City: “We’ve kept our tax rate flat for four years. We have not raised taxes by even a penny.”
Citizen: “But my taxes keep going up.”
City: “You’ll have to talk to the appraisal district. We only set the rate and we haven’t made any increases.”
Citizen: “Okay. Appraisal district — why are my taxes going up?”
Appraisal District: “We just set the value of your property at the fair market value — as required by law. We have nothing to do with tax rates. Don’t blame us.”
City: “Don’t blame us. We don’t have anything to do with valuations.”
State Rep: “Don’t blame us either. The local governments are out of control.”
Everyone can claim their hands are clean. Everyone can point at the next person and send the poor taxpayer on a fruitless round-robin of investigation. And so the fraudulent deception continues.
Here’s why it’s a fraud
The Appraisal District is lead by the Chief Appraiser. The Chief Appraiser is hired by a board of directors for the appraisal district. This group is called, appropriately enough, the “Appraisal District Board of Directors.”
Don’t confuse this with the Appraisal Review Board. We’ll come back to them in a moment.
The Appraisal District Board of Directors hires the Chief Appraiser and sets certain matters of appraisal district policy and budget.
An astute reader may ask, “But what is this Board of Directors, and where do they come from? How does a person get on that board of directors?”
Here’s the truth the taxing entities don’t want you to know.
The taxing entities select who will serve on the board of directors. The city, the county, the school district — all of these have a say and together they select the Appraisal District Board of Directors.
The very people that have an insatiable desire for your tax dollars, the very people that righteously declare they have nothing to do with the appraisal district — they are the ones who populate the Appraisal District Board of Directors, and it is this board of directors that hires the Chief Appraiser and sets key policies for the appraisal district.
Here’s an example from the Kaufman County Appraisal District website.
Yes, the taxing entities have a controlling interest in the operations and policies of the appraisal districts. The people who tax you, and consume your taxes, are the very people that have ultimate control and governance of the people who value your property.
One elected official from East Texas confided in me a few years ago. He said, “David. It’s worse than you think. If we don’t see the kind of property valuation increases that we want to see, we will replace the board members that we have control over with someone else that will delivery the increases in valuations we expect.”
Let that sink in.
Essentially, elected officials piously declare they have zero involvement in your excessively high tax bill, but they consume your tax dollars, they set the tax rates, and they ultimately influence those who value your property.
Oh, one more thing.
Remember how we said that the Appraisal District Board of Directors is not the same thing as the Appraisal Review Board?
The Appraisal Review Board is a group of fellow citizens that sit in a semi-judicial manner. They hear your protest. They examine your evidence. They examine the evidence presented by the Chief Appraiser. They ultimately have the power to reject your protest or they also have the power to reduce the valuation of your property, thus resulting in lower taxes for you — but also less revenue for the taxing entities.
How does one get to be on the Appraisal Review Board? Is one elected by their fellow citizens? Is the Appraisal Review Board like a jury where members of the public are chosen at random to serve?
Remember how the taxing entities control who sits on the Appraisal District Board of Directors? And remember how the Appraisal District Board of Directors hires the Chief Appraiser and makes important decisions concerning policies and budgets. Guess what else the Appraisal District Board of Directors does? Yes. You guessed correctly.
From the Texas Comptroller’s website:
“In counties with a population of 120,000 or more, members of the ARB are appointed by the local administrative district judge in the county in which the appraisal district is located. The board of directors appoints ARB members in all other counties.”
In counties of less than 120,000 persons, the Appraisal District Board of Directors selects who will serve on the Appraisal Review Board — the people who hear your tax protest and find in favor of the appraisal district or find in your favor. At least in counties of more than 120,000 persons, there is a degree of independence in this the Appraisal Review Board process. Sadly, this should be standard in every county.
By the way, what is an Administrative Law Judge, what do they do?
They are part of the little-known office called the Texas State Office of Administrative Hearings. This office was created in 1991 to hear disputes between Texas State agencies, as well as disputes between agencies and the public.
From their website:
The State Office of Administrative Hearings, also called SOAH, resolves disputes between Texas agencies, other governmental entities, and private citizens either through an administrative hearing or mediation. The office is separate and independent from the agencies involved in the disputes. The administrative law judges who preside over the disputes are neutral. The specific objectives of the State Office of Administrative Hearings are to:
Conduct fair and objective administrative hearings.
Provide fair, timely, and efficient decisions and proposals for decision.
Offer the opportunity for parties to resolve their disputes through mediation (or alternative dispute resolution).
There’s no reason all counties in Texas should not benefit from this level of independence.
According to current population data, only 37 counties in Texas qualify for this additional independence for the Appraisal Review Board. This leaves 217 counties without a fair and proper level of independence. That’s nearly 5 million Texans that deserve better and more fair Appraisal Review Board hearings.
The Bottom Line
Let’s recap this.
The taxing entities select the Appraisal District Board of Directors and they count on the Board of Directors to get the sort of appraisal increase they want to ensure an ever-increasing supply of your tax dollars.
The Appraisal District Board of Directors hires the Chief Appraiser — who will carry out taxing entities’ thirst for this ever-increasing revenue from your pockets.
The Appraisal District Board of Directors (in counties of less than 120,000 persons) also determines who will sit in judgement on your your protest and ultimately determine to find in favor of the appraisal district (something which helps keep the revenue flowing) or find in favor of the taxpayer with a reduction in taxes (something which ultimately takes dollars away from the taxing entities).
Can you say “conflict of interest?”
If you’ve ever protested your property taxes and felt that the entire process was rigged against you, you’re right. In any proper judicial proceeding, this incestuous relationship among those that set your tax rates, consume your tax dollars, value your property, and hear your appeal — would represent a massively corrupt conflict of interest.
Literally, the fox is not only guarding the henhouse, but built the henhouse, and he gets to control who hears complaints about the henhouse.
But in the Texas property tax system this is all quite normal and supposedly acceptable. It shouldn’t be, but it is.
In Part 2 — we’ll examine how — despite this corruption, you can be effective in winning a property tax protest.