THE SECRET LANGUAGE OF EXEMPTIONS

By: Jack Cross
The lost value from property tax exemptions and special
appraisal methods grew by more than $54 billion in 2017,
and now sits at just a bit above $666 billion.
Most of these exemptions are favored by voters,
include homesteads, veterans, agriculture, land and religious
organizations. But, innumerable carve-outs exist
— most not given serious review since they were first
implemented. There is an astounding scarcity of knowledge
when it comes to tax breaks and property taxes.
No one knows how many special carveouts there are
in the tax code, how much they cost or if they are even
working. Sen. Rodney Ellis in 2013 filed a bill with then
Sen. John Carona to establish a process for regularly
examining each exemption. The bill did not survive the
session.
Tax payers have been subsidizing private country
club golf courses for decades. Golf course owners have
benefited from an evaluation method that assesses their
property values at a tiny fraction of market value thanks
to something called the Greenbelt Act.
The Wall Street Journal reported that the Korean electronics
company Samsung got their taxes dropped from
$21,080 to just $135.68 through a wildlife management
exemption on 54 acres of land around their Austin semiconductor
plant by hanging 10 birdhouses and spraying
for fire ants.
The “ag exemption” is a political third rail; no one is
suggesting eliminating the agricultural valuation but, the
exemption is being grossly misused. There is no discussion
to tightening the requirements to make sure it’s more
closely shaped to the law’s original intent. There is no
minimum acreage defined and every CAD has its own
rules. Farms and land interests are going to oppose any
bill. Even if it were a bill to put land value at zero, they
would oppose it because they’re afraid it would affect
them.
“Pollution control is a really big deal. The 1993 exemption
was sold as an incentive for clean air. It
should have had a sunset clause, because
today stringent environmental laws remove any
incentive, the refineries can’t operate without
the equipment. Today it is just a huge tax gift.
The exemption relieves the oil and gas industry
annually about $10 billion in taxable value.
The oil and gas industry are constantly asking
to expand the exemption and have had some
success. In 2010 state regulators denied Valero
a for a full property tax break on equipment
used to produce low Sulphur fuel at five refineries.
The equipment was a government requirement,
had nothing to do with plant pollution and would
have saved Valero millions.
When the state grants Tax loopholes and special
exemptions they are taking away a source of revenue for
local government. When the state takes steps to restrict
the local revenue stream, it is a safe bet that cities and
counties will instead raise tax rates (or appraisal values)
for the remaining taxpayers. There is a limit to how far
taxing units can cut revenue without increasing costs for
other services that the public demands. The Texas property
tax code definitely needs reforming but the lawmakers
are looking in the wrong place.