AUSTIN (KXAN) — Of all the places Gov. Greg Abbott might go for policy ideas, it's hard to imagine a less likely place than California. But the uber-expensive, highly-taxed, bluest-of-blue states may actually hold the answer to an issue Abbott called an "emergency" during his State of the State address.
Soaring home prices have come with soaring property tax bills and a growing number of Texans, many of them retired, are being forced to sell their homes because they can't afford to pay the taxes. It's one of the reasons Abbott made property tax reform one of his top priorities during the current legislative session.
"We will ensure seniors who have worked their entire lives are going to be able to retire in a home they've already paid off," Abbott said during his address outside the capitol.
Contrast that with California where the median price of a home has increased 150 percent since 1999, but relatively few people are forced to sell because they can't afford the property tax.
So, how do they do it?
Before 1978, California handled property taxes a lot like Texas does now. Every year, you'd get a bill based on what the local assessor thought your house was worth.
"We saw examples in the mid-70s of a four-fold increase in property taxes in just one year, and that's what was causing sticker shock for a lot of Californians," says Jon Coupal, president of the conservative Howard Jarvis Taxpayers Association -- named after the man who led the taxpayer revolt that changed how California handles property taxes.
Jarvis spearheaded the campaign for Proposition 13, which, despite bipartisan opposition in the Capitol, was passed by voters in 1978. It did away with annual assessments in favor of using the purchase price to determine the taxable value of a home. On top of that, it says the taxable value can only go up 2 percent every year.
How does that work in real life?
My parents are a great example. They bought their house in a Los Angeles suburb for $115,000 in 1979. Today, their house is worth more than $600,000, but they're only paying taxes on about $180,000 because, unlike in Texas, California property taxes are based what they paid for it in 1979, not what it's worth today.
The young couple that buys the house next door for $650,000 pays taxes on $650,000. As a result, their bill is much larger, but it's going to remain stable as long as they stay in that house.
“Clearly, it worked well in terms of its primary objective to keep people in their homes,” says Coupal about the effect of Prop. 13 40 years later.
Prop 13 has not been a magic bullet
Like Texas, much of the property tax revenue in California goes to public schools -- which at one time were considered to be some of the best in the nation. But since Prop. 13 passed, California's per pupil spending has plummeted and students in the Golden State rank near the bottom in reading and math.
Californians might enjoy stable and relatively low property taxes, but they are getting hammered in other ways. California has the highest top income tax rate in the country to go along with the highest statewide sales tax rate and the second highest gas tax.
Critics argue those taxes low-income people the hardest while lower property taxes mostly benefit the rich.
Dale Craymer, president of the Texas Taxpayers and Research Association said in an email that California's system "penalizes newcomers” to the housing market.
Could Texas lawmakers adopt a California-style plan?
They could, but it appears they're taking a different approach. There are also some legal hurdles. First, the sale price of a home is not made public in Texas. Because California property taxes are assessed based on the sale price of a home, it's important everyone knows when a property is sold and for how much.
Then there's Article 8 of the Texas constitution which says taxation must be "equal and uniform." Some legal experts say taxing one house at 5 times the value of the one next to it is neither equal nor uniform.
So, now what?
California found a way to keep people from being taxed out of their homes, but that is only one part of the complex problem. Gov. Abbot and lawmakers seem to have the will for property tax reform, but finding the way is the hard part.
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