Discover How ‘Invisible Government’ is Increasing Tax Bills for Texans
The increasing tax burden on Texans is largely attributed to the growing number of special purpose districts. These districts include various governmental functions, yet they often elude scrutiny and regulation present in other taxing entities. As of 2023, there are approximately 2,300 of these districts, showing significant growth since 1998.
Special Purpose Districts: An Overview
Special purpose districts have nearly doubled in number since 1998, becoming a substantial part of Texas’ tax landscape. These districts represent roughly 16% of the total property tax revenue, a notable increase from 13% in the previous year. In 2023, they collected over $12.7 billion in taxes, a dramatic rise from $3.1 billion two decades earlier.
Municipal Utility Districts (MUDs)
- About half of the special purpose districts in Texas are municipal utility districts (MUDs).
- MUDs are prominent in rapidly expanding regions where developers utilize them to issue bonds for infrastructure outside city limits.
- Tax rates in MUDs can be significantly higher, sometimes triple, compared to those within city boundaries.
Political Response to Rising Taxes
Governor Greg Abbott has expressed frustration with local government tax increases, aiming to impose limits on rising property taxes. He asserts that many local governments do not spend taxpayer money judiciously and advocates for budget cuts instead.
However, the focus often remains on cities and counties, while the oversight of special purpose districts is notably lacking. A bill previously proposed to cap revenue growth for municipalities failed to include MUDs, raising concerns among lawmakers and constituents alike.
Legislative Developments
In 2019, Texas lawmakers enacted a cap limiting property tax revenue increases for cities and counties, but many special purpose districts, including MUDs, were exempted. This means that these districts can raise their revenue without needing voter approval, which can exacerbate tax burdens for residents.
The Complexity of Governance
Texas hosts over 30 different types of special purpose districts, each handling specific governmental functions such as water management, safety, and transportation. Residents often find themselves navigating a complicated system, sometimes paying taxes to multiple districts.
This fragmented structure can lead to confusion. For instance, in some areas, homeowners may contribute to eight or nine different taxing authorities, complicating the tax landscape significantly.
Calls for Reform
Given the complexity and growth of these districts, experts suggest that state oversight is critical. Proposals have emerged for a comprehensive review process to evaluate the necessity and efficiency of special purpose districts regularly.
Many residents in MUDs report surprise at their tax rates, which are ultimately set by boards not required to reside in their districts. This lack of local accountability highlights the imperative need for reform and transparency in the governance of special purpose districts.
In conclusion, the surge of special purpose districts in Texas represents a significant and often overlooked contributor to rising tax bills for residents. As the state grapples with this “invisible government,” the need for comprehensive policymaking and oversight becomes increasingly important.
