2024 Results of the 20% Appraisal Cap in Texas

• In Event: Tax Limits

Abstract

This report examines the circuit breaker limitation on appraised value (“appraisal cap”) for ad valorem property tax enacted by the Texas Legislature in 2023 as part of S.B. 2. To be representative of the state’s economy, we analyzed the operation of the appraisal cap in five distinct Texas counties.

In 2024, a total of $4.2 billion of property value was removed from the property tax roll in the five counties because of the appraisal cap. The appraisal cap was relatively small in operation.

The appraisal cap led to higher tax rates in all five counties than would have been necessary without the cap. This occurred because, when property value is removed from the appraisal roll, Texas law allows taxing units to maintain a constant level of tax revenue by raising tax rates to offset the reduction in taxable value. We found that the cap resulted in slight increases in the No-New-Revenue Tax Rate (NNRTR) and Voter-Approval Tax Rate (VATR) of each county.

Although the increase in the NNRTR, VATR, Adopted Tax Rate and tax levies on Uncapped Properties was relatively small, that is because the value removed from the tax roll because of the 20% appraisal cap was relatively small. If the appraisal cap had been lower than 20%, or if more properties had been eligible for the cap, significantly more value would have been removed from the appraisal rolls and the increase in tax rates and tax levies on Uncapped Properties, including homesteads, would have been more pronounced.

Authors

• Joyce Beebe, joyce.beebe@rice.edu

• John Diamond, Rice University's Baker Institute

• Jennifer Rabb, TTARA Research Foundation