Texas Law Changes How Tax Rates Get Calculated

Senate Bill 10 modifies how local governments across Texas calculate tax rates. The law updates the formulas that determine the highest property tax rates a local government can set without first asking voters for approval. These calculations affect cities, counties, and special taxing units like school districts and water authorities.

The bill creates different formulas based on the type and size of local government. For special taxing units, the voter-approval tax rate is calculated by multiplying the no-new-revenue rate by 1.08, then adding the current debt rate. For municipalities and counties with fewer than 75,000 people, the multiplier is 1.035. For larger municipalities and counties, the multiplier is 1.025 or 1.035 depending on circumstances.

The law also addresses situations where local governments collect sales taxes in addition to property taxes. When a government starts collecting a new sales tax, the formulas adjust by subtracting the sales tax gain. When a government stops collecting a sales tax, the formulas add back the lost revenue. These adjustments help ensure that total tax collections remain stable when funding sources change.

Local government officials use these formulas to calculate their tax rates each year. The formulas account for new property added to tax rolls, property that is lost to exemptions, and other revenue sources. By updating these calculations, Senate Bill 10 provides clearer guidance for how local officials determine what tax rates require voter approval.

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