Deep in the Heart of (Property) Taxes: Exemptions & Tax Rates

"In this world, nothing can be said to be certain except death and taxes." - Benjamin Franklin

EXECUTIVE SUMMARY:

As mayor, I will advocate, again, for an increase in the homestead exemptions that we offer our citizens to help reduce the city's portion of the property tax burden. Rowlett currently offers a 1% general homestead exemption. My opponent wants to raise it to 2% or $5000.

The City of Garland just raised theirs from 10% to 11%. I believe Rowlett residents deserve more than 2%. I would like for the new council to find a way to increase the homestead exemption to 5% in the 2026 budget, 8% in 2027, and 10% in 2028. I also want to increase the over-65 exemption to be equal to the disability exemption, as is the case in 23 of the 31 cities in Dallas County.

Why do we have property taxes, anyway?

The ultimate purpose of government is to provide to a geographically defined group of people the things that individuals or families can't (or can't easily) provide for themselves. That includes necessities such as physical safety, clean water, and roads to drive on, as well as amenities such as parks, libraries, and aesthetically pleasing public spaces.

The common thread is that because of multiple factors, those are things we probably wouldn't have without governments. But government - like households and businesses - have to have money to operate. In some states, cities impose income taxes.

We don't have state or local income taxes in Texas. While there are some additional revenue sources such as other taxes (sales, alcoholic beverage, hotel/motel), user fees for specific services, interest income from investments, and grants from federal and state programs, in our community most city revenue comes from property taxes.

Calculating property taxes

The total property tax burden includes city, county, school district, hospital district, and community college district. The amount of tax a homeowner ultimately pays depends on the rate, which is set by the taxing entity, and the valuation, which is set by the county appraisal district.

The valuation used to calculate the tax is reduced by exemptions. The state mandates a general exemption that school districts have to grant. Local government exemptions are optional and set by the governing body (for city taxes, the city council).

Assessed value - exemptions = taxable value
Taxable value ÷ 100 x tax rate = annual tax bill

The total tax bill for a home in Rowlett (Dallas County) that's valued at $250,000 with the optional homestead exemption (and no other exemptions) is a little over $4300 per year, according to the Dallas Central Appraisal District's calculator.

With the median listing price at $415,000 and many homes valued about $500,000, we have a lot of homeowners who are paying big property tax bills.

Commentary:

In setting tax rates, city officials often emphasize that the city tax is only part of the total tax bill, and the school district tax rate is higher. That's all true, but in my opinion it's not a good excuse for setting a high rate. School districts also give (per state mandate) a substantially higher homestead exemption. That's currently $100,000 and SB 4 would raise it to $140,000.

The city portion is the only part of the tax burden that the council can control, so I want to do what we can to reduce that burden on our residents. That includes both reducing the rate and increasing the exemptions. My preference would be to never exceed the "no new revenue" rate - but realistically, we have serious needs.

Roads and alleys need to be fixed, our public safety departments have to be adequately staffed and equipped, and citizens want amenities such as functional parks, a vibrant downtown, and beautification of our thoroughfares and neighborhoods - all of which indirectly benefit the city's financial status by helping attract businesses to shift the tax burden off of residents.

Comparing DFW cities

So, is it true that surrounding cities have lower tax rates and offer higher homestead and senior exemptions than Rowlett? Some do and some don't.

I'm not going to sugarcoat the facts. According to the numbers in DCAD's tables comparing 2024 actual and 2025 estimated tax rates and exemptions, there is only one Dallas County city with a higher tax rate than Rowlett: Balch Springs. Rates range from a low of 0.208550 to a high of 0.794629. Our rate is 0.769691.

When it comes to exemptions, we fare a little better. The optional homestead exemptions in Dallas County range from 0% to 20%. The cities of Addison, Carrollton, Farmers Branch, Grapevine and a few others offer 20% optional homestead exemptions. Those cities have significantly more sales tax and/or commercial tax base than we do - but even Hutchins, Seagoville, and Wilmer offer 10% exemptions. On the other hand, Sachse, Wylie, Richardson, Mesquite, and several more don't offer an optional homestead exemption at all.

Over-65 and disability exemptions (which are equal in a majority of cities) range from $10,000 in two cities - Ferris and Grapevine - to $616,000 in University Park. Garland's is $56,000, Sachse's is $50,000, and Mesquite's (one of the few where the two aren't equal) is $65,000 for over-65 but only $15,000 for disability.

Commentary:

It takes money to provide the necessities and amenities that our residents want. I get that. It takes investment in infrastructure, beautification, and public safety to attract the businesses that could generate alternate revenue sources to shift the tax burden. I get that, too.

Realistically, we may never be able to operate on a tax rate in the .20s or .30s like most of the cities in neighboring Rockwall County - and certainly not by the end of the next mayoral term in 2028 - but I believe we can aspire to bring the rate down, over the next 5-10 years, to the .40s or .50s, a midpoint in the list of Dallas County cities.

That is dependent on the willingness of the council to make some hard decisions at budget time.

The "cost" of tax relief

Whenever I have proposed lower tax rates or increased exemptions, I've been met with the argument that it would "cost the city too much." I don't like that terminology. It implies that the city is entitled to X amount of money and that by letting taxpayers keep more of the dollars that they work to earn, the city is "spending" money on tax relief.

The more accurate question is "how much less revenue would the city have if it reduced the tax rate and/or increased the exemptions?" That amount depends on many factors, including the valuations assigned by the appraisal districts. But we can't pretend there wouldn't be an impact on the budget.

Balancing the city's budget is similar to balancing our household budgets. The city doesn't have a set "salary," so it's more like being self-employed in that you don't know for sure what your income will be in the coming year. So you have to budget based on estimates. If you decide to take on jobs with lower pay rates because it's work you enjoy more, you have less to spend on discretionary purchases. Or you could find ways to supplement your lower income, such as with investments.

Applying that to the city, there are two ways to "afford" a tax cut: reduce expenses or bring in more revenue from other sources (or a combination of both). I believe we need to look at ways to cut costs - something we've done, for example, by bringing the concrete and asphalt work in-house instead of paying contractors - and investing in the right kind of economic development to increase our sales tax revenues.

That's a very simplified version of how it works. What to cut and what to keep, what new projects to fund and which ones to put on hold - those are decisions that the full council makes in those marathon budget meetings. But the council needs input from you, the taxpayers, to make those decisions. As mayor, I will encourage much more citizen involvement in the budget process. It's your money we're talking about.

SEE DEB'S PROPERTY TAX ACTION PLAN

Deb talks taxes: