Today the Austin City Council will talk about the possibility of implementing a twenty percent homestead property tax exemption. It's something many of the newly elected council members promised on the campaign trail last year.
So, what exactly does a twenty percent homestead exemption mean for homeowners?
Let's look at your property taxes as a whole, as though they were a pie.
In order to figure out what percentage of your taxes go where, let's use the pie as an illustration.
Dick Lavine is a fiscal analyst for the Center for Public Policy Priorities, an Austin left-leaning think-tank.
For this exercise, Lavine sits outside his home. On his garden table is a pie that Lavine cuts in half. "I'm going to make the school district half, because I'm not going to make 53 percent." That huge slice represents the money homeowners pay in property taxes to local schools.
"Now, the other half," says Lavine, "gets sliced more or less into [three] equal slices." Lavine continues: "The city of Austin takes about seventeen percent of the property taxes paid."
So that would be represented by one of the three pieces Lavine just cut.
Math geniuses out there, please excuse how roughly we are treating these percentages.
If council passed a twenty percent homestead exemption, which sounds like a lot, what would that slice of the pie look like?
Lavine carefully tries to carve out twenty percent of one of those three slices from the second half. Because, he says, "[it's] not twenty percent of your whole tax bill. That's twenty percent of the part of your tax bill that goes to the city."
When Lavine is done cutting, the slice is very small in relationship to the entire pie.
In other words, a $300,000 home would have roughly a $6,000 tax bill and a twenty percent tax exemption of that would be a $300 annual exemption.
The City of Austin's Deputy Chief Financial Officer Ed Van Eenoo says, "a twenty percent exemption would result in [about] 36 million less tax revenue [for the city]."
If the exemption were to be approved by city council, the city would have to come up with other revenue sources to make up the difference. One possibility is to tax businesses at a higher rate. Another possibility is to look at budget cuts.
If council approves the exemption, the process promises to be fast. That way, it can be implemented in time for next fiscal year.