The Little-People Tax

Dallas tax appraisers can't keep up with Ross Perot. But if you're Average Joe, they've got your number.

Like a lot of other homeowners in Dallas, Wanda Taylor wasn't exactly thrilled to see her annual property tax appraisal when it came in the mail this April.

In each of the past four years, the Dallas Central Appraisal District has raised the value of her stone cottage in East Dallas in line with the rapid renewal of her neighborhood. "We've got all the yuppies moving in. They want to put these little signs on the corners saying Coronado Hills, or maybe it's Coronado Heights," says Taylor, a 53-year-old self-described "aging hippie" who equates the price she paid for her house in 1974 to the cost of a new pickup truck today.

Swiss Avenue mansions have been hot properties for years, but the Dallas Central Appraisal District hasn't caught on. This one is currently on the rolls for $287,800. The fixer-upper next door sold last year for $620,000. Below: East Dallas homeowner Wanda Taylor, pictured with her husband, Robert, and dogs, is an easy mark for Dallas tax appraisers. They've raised the taxable value of her house each of the last four years.
Swiss Avenue mansions have been hot properties for years, but the Dallas Central Appraisal District hasn't caught on. This one is currently on the rolls for $287,800. The fixer-upper next door sold last year for $620,000. Below: East Dallas homeowner Wanda Taylor, pictured with her husband, Robert, and dogs, is an easy mark for Dallas tax appraisers. They've raised the taxable value of her house each of the last four years.
Swiss Avenue mansions have been hot properties for years, but the Dallas Central Appraisal District hasn't caught on. This one is currently on the rolls for $287,800. The fixer-upper next door sold last year for $620,000.
Mark Graham
Swiss Avenue mansions have been hot properties for years, but the Dallas Central Appraisal District hasn't caught on. This one is currently on the rolls for $287,800. The fixer-upper next door sold last year for $620,000.

Because of the upswing in her neighborhood, Taylor's appraisal has nearly doubled in four years. "It's gone up ridiculously, but there's nothing you can do about it," she says.

As everyone who owns a home in Dallas knows, the value assigned to it by the Dallas appraisal authorities is an important number.

If the district says your house is worth $100,000, you paid about $2,700 last year in property taxes, minus exemptions if it was your primary residence or if you were over 65. If the appraisers said it was worth $10 million, the bite was $270,000, minus those same exemptions.

In this property-wealth-based method of paying for schools, police, jails, public hospitals and the like, Texas law says you are on the hook for taxes based on the full market value of your home.

Nice in theory. But in reality, it doesn't come close to working that way.

In Dallas, the more expensive your home, the bigger the break you'll likely be getting on your appraisal--and hence on your taxes.

If you owned one of the biggest, most lavish houses--say, a trophy estate in Preston Hollow or the Park Cities--the appraisal system gave you a 47 percent discount last year, almost half, right off the top, according to records of the most recent reported sales and appraisals.

If you were merely well-to-do and owned a majestic historic home on Swiss Avenue, you were on the hook for only 63 percent of the value of your house, according to the top 10 reported sales on that street.

If you were anything below that, chances are appraisers have you pegged on the rolls at 80 percent of market value or more--and you were made to pay most, if not all, of your share of the taxes under the law. For instance, a 1,100-square-foot house currently for sale on Coronado Avenue, a block away from Taylor's house, is on the 2001 rolls for 83 percent of its asking price. Another is at 84 percent, and that's only if it sells at full price. If you bought last year or early in 2001, your tax value is pegged at nearly full price.

If that sounds unfair--the Texas Constitution says property must be taxed equally and uniformly--there's more.

In 1997, the state Legislature passed and voters approved a measure to cap appraisal increases at 10 percent per year. The popular measure was sold as a benefit for the little guy, the fixed-income senior citizen swamped by the tax consequences of Texas' frothy real estate market, the cash-strapped soul who stood to lose his or her home.

But now that the cap is taking hold, it's become evident that the upper tier is getting the lion's share of the break, in both percentage and dollar terms. This year, according to Foy Mitchell, chief appraiser for the Dallas appraisal district, preliminary estimates show the cap is shielding about $2 billion worth of property from taxation in Dallas County, much of it in affluent neighborhoods where property values have risen the most.

Take the house of EDS founder Ross Perot, Dallas' top hand on the Forbes list of the world's richest people. (He's No. 104, with $3.8 billion.) From 1995 to 1999, four sizzling years for Dallas real estate, the appraisal district raised its valuation of Perot's 20-acre walled estate on Strait Lane a mere 4 percent. That followed a 1993 court case in which Perot had sued the district over what his 9,400-square-foot home--the pool, tennis and racquetball courts, rifle range and bowling alley--was worth.

In 2000 and 2001, however, the district decided Perot's estate was worth far more and in two years raised its value from $7.5 million to its current $17 million.

Because of the cap, however, Perot will be taxed this year as if the estate were worth $9.9 million--meaning he pays no taxes on about $7 million in value. For the city of Dallas, that's a loss of about $37,000 this year, based on 2000 tax rates and exemptions; for Dallas County, about $11,000.

And that's just one house. Estates owned by developer Trammell Crow, oilman Edwin Cox, golf-club mogul Robert Dedman Sr. and businessman Gene Phillips, who is facing a federal indictment for an investment scheme involving the mob, plus others in the chateaux district are getting multimillion-dollar markdowns this year, too.

"The cap has distorted the process so you find the people who you were attempting to help were helped somewhat, and the people who you didn't intend to help were helped a whole lot," Mitchell says. "Someone who is wealthy gets a great benefit, especially when there's been this great appreciation."

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