Let’s Talk TRUTH About Addison Taxes and Tax Rates

Let’s Talk TRUTH About
Addison Taxes and Tax Rates
By Susan M. Halpern
Former Addison Councilmember (1992-1999)

The 2021 election season once again features negative candidates misrepresenting the issue of Addison’s property taxes. This misinformation includes the claim that Addison has the second highest tax rate in Dallas County, which is patently false. So, let’s talk TRUTH about Addison’s tax rate and property taxes, and how they compare to other municipalities in Dallas County.

Start here. The TRUTH is that Addison’s tax rate is actually 19th amongst the 31 municipalities in Dallas County. That is, 18 municipalities – 58% – have a higher tax rate than Addison.

But the tax rate is only part of the equation. Property taxes are a function of two figures: taxable property value and the tax rate. You cannot talk about one without the other. And, taxable value is often less than appraised value, because it can be reduced by exemptions. The most common example is the homestead exemption that is available to homeowners who reside in their homes (as opposed to homes used as rental properties). The homestead exemption reduces the value to which the tax rate is applied. Let’s do some math to illustrate the point.

Suppose we have a tax rate of 50 cents per hundred dollars of value and a home worth $300,000. With no other considerations, total taxes are $1,500.00 (($300,000 x .5) ÷ 100). But, if we now apply Addison’s 20% homestead exemption to the value of our hypothetical home, our taxes go down. This is because the homestead exemption reduces the TAXABLE value of our hypothetical home by $60,000. To no one’s surprise, the tax bill is lower: (($240,000 x .5) ÷ 100), or $1,200.00.

Next, let’s compare our $1,200.00 tax bill to a hypothetical neighboring community with a lower tax rate (.45) but no homestead exemption. Despite the lower rate, taxes are actually higher (($300,000 x .45) ÷ 100) = $1,350.00. This is because the lower rate has been applied to a higher TAXABLE value for the home.

You can easily see why talking only about tax rates is disingenuous and outright deceptive. We must also consider TAXABLE value, because both components impact the taxes property owners actually pay. In turn, TAXABLE value depends on what exemptions a municipality allows. And that, in turn varies more than you might think.

Let’s focus on the homestead exemption for purposes of our discussion. In Dallas County, only 8 of 31 municipalities (including Addison) allow a 20% homestead exemption. 10 municipalities allow 10% or less, and the other 13 have no homestead exemption at all. Given these differences, comparing tax rates is an apples-to-oranges comparison. It doesn’t work.

To confirm this point, let’s compare Coppell and Addison, using our hypothetical $300,000 home. Coppell (.58) has a lower tax rate than Addison (.608676), but Coppell only allows a 5% exemption for homesteads. This means that Addison’s tax rate is applied to a TAXABLE value of $240,000, whereas Coppell’s (lower) tax rate is applied to a TAXABLE value of $285,000. Here are the tax bills:

  • Addison taxes: (($240,000 x .608676) ÷ 100) = $1,460.82
  • Coppell taxes: (($285,000 x .580000) ÷ 100) = $1,653.00

Coppell’s taxes are higher, even though its tax rate is facially lower. This is why you have to consider both parts of the equation. So, no, Addison does not have the “second highest tax rate in Dallas County,” but if you’re intent on comparing Addison to other municipalities, you need to also consider the issue of TAXABLE value. Focusing solely on rate is deceptive and downright misleading.

The TRUTH is that when we normalize for Addison’s homestead exemption, and thereby compare apples to apples, Addison’s rank improves from 19th (tax rate) to 22nd (actual tax bill) out of the 31 Dallas County municipalities – placing it among the 10 lowest in the amount of taxes paid. This is because Addison’s rate is being applied to a lower TAXABLE value than many other communities.

Here’s the other thing. Addison residents enjoy the benefits of a significant commercial tax base. More than 85% of Addison’s property tax revenue comes from commercial property owners. The converse of that is that Addison residents pay less than 15% of Addison’s property tax revenues. It’s a great deal for Addison residents.

Budgets are about setting priorities and funding them. Nothing is free. Addison residents enjoy a high level of services because Addison’s budget provides for it. So, when you see these negative candidates, ask them how they plan to maintain high levels of service while lowering tax rates and granting tax abatements to commercial properties. It’s just math, and their math is fiction. Cutting tax revenue means cutting something, and they should be able to articulate what those cuts will affect.

And while you’re at it, ask these candidates what they did to express their supposed “concerns” to Addison’s council during the budget process. I think you’ll find that they attended no meetings, made no phone calls and wrote no emails about any of it. These “johnny-come-lately” claims are nothing more than pandering to Addison voters by brazenly misleading them.

Addison voters have nothing to gain from fearmongering candidates who haven’t done the work to learn the TRUTH about taxation. We need a council that understands Addison’s budget and is willing to fund the level of service we as residents expect. We’ve had that for the past four years, and it’s time to stay the course.

The Addison Way means responsible budgeting. We have it now and we need to keep it that way.