Opinion ID: 2104074
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Heading: The Truth-in-Taxation Scheme

Text: A taxing unit's annual truth-in-taxation notice allows its taxpayers to compare the unit's proposal for one year's taxes with the prior year's taxes. See Tex. Const. art. VIII, § 21. Before adopting a tax rate for the fiscal year, a taxing unit must report to its taxpayers its effective tax rate and its rollback tax rate. See Tex.Tax Code §§ 26.04(e)(1), (g). In the same notice publishing these two rates, the taxing unit must show the fund balances at issue in this case. See id. § 26.04(e)(2). The formula for the effective tax rate considers only properties that remain on the tax roll from the previous fiscal year. This rate shows how the taxing unit would collect the same amount of overall revenue from these properties in the current fiscal year as it collected in the previous year. See id. § 26.04(c)(1). The calculation of the rollback tax rate treats taxes for debt and non-debt purposes separately. By imposing the rollback tax rate, the taxing unit would meet its debt service obligations for the fiscal year and also raise its levy for non-debt expenses by 8% over the previous year's non-debt total. See id. § 26.04(c)(2). Changes in taxable property values and in the taxing unit's debts from one year to the next dictate the mathematical relationship among the effective tax rate, the rollback tax rate, and the taxing unit's actual rate for the previous year. The Tax Code authorizes the taxing unit to adopt a rate for each fiscal year that is high enough to pay its debts and to meet its maintenance and operation needs. See id. § 26.05(a). Depending on the unit's debts, service plans, and accumulated surplus or deficit, this rate may be lower than, higher than, or equal to the previous year's rate. See Texas Co. v. Panhandle Indep. Sch. Dist., 72 S.W.2d 957, 959 (Tex.Civ.App.-Amarillo 1934, writ ref'd) (holding overall tax levy, within statutory limits, to be a discretionary matter for the taxing authority). If the unit wishes to adopt a rate higher than either the effective tax rate or the rollback tax rate, however, the taxing unit must hold a public hearing before adopting it. See Tex.Tax Code § 26.05(d). Moreover, in a special election after the taxing unit has adopted the annual tax rate, voters can cut taxes back to the rollback tax rate, perhaps forcing the taxing unit to alter its plans. See id. § 26.07; Vinson v. Burgess, 773 S.W.2d 263 (Tex.1989). The truth-in-taxation statute does not, by itself, limit a governmental unit's power to levy taxes. But see, e.g., Tex. Const. art. IX, § 4 (limiting hospital district tax rates to $0.75 tax per $100 assessed value). Instead, the truth-in-taxation scheme focuses on giving taxpayers information. If the taxing unit proposes to increase taxes above either the effective tax rate or the rollback tax rate, the taxpayers can apply these rates and the proposed rate to their taxable property values to compare the burdens the rates would impose. They can also examine the taxing unit's reported fund balances to evaluate the unit's need for additional money.