Property Tax Abatement: A Case Study of San Marcos Texas (Term Paper Sample)

Property Tax Abatement: A Case Study of San Marcos Texas
Name
Institution
Property Tax Abatement: A Case Study of San Marcos Texas
Abstract
Tax abatement in general terms refers to the agreement between a taxpayer and a taxing unit to exempt the entire or part of the increase in the amounts payable as the tax of tangible and real property from taxation for a period not exceeding ten years. The idea of tax abatement acts as development tools in most districts, counties, and cities where they are implemented. Its application attracts new industries as well as encourage the retention of existing businesses through property tax reductions and exemptions. It is important to note that as much as these sounds right, it may not apply to school districts.
Introduction
Most cities, including San Marcos Texas, have incorporated property tax abatement programs for one primary reason- to significantly reduce or completely eliminate tax values on homes for a period not less than ten years. The main reason as to why these programs are enacted by any given state is to attract buyers and investors to locations with slightly lower demand or to districts that are amid revitalization efforts so that they can pick up and develop. These privileges may, however, be restricted to certain designated regions or still, they may be offered citywide depending on the state’s laws about tax abatement. For instance, some cities restrict tax reduction programs to the low and middle-class property owners so as to give them the chance to develop by themselves but generally, there are no restrictions based on income for most city-states.
Individuals have the option of attaining properties that already have abatements or purchasing eligible properties and making the required adjustments and improvements to acquire the abatement by themselves (Augustine, 2009). The first option offers a simple option for someone else has already endured the challenges brought about by the construction as well as the bureaucracies associated with the government. This means that one only needs to move in and enjoy the abatement without having to encounter the cons mentioned above.
Procedure of Establishment
There exists a 6-step process through which a taxing unit can establish property tax abatement agreements. In the case of San Marcos Texas, these steps are as outlined in Chapter 312 of the Texas Tax Code.
Guidelines and Criteria
Each taxing unit that wants to incorporate tax abatement proposals must come up with guidelines and criteria for establishing a reinvestment region which must hold a public hearing to alert public members.
Resolution
A taxing unit considering the adoption of property tax abatement must gather majority votes for settlement in a meeting held by the group’s governing body. A vote favoring the resolution indicates the taxing unit’s good intentions to participate in tax abatement.
Public Hearing
A seven-day notice is given to the presiding officers of every existing taxing unit that has jurisdiction in the area over the real properties informing them about the planned public meeting. This notice should also be published in a newspaper to aid the circulation of the information seven days before the meeting. The agenda of the meeting should be to convince the public that the improvements sought are feasible and would benefit the zone in the long-run. The area should meet one applicable criterion to be considered a reinvestment region.
Designate a Reinvestment Zone
After the public hearing has been passed out and the outlined guidelines and criteria have been met, the taxing unit is now allowed by official action to designate the reinvestment region. This is described in the chapter 2303, which designates an area as an enterprise without further hearing and any procedural requirement by the taxing unit.
Tax Abatement Agreement
Under this chapter and after the designation of a reinvestment zone, the governing body of the taxing unit can enter into a tax abatement agreement to officiate the deal (COFFIN, 1982). This, however, applicable only after the proper guidelines and criteria adopted as per stated above have been met.
Written notice
A written notice indicating the taxing unit’s intent into the agreement above must be forwarded to the presiding officers of each of the other taxing units from which the property is located. It is a requirement that the notice is given seven days before the date the abatement is granted. The other taxing units may choose to enter or disregard the decrease, either way; there are not penalties that are imposed.
Tax Abatement Policies in San Marcos
This case study examines the property tax abatement policies applied in San Marcos Texas which has a close population of up to 35,960 permanent residents and over 21, 325 college and university students. The whole community, (which extends a range different communities) reports success with the property tax abatement policies. Property tax leads as the significant factor due to its impact on ownership and economic development gave its current, existing tax base. The above-mentioned community represents a rural based setting with midsized individuals who have a significant of exempt property. The core objective of this study is, therefore, to establish the interrelation between property tax abatement and assessment by analyzing and separating essential and realistic factors.
How it Works
Tax abatement refers to a mode of allocating resources through exemptions to tax rather than by direct expenditures. The tax abatement policies are created through a local mechanism as well as a government enabling registration process that provides for the foregoing of incomes due to special tax deductions, exemptions, deferrals, credits, and tax rates. The whole process eventually leads to the lesser or zero tax payables to the businesses (Mandelker, 1980). The source for the finances used to enact this policy is largely the change that is made on the tax base that may not immediately indicate variations in the tax rates.
Tax concessions are applied everywhere and in all states and federal the tax code that includes, but is not limited to, property, incomes and sales tax abatements. Property abatement as per today remains to be leading and most frequently utilized economic development tool. All states that have incorporated property abatement policies have attained over 100% in concessions. Periods for exemption vary from five years to a maximum of 30 years, with ten years being the most frequent. Research indicates that eleven of the state’s target property tax abatement to specific industries such as manufacturing, transportation, timber, mining textiles and railroads.
Assuming all factors such as transportation, business operating costs and workforce are equal, tax abatement may then choose to act as a factor in analyzing a business geographical location which subsequently leads to property tax, jobs and other associated positive results.
The measurement of tax abatement’s hard because the revenue gains or losses wholly depend on taxpayer behavior and abatement provisions. The interactivity between the net job changes and the other taxes changes may result in increased or decreased incomes. The standard methods used for the calculation abatement fee depend on actual face values and do not on actual reality is that it does not measure the same amount of interactivity on other revenues and costs. Measures of ensuring cost-effectiveness in the incorporation of property tax abatement depend on highly on the methodologies and accuracy used in the process of assessing property value. If wrong estimations are employed during assessments, the likelihood of producing inaccurate estimates with regard to revenue gain or loss is increased.
Studies of property tax abatement in San Marcos Texas have revealed a declining percentage of regions with a coefficient of dispersion ranging between 5 to 20 dependent on the type of property owned (Mandelker, 1980). The ratio is used to measure the dispersion of uniformity ratios obtained after the assessment is carried out in the region. This statics can analyze and give advice on the recommended effective property tax rate that should be employed by the taxing unit i...