I’m glad Harris County is out of this business.
Texas has the seventh-highest property taxes in the nation, according to the Tax Foundation, an unwelcome distinction state officials have for years tried to shed as they have repeatedly promised to ease the burden on struggling homeowners like Rojo. Yet when those same Texans fall behind on these taxes, The Texas Tribune found that the state employs one of the most punitive fee structures in America, which allows private law firms hired to collect the debts to charge an additional 20% on top of existing base taxes, penalties and interest.
No other state outsources delinquent tax collection to the degree it happens in Texas, where thousands of entities collecting local school, county and municipal property taxes do so under a system the Legislature created in 1979.
The cottage industry that grew in response is unique to the state — and lucrative. Law firms collecting delinquent taxes in the 100 most populous Texas counties earned at least $184 million in revenue in 2023 — which amounts to billions of dollars over the course of the more than four decades Texas has allowed this practice.
The Tribune calculated the collection fees for a year by obtaining contracts and payment reports through hundreds of public records requests to county tax offices, appraisal districts, cities and school districts. That sum, which is an undercount because some of the smaller counties in that group did not provide their figures, is larger than the annual budget of Beaumont.
Almost all the fees went to just three Texas firms: at least $128 million to Linebarger Goggan Blair and Sampson, followed by at least $28 million to Perdue Brandon Fielder Collins and Mott and at least $18 million to McCreary Veselka Bragg and Allen.
State Sen. Judith Zaffirini, D-Laredo, said the Tribune’s findings raise concerns about the financial burden placed on Texans, “many of whom are already struggling to pay their property taxes.” She said lawmakers should consider reforms, including lowering the fees law firms can charge.
“The fees imposed by third-party collection firms can compound the financial challenges faced by delinquent taxpayers,” Zaffirini, a member of the Senate Finance Committee, said in an email. “This system should balance the need for efficient tax collection with fairness and compassion, ensuring that Texans are not penalized excessively for falling behind on their payments.”
The appetite for reform among Republicans, who control every lever of state government, is unclear. Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dustin Burrows — three of the loudest advocates for property tax relief this legislative session — did not respond to interview requests.
A House committee chaired by Burrows in 2020 examined the state’s system of allowing outsourced delinquent tax collection and endorsed it as a success.
Outsourcing is near-universal among taxing entities. But in 2023, Harris County — the most populous in Texas — began transitioning to in-house delinquent collection. Its leaders made that decision after discovering that more than two-thirds of overdue homeowners lived in poorer, majority Black and Hispanic precincts.
Travis County has never outsourced, concluding that doing so would subject taxpayers to needless extra fees with no added benefit for the government.
“It behooves me to never lose sight of the fact that there are people who are living on the edge,” said Travis County Tax Assessor-Collector Celia Israel, adding that her office maintains a collection rate near 100%.
[…]
Michael Berlanga, a Certified Public Accountant, real estate broker and property tax consultant in San Antonio, said the law firms overstate the complexity of delinquent tax collection. While the firms had a massive technological advantage 40 years ago, when few tax offices had computers, financial software and data storage are now cheap and widely available.
“Linebarger, over decades, has convinced the taxing authorities ‘we’re more efficient than y’all are,’” Berlanga said. “When’s the last time… the performance of Linebarger was audited against the supposition that ‘We would have collected that money anyway?’”
I’m glad Harris County has ditched Linebarger in favor of in-house collections. More often than not, the delinquent filers have run into some financial trouble, which the fees will just exacerbate without doing anything to benefit the county. This is a more humane approach, and the county can still file lawsuits as needed with the delinquents who don’t work with them. New Tax Assessor Annette Ramirez, who is featured later in this story, was the leading champion for this approach in last year’s primary, and she had the experience doing it that way because of her time with Aldine ISD. Go back and listen to my interview with her from the primary if you haven’t already to learn more. I wish more counties would go this way, and I wish the Lege would force a less punitive approach for these collections. I don’t see the latter happening anytime soon, but you can talk to your county’s Tax Assessor about the former.