Stung by high property taxes? TX leaders promised relief. What that might mean for you
On the campaign trail, Texas Gov. Greg Abbott made a $13.5 billion promise.
He pledged to use half of the state’s anticipated $27 billion surplus for property tax relief.
“We can reduce the school property taxes while fully funding schools by using the budget surplus of $27 billion to pay for it,” Abbott wrote in a candidate questionnaire to the Star-Telegram ahead of the November election.
How will the tax cut be executed? The specifics will fall to the Texas Legislature, which meets starting Jan. 10 for a session during which property tax relief is expected to be a high priority. Dozens of bills relating to property taxes have already been filed. Most will not become law.
But it’s too soon to say which route the Legislature will go and how much people will save. Texas does not have an income tax, but its property taxes are among the highest in the nation.
Still, experts and members of the House and Senate have ideas, including reducing school property tax rates by funding schools or changes to the homestead exemption.
Another factor at play: The amount of surplus dollars lawmakers have to work with could change from the $27 billion Texas Comptroller Glenn Hegar forecast in July. He gives his next update in January when the number could be higher.
Ways lawmakers could cut property taxes
Dale Craymer, president of the Texas Taxpayers and Research Association, laid out few routes lawmakers could take to reduce property taxes.
They could appropriate additional money to schools and require those dollars be used to lower property tax rates, he said. School district property taxes, which help fund the maintenance and operation of schools, are typically the highest for taxpayers. Craymer also suggested that lawmakers could raise the state’s homestead exemption, which is set at $40,000 for school districts. That option would not provide benefits to rental properties or businesses, he said. A third option being discussed is lowering the appraisal increase cap, particularly on residential properties, Craymer said. Appraisal increases are capped at 10% per year on homesteads.
“So really, there are three ways,” Craymer said. “Two of them are focused on homeowners — appraisal caps and homestead exemptions — and then the third one, cutting tax rates, benefits everybody.”
Abbott’s office said he was unavailable for an interview ahead of Thanksgiving.
Without knowing the method of delivery, Craymer hadn’t estimated potential savings.
“The amount of relief that people get depends on how they decide to ultimately target it,” he said.
In 2019, a school finance bill allocated about $5 billion for tax cuts, according to the Texas Tribune. Texans saw an 8 cent reduction on school districts’ maintenance and operation tax rates in the 2019-2020 school year, according to the Texas Taxpayers and Research Association. That translates to a savings of $208 for the owner of a $300,000 home with a homestead exemption.
But the relief didn’t lower tax bills — rapidly rising property values mean that tax bills have continued to rise.
Experts don’t expect property tax relief to be offered in the form of a rebate check.
“That will probably be discussed, but we don’t have the mechanism to do that,” said State Sen. Hancock, a North Richland Hills Republican. “The comptroller’s office isn’t set up to write checks and send them out.”
Texas lawmakers prepare for property taxes cuts
Hancock is expecting to see a number of bills filed and believes more than one mechanism for property tax cuts may used by the time lawmakers head home at the end of the session.
There are questions to debate like whether relief should be offered all at once or spread out over a period of time, Hancock said.
“I want to hear everybody else’s thoughts and see what concepts are out there in order to do this and do it the most equitable and the best way possible so that it has the strongest positive impact on our constituents,” he said.
A number of bills related to property taxes have already been filed. One by Andrew Murr, a Junction Republican, would eliminate school districts’ maintenance and operation tax. Another by Rep. Richard Peña Raymond, a Laredo Democrat, proposes a temporary $360,000 homestead exemption. In an interview, Raymond said he expects the surplus to be north of $40 billion when “rainy day fund” dollars are folded in, and he proposed using $20 billion to fund the increased exemption.
Both Hancock and Rep. Chris Turner, a Grand Prairie Democrat, believe the push for reduced property taxes will be bipartisan.
“It would be hard to vote against returning tax money to constituents,” Hancock said. “Now... the debate until we get to that final product could be partisan. It could be House, Senate different directions.”
Turner is partial to increasing the state’s homestead exemption.
“And the way we do that is by increasing the state’s share of public education funding, thereby relieving pressure on homeowner property taxes,” he said.
In regard to Abbott’s proposal, less important is the percent of the surplus used to reduce property taxes, Turner said.
“What’s more important, and really the only thing that should be important, is what is the specific benefit to the average homeowner in Texas,” he said.
What do local officials want to see done?
Fort Worth school board president Tobi Jackson cautioned that while the state may have a “large amount of unappropriated revenue right now, buying down tax rates is an ongoing cost.”
“If the Legislature doesn’t have a revenue source to replace these lost property taxes they will be unable to make future investments in our schools,” she said.
Jackson pointed to inflation as the main driver of extra dollars for the state to spend. She suggested that the state use the funds to invest in those affected by inflation, like schools, rather than using the money for property taxes.
“Increasing the basic allotment translates into direct pay increases teachers,” Jackson said in an email.
Tarrant County Judge-elect Tim O’Hare supports Abbott’s proposal to use half of the surplus to cut property taxes.
“Our property taxes in Texas are simply too high and relief must be provided to taxpayers,” he said in an email, responding to written questions. “This would be a good start, but it is up to local elected officials to do their part by cutting the rates.”
Asked what steps he’d like the state to take to reduce property taxes, O’Hare said “the state can fund some of the currently unfunded mandates and also further limit the ability of local governments to raise property tax rates.” He supports appraisals being capped at 2.5% annual growth.
“We need real, lasting property tax relief in Texas,” O’Hare said.
Will expected cuts last long term?
Asked during a September debate about long term property tax relief, Abbott said property taxes can be driven down on a long-term basis if the funds are used to “lower the school property tax component.”
“What I propose to do with this $13.5 billion, if not more, is to drive down those property tax rates even further,” Abbott said. “My goal is to eliminate the school property tax that’s imposed in the state of Texas, so that people can genuinely own their own home without being taxed out of it,” Abbott said later in the debate. He also called for the reduction of appraisals and “completely” changing the appraisal system.
Chandler Crouch, a Fort Worth real estate agent who helps people with their property tax appraisal protests, predicted there will be significant bills discussed in the area of property taxes, but was skeptical about the chance of major reforms.
“There are some significant bills being talked about, but the ones that have a likelihood to get passed are not going to be bills that people jump for joy about,” he said. “They’re necessary bills that either smooth out rough patches in our property tax code, and then there are other bills that incrementally move the needle to be a more fair system.”
He gave Abbott’s surplus proposal a greater than 50% chance of happening, but didn’t think the funds would serve as a long term fix for the property tax system.
“I’m cautiously excited about the prospects of that happening,” Crouch said. “The reason I say it like that is because, yes of course that money should be given back to taxpayers and applied to property taxes. There shouldn’t be a debate about that. The only problem is that, that’s going to be used as a pacifier so that we don’t have any other reforms.”
The proposal will work and people will be happy, but he called it a Band-Aid.
“Whatever minor relief that gives, once you spread that out over all of the taxpayers, it’s not going to be a big, big difference,” Crouch said.
James Quintero, policy director the Texas Public Policy Foundation, a conservative think tank, said he favors lowering school district property tax rates because it has an opportunity to become permanent. A bill by Sen. Kelly Hancock creates a spending limit that Quintero said should mean there are opportunities for significant surpluses in future sessions.
“Now with that ceiling in place, you know coming into each and every legislative session that there’s a pretty strong potential for meaningful surplus that can be used for tax relief purpose,” he said.
But others aren’t as optimistic about the chances of future surpluses. Whatever lawmakers decide on, Brent South, chair of the legislative committee for the Texas Association of Appraisal Districts, hopes it’s sustainable and can go into effect year-over-year. He cautioned that the extra dollars may not always be an option.
“What concerns me, I think, is if they use $13 billion because they have the surplus this year to buy down property taxes or give some type of a refund or discount, can they do that moving forward?” South said. “Because you’re not going to have a $27 billion surplus ... every two years. What happens in those years where you don’t have a surplus or have a deficit?”
So what’s the long term option?
“I think that’s the $13 billion question,” South said.
This story was originally published November 29, 2022 at 6:00 AM.
