Texas House, Senate promise property tax cuts. Which plan will save you more money?
Leaders in the Texas House and Senate say their plans for property tax relief could save homeowners hundreds on their tax bills.
Property tax reform has been a top priorities of Republican lawmakers — including the big three: Gov. Greg Abbott, Lt. Gov. Dan Patrick and Speaker Dade Phelan — but the House and Senate have different ideas about how to deliver the cuts. Their proposals range from tax rate reductions, to appraisal caps and larger homestead exemptions.
“We’ll all sit down and work together to find the most effective way to make sure we are reducing property taxes in the way that the property owners will feel it the most,” Abbott said in a Feb. 23 interview with the Star-Telegram.
Lt. Gov. Dan Patrick was joined by several Republican lawmakers for a Tuesday news conference to outline the chamber’s proposal for $16.5 billion in property tax relief. The three property tax bills were heard in the Senate finance committee Wednesday. Two — Senate Bill 3 and Senate Bill 4 — passed out. A vote was not taken on Senate Bill 5.
Senate lawmakers propose a $70,000 homestead exemption on school property taxes, a $30,000 increase that Patrick has made a priority. Those over 65 or disabled would get $100,000 total in exemptions, according to the presentation.
The Senate’s plan for property tax cuts would save the owner of a home appraised at $331,000 an estimated $756 in the first year of the $70,000 homestead exemption. Those who over 65 or disabled would save an estimated $1,033 in the exemption increase’s first year.
Senators propose using $5.38 billion to lower school tax rates by 7.03 cents per $100 of taxable value, a savings of about $200 for the owner of a $331,000 home in the Fort Worth school district. The rates are set by school districts, but lawmakers can lower them by sending more money to school districts.
A bill by Sen. Tan Parker, a Flower Mound Republican who was among the lawmakers at the news conference, proposes helping businesses with taxes.
“It’s important to know that we’re touching every taxpayer, every homeowner, every business owner, with needed tax relief,” said Sen. Paul Bettencourt, a Houston Republican.
The bill raising the state’s homestead exemption has the support of every senator, across party lines. Increasing the exemption would have to be approved by voters through a constitutional amendment, the bill states.
The approach diverges from the House, where Speaker Dade Phelan supports limiting yearly appraisal increases to 5% for all property types. As the law stands now, appraisal increases are capped at 10% per year on homesteads.
The House’s proposal for property tax relief was heard in committee on Monday where it was left pending. Rep. Morgan Meyer, the bill’s author and Dallas Republican, said his bill combined with the House’s budget would provide more than $17 billion in property tax relief.
Meyer’s proposal reduces school districts’ maximum tax rates by 15 cents per $100 of taxable value, with the state adding more than $11 billion into school funding, Meyer said. He said the bill in tandem with the proposed state budget would save the owner of a $350,000 home $542 on their property tax bill in 2024 and $733 in 2025.
“Members, we have a once in a lifetime opportunity to provide real, meaningful property tax relief and put safeguards in place for future generations of Texans,” Meyer said.
Phelan said in a March 2 statement that the proposal would make “much-needed improvements to the state’s appraisal system.”
“This bill is a great building block for our state to continue to thrive, and I look forward to the Texas House passing House Bill 2 this legislative session,” Phelan said.
He declined to comment through a spokesperson Tuesday.
Rep. Trey Martinez Fischer of San Antonio, who chairs the House Democratic Caucus, said the proposal would “disproportionately benefit corporations” as Republicans fail to adequately fund schools.
“House Republicans ultimately have to decide do they care about Texas kids, or do they only care about tax cuts for out-of-state corporations?” he said in a March 2 statement. “The clock is ticking.”
Patrick said he used to favor appraisal caps, but learned as a senator that they don’t work. He argued that increasing the appraisal cap would reverse 2019 property tax cuts. Senate Bill 2 capped the yearly increase in property tax revenue collected by cities and counties to 3.5%, unless otherwise approved by voters. House Bill 3 capped increases in school tax collections to 2.5% a year.
“If you lower the appraisal cap, the tax rate will go up and in a few years we will destroy everything we’ve done,” Patrick said.
Texas lawmakers are working with a $32.7 billion surplus and $188.2 billion for general-purpose spending, though they are limited in how much of that they are allowed to use.
Abbott didn’t say whether he supported increasing the state’s homestead exemption in a February interview with the Star-Telegram.
He did advocate for the state funding schools to lower tax rates.
“The goal is this, and that is for the state to continue to buy down the school property tax component of your property tax bill until we eliminate it altogether,” Abbott said. “Doing that would substantially eliminate your property tax bill in the state of Texas. That alone will make Texas extraordinarily attractive for people to move to, for businesses to come here and grow.”
Abbott acknowledged that eliminating schools’ maintenance and operation tax completely would take time. He’d like to see part of the state’s surplus be used to help each session.
“Candidly, it all depends on, what will our budget surpluses look like in the future?” Abbott said.
This story was originally published March 14, 2023 at 5:50 PM.
