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Jul 11, 202329 min read

UPDATE: Property Tax, 88th TX Legislative Session

Updated: Jul 26, 2023


Summary: Property tax reduction is almost a done deal and it's the headline of this week, the second legislative session, and the 88th Texas Congress. Elected officials had $33 billion in budget surplus and are spending $12.3B of the surplus on providing tax relief to Texas property owners, who pay some of the highest property taxes in the nation.

Latest Update: Wednesday, 26 July 2023, additional articles; Friday, July 14, 2023, additional articles; Tuesday, 11 July, 2023 legislation passed; Friday, 07 July, 2023 article; Friday, 30 June, 2023 Second Session; Wednesday, 28 June, 2023; originally posted 09 March 2023

Select #Tags for additional articles: #PropertyTax, #StateLegislation



 

Property Tax Legislation during the 88th TX Legislative Session


Update: 14 July 2023, Gov. Greg Abbott has signed an $18 billion tax cut for Texas property owners, sending the proposals to voters for their approval later this year.


Property tax reduction is the headline of this week, the second legislative session, and the 88th Texas Congress. Elected officials had nearly $33 billion in budget surplus and are spending $12.3B of the surplus on providing tax relief to Texas property owners, who pay some of the highest property taxes in the nation.


"Republicans came to Austin this year with a nearly $33 billion surplus and big promises to use a big chunk of it to provide tax relief to Texas property owners, who pay some of the highest property taxes in the nation... The deal marks the end of a stalemate among the state’s top Republicans that lasted nearly seven months as they butted heads over how to dole out $12.3 billion in new tax breaks budgeted by lawmakers earlier this year." [1]


The total package is valued at $18 billion. That compression total includes the $5.3 billion already outlined in the 2024-2025 budget to continue the 2019 level of compression. [2]


Lt. Gov. Dan Patrick and Speaker Dade Phelan announced in a joint statement on Monday that they’d reached “a breakthrough deal on property tax legislation” and their now agreed upon plan will be “the biggest property tax cut in Texas history.” [3] Although critics fault the agreement for failing to address a plan to ultimately eliminate property taxes altogether. [4]


"The legislative deal would save the average homeowner about 41.5% on property taxes each year, or an average of about $1,300 per year. It would lower taxes for the state’s 5.7 million homeowners and add a temporary cap on appraisal increases for some non-homesteaded properties." [1]


Although the legislation is expected to pass both houses by the end of the week, voters must pass the plan in a constitutional election in November 2023. If voters approve the deal, the cuts would start with the 2023 tax year.


If passed, the legislation provides the following:


• Allocates about $12.6 billion (of the total $18B) to compress (reduce) the school district Maintenance & Operations rate by 10.7 cents per $100 valuation for homeowners and business properties.

Note: There are two parts of school district property tax rates, the Maintenance and Operation M&O tax rate that covers the day to day expenses of state-run, public education and the Interest and Sinking I&S rate that covers the cost and repayment of school district debt.


• Increases to the standard homestead exemption by $60,000 -- from $40K to $100K at an estimated cost of $5.3 billion. ("Critics argue no matter how much a homestead exemption increases, it won’t provide lasting relief because it gets wiped out by rising appraisal rates and inflation." [3])


• Includes a pilot program with a 20 percent appraisal cap on commercial and non-homestead rental properties valued at or under $5 million — a number that could be adjusted by the comptroller with inflation each year. The program would be a brand new addition to the tax code. The program would expire on Dec. 31, 2026, unless lawmakers decide to renew it or make it permanent later.


• Includes a franchise tax relief bill, a $1.47 million increase in the franchise tax exception.


• Includes reforms to appraisal review boards, including creating elected positions.


• Includes some extra relief for seniors and property owners with disabilities, averaging an extra $170 per year.


Sources and articles.

[1] Texas House and Senate reach a deal on how to cut property taxes, The Texas Tribune, 10 July 2023, Excerpts

The $18 billion compromise between the Texas House and Senate — which includes more than $5 billion approved for property tax relief in 2019 — would lower taxes for the state’s 5.7 million homeowners and add a temporary cap on appraisal increases for some non-homesteaded properties.


It would also cut franchise taxes for small businesses and send billions of dollars to school districts so they can cut their taxes across the board. However, none of that money will go toward additional public education funding, according to legislation filed by state budget leaders on Monday.


The proposal must clear both chambers before it heads to Gov. Greg Abbott’s desk. Abbott said he looks forward to approving it. Then voters must pass the plan in a constitutional election in November. If voters approve the deal, the cuts would start with the 2023 tax year.


The legislation, expected to be passed this week, allocates about $12.6 billion to reduce the school property tax rate by 10.7 cents per $100 valuation for homeowners and business properties. It also includes an increase to the state’s homestead exemption from $40,000 to $100,000 at an estimated cost of $5.3 billion, and some extra relief for seniors and property owners with disabilities, averaging an extra $170 per year.


The Senate bill’s author, state Sen. Paul Bettencourt, R-Houston, said the deal would save the average homeowner about 41.5% on property taxes each year, or an average of about $1,300 per year.


“Reducing property taxes, providing relief to small-business owners, and reforming our appraisal system will ensure economic growth and prosperity, and this agreement is a significant victory for all Texans,” Phelan said in a statement.


The new property tax relief bill, a franchise tax relief bill and the constitutional amendment required to enact the cuts were filed Monday.


The deal marks the end of a stalemate among the state’s top Republicans that lasted nearly seven months as they butted heads over how to dole out $12.3 billion in new tax breaks budgeted by lawmakers earlier this year.


Republicans came to Austin this year with a nearly $33 billion surplus and big promises to use a big chunk of it to provide tax relief to Texas property owners, who pay some of the highest property taxes in the nation. But for most of the year, the heads of the House and Senate — Phelan and Patrick — couldn’t come to terms on how to do it.


The main dividing line came over whether homeowners or business owners would get a bigger tax break. Phelan and House lawmakers wanted to send the entire $12.3 billion in new money to school districts to lower their tax rates, a kind of tax cut referred to as “tax rate compression.” Doing that would result in across-the-board cuts for all property owners, but it would most benefit business owners.


Abbott and conservative tax-cut warriors saw the proposal as a way to put the state on a quicker path to eventually eliminating the school maintenance and operations tax, the bulk of the school property tax that pays for day-to-day school expenses like teacher salaries. But as the weeks dragged on, Abbott’s support for a compression-only tax-cut proposal seemed to wane as he encouraged House and Senate leaders to come to a deal and send him a bill.


Patrick and Senate tax-cut writers had agreed with the House on allocating $12.3 billion for property tax cuts but wanted to use only 70% of that amount for tax rate compression so they could use the rest to pay for a boost to the state’s school district homestead exemption, the amount of a home’s value that can’t be taxed to pay for public schools. Patrick and Bettencourt, Patrick’s lieutenant on the tax-cut issue, pushed for raising the exemption from $40,000 to $100,000.


And it’s the closest thing to a win that the House appears to have in the compromise, which includes the entire homestead exemption the Senate was asking for — but only 60% of the compression the House and Abbott were pushing for during the year’s first special legislative session.


Absent from either chamber’s previous proposals was any targeted tax relief for the state’s 3.7 million renter households. House Democrats last week unveiled their own tax-cut package that would give tenants a cash refund equaling up to 10% of the rent they paid the previous year. But Republicans didn’t include anything like that in the package released on Monday.


Republicans and some tax policy experts argue that renters will benefit from the compression portion of the tax-cut package because landlords won’t pass as much in property taxes onto their tenants — thus resulting in smaller rent increases. But others say demand for the state’s red-hot rental market and a dearth of supply to meet that demand, not property taxes, have driven rent increases in recent years.





Additional Articles



... a plan to eliminate one of multiple property taxes homeowners pay: the school maintenance and operations (M&O) tax. Eliminating this tax over time was part of Gov. Greg Abbott’s call for the first and second special legislative sessions.


Abbott, when running for reelection for his third term, vowed to return half of the state’s record $33 billion surplus to taxpayers. On Wednesday, he said the package allocated “at least $13.5 billion from our historic budget surplus to provide substantial relief to property taxpayers across Texas.” With additional money from the budget, he said they were delivering “over $18 billion in property tax cuts.”


According to Ginn’s analysis, the package includes $12.7 billion in new relief and $5.3 billion from the earlier-approved state budget. Neither $13.5 billion nor $12.7 billion is half of the surplus, he points out.


After the legislature passed an $18 billion property tax relief package Thursday, House Speaker Dade Phelan said it was “the largest cut in Texas history.” Lt. Gov. Dan Patrick said it was “the largest property tax relief package in Texas history, and likely the world.”


The combined $18 billion in property tax cuts, Ginn also points out, isn’t the largest property tax cut in state history. That occurred under Gov. Rick Perry in the 2008-2009 legislative session when the legislature passed $14.2 billion in property tax relief, he said. In order to surpass that, adjusting for inflation, “for us to have the same purchasing power of those dollars back then it would need to be about $21 billion,” he said. “This isn't the largest tax cut in history. It's substantial, it's historic, probably the second most ever.”


Homeowners to receive 41.5% reduction in property tax bill this November, bill author says,




• Property Tax Relief, email Senator Phil King, 10 July 2023

 

Update Posted Friday, 30 June, 2023 Second Session


Property Tax Political Theatre was the only thing to emerge from the First Special Session of the 88th Texas Legislature. After happily passing the largest spending budget in the state’s history during the regular session, our elected officials can't figure out how to share the leftovers with taxpayers. [Willow Park Civics Editorial]


"Homeowners in Texas currently pay the sixth-highest property taxes in the U.S., with many seeing double digit increases in their bills in one year. " / "... the best option would be what Abbott said was his goal: to eliminate school property taxes, so Texans can actually own their homes." However, the Senate and House have less ambitious ideas and bills.


 

88th Texas Legislature, SECOND Special Session, 29 June


Texas’ top Republicans are fighting over how to split property tax cuts between businesses and homeowners. Democrats want renters to see relief, too. Tenants make up more than one-third of the state’s households. They pay, via their monthly rent, one-quarter of the state’s school property taxes — which are among the highest in the nation. Renters’ cost of living surged during the COVID-19 pandemic as the state’s housing boom drove rents sky-high.


• Senate Unanimously Passes Tax Relief Bill, The Dallas Express, 29 June 2023





• Texas Property Tax Relief Plans Move Forward in Second Special Session, Senate Adds Teacher Payment, The Texan, 28 June 2023





The standoff between Texas’ top Republicans over how to make good on promises to cut Texans’ property taxes is heading into its third legislative session this year — with no sign of a deal.


Lawmakers face a time crunch to reach a deal on property tax cuts. If legislators agree to a bump in the homestead exemption, which lowers the amount of a home’s value that can be taxed to pay for public schools, voters will have to approve that in a constitutional amendment election. The Legislature would have to pass such a deal before a key August deadline in order to get the homestead exemption on the November ballot.


The main dividing line between Texas Republicans on how to dole out $12.3 billion in new property tax cuts has been between a proposal that would benefit homeowners and businesses — backed by Abbott and House Speaker Dade Phelan — and one sought by Lt. Gov. Dan Patrick to give greater relief to homeowners.


The tax-cut method Abbott and Phelan favor would take all $12.3 billion and send it to school districts so they can lower their tax rates — which lawmakers routinely call “tax rate compression.” School districts’ property taxes make up the biggest chunk of a property tax bill. All Texas landowners would see a trim in their tax bills under the Abbott-Phelan proposal, though businesses and wealthier homeowners would see a greater benefit.


The idea of eliminating what’s called the M&O tax has worried public school officials who fear the proposal would lead to spending cuts for public education the next time the economy hits a downturn. Lawmakers also have few long-term options for funding the elimination of M&O taxes. The state doesn’t have an income tax and legislators would likely have to significantly raise the state sales tax in order to offset the lost revenue. Patrick has dismissed the notion of axing the M&O tax as a “joke” and a “fantasy” and cited its high potential costs.


Patrick and Senate tax-cut warriors have pushed a package that includes relief specifically for homeowners. Under their proposal, more than two-thirds of the $12.3 billion would still go toward compression. But Patrick also wants 30% to go toward a boost in the state’s homestead exemption for school district taxes, or the amount of a home’s value that can’t be taxed to pay for public schools. Patrick wants to raise the exemption from $40,000 to $100,000.


Homeowners would pay taxes at a lower rate under both proposals, but the Senate tax-cut plan would provide more immediate relief to homeowners compared with the Abbott-House plan. It’s upfront relief versus the lofty promise under the Abbott-House plan — that perhaps one day homeowners will no longer have to pay school M&O property taxes — said Lynn Krebs, a research economist at the Texas Real Estate Research Center at Texas A&M University.



Texas Gov. Greg Abbott on Tuesday called a second special legislative session, bringing the House back to Austin to work with the Senate to pass property tax relief.


The Senate has been in session since the first special legislative session was called; the House passed a property tax relief bill and went into recess after one day. Despite calls for the House to return to Austin by Lt. Gov. Dan Patrick, the House remained in recess for 29 of the 30-day first special legislative session.


Abbott issued a proclamation Tuesday announcing a second special legislative session to begin today to specifically address eliminating one type of property tax and to provide “lasting property tax rates.”


 

88th Texas Legislature, FIRST Special Session, 01 June to 29 June 2023



After Gov. Greg Abbott indicated Wednesday he could veto a large number of bills if no compromise is reached between the House and Senate on property tax relief, Lt. Gov. Dan Patrick says Abbott is threatening to destroy the work of the legislature.

Abbott made his comments during a bill signing ceremony on Wednesday, with just days left until Sunday, June 18—the last day he can sign bills into law or veto them. In Texas, any legislation not specifically vetoed by the governor becomes law.

There were 4,550 pieces of legislation passed by the Texas House and Senate and sent to the governor as part of the 88th Session of the Legislature. As of Wednesday night, Abbott had signed 873 pieces of legislation into law and vetoed five.

• Gov. Greg Abbott and House Speaker Dade Phelan join forces on property taxes. It might help the push for school vouchers., The Texas Tribune, 14 June 2023

While the Texas Legislature wasted that tax relief opportunity during this year’s regular session as they increased spending by the most in the state’s history, Abbott immediately called a special session after sine die to address it.


Abbott’s approach uses compression. This allocates state surplus dollars to buy down school district maintenance and operations property taxes that are nearly half of the property taxes collected by local governments across the state. And this process would continue each session until those taxes are zero. This is mostly what has been passed by the House, but Lieutenant Governor Dan Patrick (R) disagrees as he is also pushing raising the homestead exemption.


t’s great to see that the discussion is how to provide the most property tax relief in the best way, but the economics and past efforts prove that compression of school district M&O property taxes is the best path being discussed to provide all families with relief and end these taxes quickly.


Based on historical revenue growth and keeping spending in check to less than the rate of population growth and inflation, these school taxes could be eliminated within a decade resulting in the state paying 100% of public education.


Those taxes funding public schools would be replaced mostly by state sales taxes based on the current state-determined school finance formula while relieving families who are homeowners, renters, and employers across the state of burdensome property taxes. These benefits support increased economic growth, more jobs, and lower prices.


Patrick has pushed back against Abbott’s plan with a concern that sales taxes couldn’t adequately fund schools, especially in the event of an economic downturn. He believes that homestead exemptions are a more suitable form of relief even as they would need a constitutional amendment. [more]


• Lt. Gov. Patrick Defends Property Tax Plan, The Dallas Express,07 June 2023

• Abbott: Goal is to eliminate property taxes, The Center Square, 03 June 2023, Excerpts

Gov. Greg Abbott says his goal is to eliminate homeowners’ property taxes in the state of Texas. He says it’s possible to achieve over time because of the significant economic growth of the state.


All three Republican leaders, Abbott, Lt. Governor Dan Patrick and Speaker Dade Phelan, have pledged to reduce property taxes and made it a legislative priority.


They’ve also all agreed to dedicate roughly half of the $33 billion surplus, $17 billion, to provide property tax relief. The money is already appropriated, Abbott said. “Now we just need to decide how we are going to cut those property taxes.”


This is a great problem to have, he notes, when other states like California are running double-digit deficits.


However, the leaders haven’t been able to reach an agreement. With the regular session coming to a close on May 29, Abbott called a special legislative session to first address property tax relief.


On Friday, Abbott spoke at a Texas Public Policy Foundation event recapping the 88th legislative session and explaining his vision to end property taxes.


Earlier in the week, Lt. Gov. Dan Patrick highlighted his plan to reduce property taxes at TPPF, including a combination of reducing school district property taxes, referred to as compression, and increasing the homestead exemption.


• Texas Republicans are fighting over how to split $12.3 billion in property tax breaks between homeowners and businesses, The Texas Tribune, 01 June 2023, Excerpt, Gov. Greg Abbott and House Speaker Dade Phelan back a plan that spreads property tax relief among all landowners, while Lt. Gov. Dan Patrick’s proposal would give homeowners a bigger boost than businesses.


 

88th Texas Legislature, Regular Session 10 January to 29 May 2023

Summary: Homeowners in Texas currently pay the sixth-highest property taxes in the U.S., with many seeing double digit increases in their bills in one year. " / "... the best option would be what Abbott said was his goal: to eliminate school property taxes, so Texans can actually own their homes." However, the Senate and House have less ambitious ideas and bills.


• City-Related Bills Passed 2023 Session > Property Tax > Texas Municipal League


• National: The Most-Hated Tax—and What States Are Doing About It, National Conference of State Legislatures, 18 May 2023 Excerpt. Americans don’t like taxes, and the federal income tax was once the most despised. But that changed 35 years ago. Since then, surveys show that property taxes are loathed above all others.


• Texas lawmakers fail to reach last-minute deal to cut property taxes, The Texas Tribune, 29 May 2023, Excerpt. After negotiations that became tense and public, the House and Senate fell short of delivering on one of the biggest legislative priorities for Republicans in the regular legislative session.


• Property Tax Relief Compromise Passes Texas House, Texas Scorecard, 19 May 2023

• Why tax policy experts fear the Texas House plan to lower property taxes could have dire ripple effects, The Texas Tribune, 15 May 2023 Excerpt. The question of how to cut taxes for Texas property owners sparked one of the biggest fights between state lawmakers this year — but when it’s all said and done, either chamber’s proposal would save the typical homeowner about the cost of a nice dinner date each month. / Still, the two options are hardly alike.

• Texas Property Tax Relief: Lofty Claims Fall Short, Austin Journal, 14 April 2023

• Texas House Rejects Record-setting Property Tax Relief, Texas Scorecard, 13 April 2023



Updated Friday, 17 March, 2023

• Geren files last-minute bill to abolish embattled Tarrant Appraisal District, Fort Worth Report, 13 March 2023, Excerpts. The next time you get your property appraised, it could be someone from the state giving you your bill.


Rep. Charlie Geren, R-Fort Worth, filed a bill Friday to abolish the Tarrant Appraisal District, which faces increased scrutiny over a series of missteps and controversies within the past several years. “I think there’s a problem at the top, and this is one way to fix the problem at the top,” Geren said shortly after arriving in Austin for the start of the legislative week.


Geren’s bill [HB 5218, Legiscan] stipulates that any county with a population of more than 2.1 million, which hosts an airport with specific designations, will have its appraisal district abolished. Tarrant meets both stipulations. Geren filed the bill on the last day lawmakers can file for the current legislative session.


• The Texas House and Senate differ on how to cut property taxes. Here’s what their proposals say. The Texas Tribune, 15 March 2023, Excerpts. Cuts to school property tax bills. Bigger tax benefits for homeowners. A controversial idea to limit property tax growth. Here’s what you need to know about the brewing property tax debate at the Texas Legislature. The Texas House and Senate have finally unveiled their proposals to lessen property owners’ tax burden on the table — and there’s a wide gulf between them when it comes to their big-ticket items.


Property tax warriors in the Senate want to raise the state’s homestead exemption on school districts, which would reduce the amount of a home’s value that can be taxed. Senators would boost that benefit even further for seniors.


Meanwhile, House leaders have thrown their weight behind a proposal to tighten a cap on how much more school districts can tax property owners each year — an idea that has proven controversial even among die-hard proponents of property tax cuts.


But there’s some agreement between the two chambers. Leaders in both chambers want the state to spend $5.3 billion to extend existing property cuts and dedicate an additional amount to further cut school property taxes.



• Report: Senate Property Tax Plan ‘Falls Short’, Texas Scorecard, 15 March 2023, Excerpt. While both chambers of the Texas Legislature are touting plans for the “biggest property tax cut in history,” a new analysis from the Huffines Liberty Foundation says the Senate’s plan “falls short.”


• Appraisal Caps Overwhelmingly Rejected in HB 2 House Hearing, Texans for Fiscal Responsibility, 14 March 2023, Excerpts. On Monday, the House Ways and Means Committee laid out House Bill 2, the House leadership’s property tax relief package. The legislation is authored by the chairman of the committee State Rep. Morgan Meyer (R-Dallas). The legislation attempts to do a few things for taxpayers such as adding 15 cents in compression to school M&O property taxes, which would lower the average taxpayer’s property tax bill by $460 in 2024 according to the author. It also proposes to reduce the appraisal cap on all real property from 10% to 5%.


This is a significant change to the way appraisals work. Currently, only homesteaded homes are capped at 10% growth. HB 2 seeks to expand caps to all real property and place the cap at 5%. Although this seems like a good idea on the surface, it would have terrible ramifications for taxpayers, as it would ultimately drive up tax rates as local governments scramble to get the same amount of income they had the previous tax year. Even the fiscal analysis provided by the Legislative Budget Board (LBB) states this fact.

 

Updated 10 March 2023

• Gov. Greg Abbott proposes devoting $15 billion to property tax cuts in budget plan, The Texas Tribune, 17 February 2023, Excerpts. Abbott proposes maintaining existing cuts to school property taxes made under a massive school finance package passed in 2019 and using state dollars to further reduce taxes under that law. The state doesn’t actually raise property taxes — that money is collected by cities, counties, school districts and other local entities — but by funneling more state money into schools, it’s able to lower the amount that schools collect. The cuts would apply both to homes and businesses.


• Texas House’s property tax bill calls for $17 billion in cuts, tighter appraisal cap, The Texas Tribune, 02 March 2023, Excerpts. Texas House Speaker Dade Phelan’s main property tax proposal unveiled Thursday calls for $17 billion in cuts and a stricter cap on how much school district taxes can go up each year, setting up a stark divide between the Texas Legislature’s two chambers on how to provide tax relief to property owners this session.

Under Phelan’s proposal — to be carried in the House by state Rep. Morgan Meyer, a Dallas Republican — the state would cut school district property taxes by 28%. For an owner of a $350,000 home, that would translate to more than $1,000 in savings on their tax bills over the next two years.


Two proposed pieces of legislation would have taxpayers vote to approve certain property taxes hikes. Texas Scorecard, 28 February 2023, Excerpts. House Bill 2220 [Legiscan] would require taxing entities to hold elections for any tax increase above the no-new-revenue rate, a property tax rate calculated to produce the same amount of tax revenue this year if applied to the same properties taxed last year, enabling the public to compare year-to-year tax burdens. House Bill 2221 [Legiscan] would require any voter-approved tax increases to receive 60 percent of the vote.


• Study Reveals Increasing Homestead Exemption Would Benefit ‘Select Few’, Texas Scorecard, 28 February 2023, Excerpts. ...the study shows individuals who rent—whether apartments or single-family homes—pay a higher share of the property tax burden because those properties don’t qualify for homestead exemptions. The state’s “homestead exemption” reduces the property tax burden by limiting how much of the appraised value can be included in the levy.


Many of the proposals currently being considered by the Texas Legislature seek to deal with the state’s skyrocketing property tax burden by increasing that homestead exemption. As Peacock notes in his study, “while property taxes for homeowners may grow at a slightly slower rate, renters and businesses receive no benefit at all from the homestead exemption.”


• $15 Billion for Property Tax Relief ‘A Good Start’ Gov. Abbott Says of Senate Plan, The Texan, 25 January 2023, Excerpts. Gov. Greg Abbott said that the Senate’s $15 billion rough plan for property tax cuts is “a good start” but that he’ll push for more as the process plays out. / The comments were made Tuesday to the press and are his first since the Senate released its draft budget last Thursday; that draft contains $15 billion for cuts, including $3 billion to raise the homestead exemption from $40,000 to $70,000. / The rest is presumed to be for compression of local rates, something the state has done in the last two sessions. The Legislature also itemized $3 billion in federal coronavirus aid last session for compression this session. “I of course will be pushing for even more,” Abbott said of the upper chamber’s blueprint.


The governor has previously called for the “largest property tax cut ever in the history of Texas” using at least half of the projected budget surplus to compress rates. That comment was made in September when the surplus estimate was $27 billion; it has since grown to $32 billion.



• TFR Statement on Appropriation Bills, Texans for Fiscal Responsibility, 18 January 2023, Excepts. Today, both the Texas House and Senate have released their budgets. Both the House and Senate appropriation bills provide $15B for property tax relief, with $12B to compress Maintenance & Operations rates by 7.75% and $3B to increase the homestead exemption from $40K to $70K. The general revenue-related fund (GRR) increase with property tax relief is 9.2%, which keeps the budget below the 12.3% spending cap.

TFR applauds the Legislature for their effort on property tax compression and wants to encourage them to dig deeper for Texas taxpayers. While this budget is a great start, it falls short of providing the largest property tax cut in Texas history. As Gov. Abbott and Lt. Gov. Patrick have both said, we have a “once in a lifetime, historic opportunity” to provide real property tax relief. Abbott has promised to deliver the largest property tax relief in Texas history. The current record stands at $14.2 billion in compression from the 2008-2009 biennium. To beat that, adjusting for inflation, the Legislature would need to provide around $20 billion in compression.

However, the best option would be what Abbott said was his goal in his debate against Beto: to eliminate school property taxes, so Texans can actually own their homes. We encourage the Legislature to continue down the path they have started and put Texas on a path toward the elimination of property taxes, and to come through on Abbott’s plan of the largest property tax cut in history by cutting more spending and providing at least $20 billion in M&O compression; preferably, however, the entire $32.6 surplus will be used. As both Abbott and Patrick have said, “This is not the government’s money. This is taxpayers’ money.” TFR would like to see all of it given back to Texans.


• Abbott pledges to provide largest property tax cut in Texas history during third inauguration, The Center Square, 17 January 2023, Excerpt. exas Gov. Greg Abbott was sworn in to his third term Tuesday, vowing to cut property taxes, fight for parents' rights in schools and more. Abbott emphasized the state’s economic prowess and highlighted several priorities on his legislative agenda. They include keeping Texas the number one state for business, providing the largest property tax cut in state history, dedicating state funds to infrastructure projects and strengthening the state grid, advancing parental rights in education and school safety measures, bail reform, and expanding criminal penalties for fentanyl-related crimes.


Excerpts. Homeowners in Texas currently pay the sixth-highest property taxes in the U.S., with many seeing double digit increases in their bills in one year.


Reducing property taxes is a top priority of the Texas Republican Party. Republican Gov. Greg Abbott, who was reelected to his third term, has pledged to return half of Texas’ $27 billion surplus to taxpayers.


The state’s record surplus has contributed an historic amount to the state’s Rainy Day Fund, which is expected to reach $13.6 billion by the end of fiscal year 2023, according to the state comptroller’s office.


One approach is to reform the appraisal process. State Sen. Louis Kolkhorst and state Rep. Cody Vasut filed bills to limit how much the appraised value of a residential homestead’s ad valorem tax can be increased. Kolkhort’s SB 152 and Vasut’s HB 145 would cap appraisal increases at 5% and 3.5%, respectively, down from 10% year over year.


Kolkhorst also filed SB 178, which would limit the “increases in the appraised value of real property other than a residence homestead for ad valorem tax purposes,” according to the bill summary.


Another approach is to use the surplus to pay down school maintenance and operation (M&O) taxes, a plan the Texas Public Policy Foundation proposed ahead of the last legislative session. M&O taxes, TPPF argues, have become a de facto statewide property tax. Reducing them will give taxpayers relief and also comply with the constitutional requirement to fund public schools, it argues.


The plan’s author, Vance Ginn, Ph.D., now founder and president of Ginn Economic Consulting and senior fellow at TPPF, said it would “prevent year-to-year spikes in tax bills and rein in irresponsible local governments.”


Reducing, and eventually eliminating, M&O taxes is “not about defunding education,” he emphasizes, but about providing property tax relief while also fully funding public education.


Texans for Fiscal Responsibility also proposed a Texas Prosperity Plan, which also proposes using budget surpluses to pay down and eliminate the M&O tax.


At least four lawmakers have filed bills to reduce the M&O taxes.


State Rep. Tom Oliverson filed HB 174, which proposes allocating and depositing a certain amount of the surplus state revenue into a property tax relief fund to reduce M&O taxes. State Rep. Matt Shaheen and Rep.-elect Ellen Troxclair filed HB 629 and HB 612, respectively, to reduce M&O taxes by using 90% of surplus state revenue.


State Rep. Andrew Murr filed HB 29 to eliminate M&O taxes and to create a joint interim committee to address their elimination. In the last legislative session, Murr introduced HB 91 to create a committee to study a new tax model.


State Rep. Steve Toth filed HB 268 to repeal or limit certain state and local taxes, including M&O taxes. It also proposes creating new state and local value-added taxes (VAT), as well as implementing school finance reform.



Texans for Fiscal Responsibility’s president, Tim Hardin, told The Center Square that property taxes have gone up nearly 200% in the last 20 years “with no sign of stopping.” The “historic property tax reform” touted during the 2019 legislative session “has resulted in no tax relief for anyone,” he said.


While his organization supports property tax reduction, it also advocates for reduced spending.


“Our tax problems can be solved the same way that we have to solve our personal budgets: cut spending. Not slow the rate of growth of spending,” Hardin said, but “actually cut spending and reduce the size of government.



With the state expected to have a $27 billion surplus when lawmakers gather in January for the next legislative session, Texas House Speaker Dade Phelan is tempering expectations that the money will be used for property tax relief. This puts Phelan and his supporters on a collision course with Gov. Greg Abbott and Lt. Gov. Dan Patrick, who have promised to use “at least half” of the surplus to cut property taxes in the Lone Star State. At a recent meeting of the Transportation Advocacy Group in Houston, Phelan indicated that his plans for the surplus may not include substantial property tax relief.




The Texas Legislature is in for a fight over how to spend its expected pot of money from inflation-driven record consumption tax collections. Trying to direct the Legislature and the Texas House specifically often resembles herding cats — 150 members with 150 different ideas on how the $27 billion projected surplus should be appropriated.


Gov. Greg Abbott has called for spending “at least half” on “the largest property tax cut ever in the history of Texas.” Lt. Governor Dan Patrick first called for using $4 billion to cut taxes and then upped that to possibly more than half of the total.


The Legislature already has $3 billion earmarked for a buydown next session from holdover American Rescue Plan Act funds.


A week ago, state representative-elect Carrie Isaac told a gathering at the conservative Texas Public Policy Foundation (TPPF) that she wants to see the entire surplus put toward buying down property taxes in the state.


This drew a response from Speaker Dade Phelan (R-Beaumont), who said to the Transportation Advocacy Group, “I know there are a lot of politicians who are going around saying ‘We need to spend half this revenue’ — and I’ve got elected officials who haven’t even taken the oath of office saying we need to spend all the revenue on property tax relief.”


“Let me just remind you: none of this money came from property taxes, it all came from sales tax… So, whatever we do on property taxes … I just want to remind everyone that this money is in our coffers because of inflation, because of [financial] pain.”


He added that the state should “look at more than just property tax relief” and pointed to potential relief on sales and franchise taxes.


“Whatever we do on property taxes, we have to do it every single session or we’re raising your taxes.”


State Rep. Tony Tinerholt (R-Arlington), who is challenging Phelan for the speakership, criticized Phelan’s comments, saying, “It is honestly shocking to see Speaker Phelan speak so strongly against property tax relief and even criticize incoming conservative lawmakers for supporting bold property tax relief.”


Tinderholt then called for a shift from the taxation status quo: “The Texas Republican Platform calls for us to move away from the broken property tax system and shift to sales taxes. This year provides a historic opportunity to do just that and yet our current speaker is criticizing incoming freshmen for supporting Republican policy.


• Texas State Rep.-elect Files Legislation to ‘Buy Down’ Property Taxes, Texas Scorecard, 17 November 2022, Excerpts

On Monday, the Texas Legislature began its bill prefiling period, and newly elected Republican State Rep. Ellen Troxclair wasted no time in filing her first bills as an incoming representative. Troxclair’s House Bill 629 works to provide property tax relief to Texans.


Property taxes in Texas are among the highest in the nation, with the majority going to school district M&O (Maintenance and Operations). Every year, Texas homeowners pay thousands of dollars in property taxes.

This fall, Texas Comptroller Glenn Hegar revealed that there was a state surplus of $27 billion. During the gubernatorial debate this October, Gov. Abbott explained that he plans to use that excess revenue to “eliminate school property taxes” so Texans can “genuinely own their own home without being taxed out of it.”


In support of Abbott’s plan, Troxclair developed a bill that would put 90 percent of the $27 billion surplus towards “buying down” the school portion of property taxes.


Troxclair said in a statement that her bill, HB 629, “would allow us to cut property taxes in half, while fully funding public schools and reducing our reliance on Robin Hood.”


• Texas' corporate welfare scheme decreases grid reliability, shrouds property tax pain, Houston Daily, 20 September, 2022, Excerpts - Last year pressure from both progressives and conservatives resulted in the Texas Legislature failing to renew Chapter 313 - Texas' corporate-welfare clause. It will expire at the end of this year. Yet many politicians, led by House Speaker Dade Phelan, are partnering with big business to bring the program back to life when the Legislature convenes next year.


As part of this effort, the Texas House Ways and Means Committee recently held a hearing on “the impact of not renewing Chapter 313.” While business groups like the Texas Taxpayers and Research Association, Texas Oil and Gas Association, and Texas Association of Manufacturers showed up to explain how the sky will fall without Chapter 313, a lot of good will come if the program expires without a replacement.

 

Willow Park Civics Research





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