After a monthslong standoff among Texas’ top Republicans, state GOP lawmakers finally struck a deal on how to cut Texans’ property taxes.
The $18 billion compromise between the Texas House and Senate — which includes more than $5 billion approved for relief in 2019 — would give increased tax relief for the state’s 5.7 million homeowners and create a tax-credit pilot program for non-homesteaded properties. It would also cut taxes to small businesses and send billions of dollars to school districts so they can cut their tax rates across the board, according to details made public by state leaders.
Both chambers adjourned July 13, ending the second special session Abbott had called this summer to hammer out an agreement on property tax relief. [A third special session will be called by Gov Abbott this fall regarding school vouchers].
Democrats attempted to insert benefits for renters, teacher pay raises and more money for public education into the tax-cuts package in a series of floor amendments but were unsuccessful.
Three bills make up the package: Senate Bill 2, which details the proposed property tax cuts; Senate Bill 3, a franchise tax relief bill; and House Joint Resolution 2, a constitutional amendment required to authorize the tax cuts.
The package puts $12.6 billion of the state’s historic budget surplus [mostly from state sales taxes] toward making cuts to school taxes for all property owners, dropping school property taxes an average of more than 40% for some 5.7 million Texas homeowners, and offering brand-new tax savings for smaller businesses and other commercial and non-homesteaded properties. The voters would need to approve the package in November for the cuts to take effect this year.
At a time when the state has some of the nation’s highest property taxes and lawmakers face massive political pressure to ease the financial suffering of their constituents, Abbott said he will sign the legislation.
The package’s marquee item is a $5.3 billion expansion of the state’s homestead exemption from $40,000 to $100,000. Bettencourt said the new exemption combined with the school tax cuts would save homesteaders — Texans who live in a residence they own — an average of $1,300 a year in property taxes.
It also offers additional cuts for seniors and property owners with disabilities, averaging about $170 more per year, Bettencourt said.
The most novel part of the plan, an idea introduced publicly for the first time on Monday, is a first-ever temporary 20% cap on appraisal increases for properties valued at $5 million or lower that aren’t considered homesteads. Those would include second homes, vacation properties, rental houses, or commercial retail or business properties.
Leaders have referred to that part of the bill as a “circuit breaker” program, but it’s somewhat of a misnomer. Unlike programs in other parts of the country with the same name, the Texas proposal does not calculate property taxes based on a person’s income or ability to pay, nor does it specifically seek to benefit lower-income taxpayers.
Including more than $5 billion approved four years ago, the legislation also allocates nearly $12.6 billion to reduce the school property tax rate by 10.7 cents per $100 valuation for all homeowners and business properties.
Those billions are being sent to school districts so they can cut their taxes for all property owners and shift a portion of their maintenance and operations costs to the state.
But the package would give no new funding to schools, a sticking point with critics who note that, compared to other states’ spending, Texas is ranked near the bottom in per-student funding for education.
$4 billion in new public education funding has been tied up since the regular legislative session amid an ongoing political battle over school vouchers. In response to Democratic calls for more money for schools and raises for teachers, senators proposed a one-time teacher pay bonus late last month as part of their tax-cut legislation. But that proposal ultimately didn’t end up in the final compromise, with Republican House members saying teacher pay should be considered in separate legislation.
The idea was intended to pacify an increasingly angry and impatient public school community — who have been expecting a pay raise since last year’s campaign season — until lawmakers can agree on an education package in another special session expected for later this year.
The passage of the tax-cuts package this week without any nod to new school funding — which depends mostly on property taxes in many districts — triggered criticism from public education advocates inside and outside the Capitol dome, who said there’s more than enough money in the state surplus to bump up the district’s funding.
While the plan won applause from a variety of advocacy groups and organizations across the political spectrum, few agreed it was a perfect plan.
“There is no bill that is perfect, but this one is pretty damn good,” state Rep. Richard Raymond, D-Laredo, said Wednesday.
And while businesses applauded the overall lowering of taxes, some taxpayer groups and conservative economists said the resulting share of the tax burden would be even larger now for businesses.
The plan shifts the school-tax burden by about three percentage points toward businesses, raising the share of the school property taxes paid by businesses from 52% to 55%, while homeowners’ share drops from 48% to 44.8%, said Jennifer Raab, president of the business-backed Texas Taxpayers and Research Association.
Targeted tax relief for the state’s 3.7 million renter households has been left out of proposals that have passed both chambers.
House Democrats last week unveiled their own tax-cut package, sponsored by Dallas state Rep. John Bryant, that would’ve given tenants a cash refund equaling up to 10% of the rent they paid the previous year. It also would have made the homestead exemption $200,000, doubling the exemption in the current bill, included a teacher pay raise and added more school funding. Their proposal did not make it into the final package. Read complete article at Texas Tribune.