After months of negotiation and receiving near-unanimous support from legislators, Texas Governor Greg Abbott is expected to secure an $18 billion property tax-cut deal. The agreement was reached during the second special session called by Abbott to address property tax relief. The completion of the legislative process is marked by the passage of three bills: Senate Bill 2, Senate Bill 3, and House Joint Resolution 2.
House Speaker Dade Phelan commended the lawmakers for their work and emphasized the benefit to the taxpayers of Texas. Despite attempts by Democrats to include additional provisions in the tax-cuts package, such as renter benefits and teacher pay raises, those efforts were unsuccessful.
At the core of the package is the significant expansion of the state’s homestead exemption, increasing it from $40,000 to $100,000. This expansion represents a substantial investment of $5.3 billion. When combined with the proposed school tax cuts, it is projected to result in an average annual savings of $1,300 in property taxes for Texas homeowners. The plan also includes additional relief for seniors and property owners with disabilities, averaging around $170 in annual savings.
An innovative aspect of the deal is the introduction of a temporary 20% cap on appraisal increases for properties valued at $5 million or less, excluding homesteads. This provision, often referred to as a “circuit breaker” program, aims to curb appraisal increases for properties like second homes, vacation properties, rental houses, and commercial properties. However, it does not consider income or seek to specifically benefit lower-income taxpayers.
Although the package offers notable tax cuts, critics contend that it fails to address the pressing issue of increased school funding. While the legislation designates nearly $12.6 billion to lower the school property tax rate for all property owners, it does not include provisions for new funding to support schools. The legislation allocates nearly $12.6 billion to reduce the school property tax rate for all property owners but does not offer new funding for schools. Critics contend that Texas ranks poorly in per-student funding compared to other states, and they believe there is sufficient surplus funding to address this issue.
The passage of the tax-cuts package has received mixed reactions. Advocacy groups from various backgrounds have applauded the plan, acknowledging its positive aspects while acknowledging its imperfections. Although businesses appreciate the overall tax reduction, some taxpayer groups and conservative economists express concerns about the increased tax burden on businesses.
Unfortunately, targeted tax relief for renters has not been included in the approved proposals. House Democrats had introduced their own package, including cash refunds for tenants, an increased homestead exemption, teacher pay raises, and additional school funding. However, their proposal did not make it into the final package.
Proponents of the tax-cut deal argue that renters will indirectly benefit from lower school taxes because landlords are expected to pass on some of the savings to tenants through reduced rent. However, skeptics argue that rising rents are driven more by market dynamics and supply-demand imbalances than property taxes.
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Governor Abbott has expressed his intention to sign the legislation, emphasizing its comprehensive and long-lasting solutions for property tax relief. The package will be subject to voter approval in November for the cuts to take effect this year. Meanwhile, discussions on education funding and other related issues are expected to continue in future special sessions.
