Texas House Approves Property Tax Bill With Changes The Senate Might Not Like

May 19, 2023 – Texas House Passed a revised version of its $16.3 billion proposal to cut property taxes, however it is unclear whether the Senate is going to like it and time is running out for lawmakers to act on one of their biggest priorities this year.

The House gave final approval to Senate Bill 3 by a 147-0 vote, including a vote from speaker Dade Phelan, who usually abstains from voting while leading House business but participated Friday as an additional show of support for the legislation. The Bill would send $12 billion to school districts to drive down tax rates, significantly boost the state’s homestead exemption on public school taxes and — to the chagrin of critics and tax policy experts — tighten the state’s appraisal cap.

The House must vote on the proposal before sending it back to the Senate, where lawmakers from both chambers will try to straighten out their differences.

How to deliver property tax relief to Texas homeowners and business owners has to be one of the most intense fights of this year’s legislative session. The state’s top Republicans have been deadlocked on the issue for weeks.

At the heart of the issue is Phelan’s proposal to lower the state’s cap on annual increases to a home’s taxable value from 10% to 5% and to extend the benefit to businesses, which don’t have such a cap. Phelan has backed the idea in response to complaints from homeowners and business owners about their rising appraisals, which they fear will result in higher tax bills.

But tightening the appraisal cap could have nasty side effects. Tax policy experts and critics of the proposal have warned it would create vast inequities among homeowners and drive up housing costs while disproportionately benefiting wealthier households.

Lt. Gov. Dan Patrick and property tax warriors in the Senate have declared the House’s appraisal-cap proposal dead on arrival in that chamber, refusing to even bring it up the for a committee vote.

Meanwhile, the signature feature of the Senate’s $16.5 billion package to cut property taxes is a proposal boost to the state’s homestead exemption for school districts, the amount of a home’s value that can’t be taxed to pay for public schools, from $40,000 to $70,000, plus an additional $20,000 bump for seniors. That benefit will provide some aid to property owners no matter what happens with property values, Patrick and proponents of the Senate proposal have said.

Under both the House and Senate proposals, Texas voters would ultimately decide at the ballot box whether to cut their own taxes.

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Author: Ethan Klein

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