After a long standoff among Texas’ top Republicans, state GOP lawmakers 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 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.
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.
Another part of the plan, which in a way revives a contentious idea the House had previously proposed, would institute a three-year, 20% cap on appraisal increases for commercial and non-homesteaded properties valued at $5 million or below — a number that could be adjusted by the comptroller with inflation each year.
An earlier proposal sought by the House to put a tighter cap on how much taxable property values can rise each year — also known as an appraisal cap — was left out of the final deal.
Currently in Texas, those appraisals can only increase by 10% each year. That benefit only applies to people who own the homes they live in. The House proposal would have narrowed that cap to 5% and extended it to include businesses and other non-homestead properties, an idea that drew harsh criticism from tax-policy advocates on both ends of the political spectrum.
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.