Former vice president of research at TPPF: 'Putting only $5 billion of the $33 billion budget surplus into buying down the property tax does not serve the interest of Texas taxpayers'

In alignment with Gov. Greg Abbott's call earlier this year for the largest property tax cut in history, all three property tax relief proposals prioritized by Texas Lt. Gov. Dan Patrick unanimously advanced in the Texas Senate last week, representing the latest update in the property tax relief battle in Texas. Shortly after the passing of the three-part legislation, Bill Peacock, former vice president of research at the Texas Public Policy Foundation (TPPF), voiced his opinion with the Houston Daily.

"I appreciate the Senate putting some money into property tax relief. But putting only $5 billion of the $33 billion budget surplus into buying down the property tax does not serve the interest of Texas taxpayers. The legislature should commit at least $20 billion – another $9 billion – to property tax relief," Peacock said on March 22. The legislature's package to lower property taxes is currently only $11.3 billion.

"The Texas Senate today passed an $11.3 billion package to lower property taxes. Proponents claim the package totals $16.5 billion, but that double counts $5.3 billion from as far back as 2019," Peacock told the Houston Daily on March 22. "Another challenge with the Senate plan is that it only puts about $5 billion into lowering tax rates. Much of the plan, such as the increase in the homestead exemption, will actually raise rates. While providing some temporary relief, that actually takes Texas farther away from completely eliminating the school M&O property tax."

The prioritized property tax relief package contained three pieces of legislation, each with its own priority. Republican State Sen. Paul Bettencourt of Houston authored Senate Bill 3 and 4. Senate Bill 3 seeks to increase the homestead exemption from $40,000 to $70,000, while also allowing seniors or disabled Texans to deduct an additional $30,000 (so up to $100,000). Senate Bill 4 uses an additional $5.4 billion to provide an additional 7 cents worth of rate compression (amounting to about 74 cents per $100 value by 2025). It also uses an additional $0.4 billion to reduce recapture. Senate Bill 5, authored by Republican State Sen. Tan Parker of Flower Mound, simultaneously works to exempt the first $25,000 of personal property claimed by a business from the property tax. It also provides a new franchise tax credit of up to 20% of the amount of property taxes paid on the inventory itself.

Previously, the largest property tax cut in Texas history was $14.2 billion in 2009, according to James Quintero of the Texas Public Policy Foundation (TPPF). In order to make good on Abbott’s promise to deliver the "largest property tax cut in Texas history," the legislature should be looking at a property tax cut benchmark of about $20 billion when adjusted for inflation from 2009 dollars.

Jeramy Kitchen of Texans for Fiscal Responsibility (TFR) notes that the next step is for the property tax relief package to head to the Texas House of Representatives. It is unclear, however, whether it will be considered, given that Texas House leadership has prioritized legislation that takes an alternative approach to property tax relief. It is expected that House Bill 2, which recently passed out of the House Ways and Means Committee with the support of 10 of the 11 committee members, will make its way for consideration by the overall House of Representatives in the coming weeks.

According to TFR, the most effective way to provide tangible property tax relief to taxpayers burdened by the state's ever-increasing taxes is the compression of the school district M&O (Maintenance & Operations) portion of the property tax, which comprises roughly 45% of all property taxes collected by Texas local government and is the largest portion that funds independent school districts across the state. Kitchen said this legislative session presents lawmakers with a historic opportunity to not only provide relief to taxpayers, but also carve a path to the elimination of immoral property taxes using the existing budget surplus. The organization believes that with some key policy changes, the path to elimination "could be much shorter if lawmakers choose to get serious about their own spending habits and those of local governments."