Texas State Capitol in Austin
The Texas Legislature ended a monthslong impasse by striking a deal on how to dole out $12.3 billion in new property tax breaks budgeted by lawmakers earlier this year.
The $18 billion compromise — which includes more than $5 billion approved for relief in 2021 — between the Texas House and Senate would give increased tax relief for the state’s 5.7 million homeowners and create a tax-credit pilot program for non-homesteaded properties, the Texas Tribune reported. The deal 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 Monday.
The proposal must clear both chambers before it heads to Gov. Greg Abbott for his signature.
“Reducing property taxes, providing relief to small-business owners, and reforming our appraisal system will ensure economic growth and prosperity, and this agreement is a significant victory for all Texans,” Texas House Speaker Dade Phelan said.
Lt. Gov. Dan Patrick said the last week of negotiations among himself, Phelan and members of both chambers “made the difference.”
“It has been a long road, but this is a great day for all property owners,” Patrick said. “It may have taken overtime, but the process has produced a great bill for homeowners and businesses.”
Highlights of the bill include:
- Over $12 billion will be spent on reducing the school property tax rate for all homeowners and business properties.
- Every homeowner who homesteads their home will get a homestead exemption of $100,000, up from $40,000.
- Non-homestead properties, valued at $5 million and under, including residential and commercial properties, will receive a 20% “circuit breaker” on appraised values as a three-year pilot project.
- Legislation will also include savings on the franchise tax for small businesses and create newly elected positions on local appraisal boards.
The main dividing line came over whether homeowners or business owners would get a bigger tax break. Phelan and House lawmakers wanted to send the entire $12.3 billion to school districts to lower their tax rates, a kind of tax cut referred to as “tax rate compression.” Doing that would result in across-the-board cuts for all property owners, but it would most benefit business owners.
Patrick and Senate tax-cut writers agreed with the House on allocating $12.3 billion for property tax cuts but wanted to use only 70% of that amount for tax rate compression so they could use the rest to pay for a boost to the state’s school district homestead exemption, the amount of a home’s value that can’t be taxed to pay for public schools. Patrick and state Sen. Paul Bettencourt, a Houston Republican and Patrick’s lieutenant on the tax-cut issue, pushed for raising the exemption to $100,000.
Read more from the Texas Tribune.