AUSTIN — The Texas Senate passed a slate of property tax cut bills Wednesday that backers say will save homeowners hundreds on their tax bills.
The bills sailed to approval with a series of unanimous votes in the Legislature’s upper chamber. They will now head to the House, where competing property tax relief proposals continue to be debated.
The Senate passed Senate Bills 3, 4, and 5 as well as Senate Joint Resolution 3, a proposed amendment to the Texas Constitution that voters will need to approve in order to enact increases to homestead exemptions. In total, they amount to $16.5 billion in tax cuts over the next two years.
The tax cuts would provide relief to all Texans, though increases to the homestead exemption would only benefit Texans who own their homes and not renters — who make up roughly 40% of households in Texas.
The bills would raise the homestead exemption on school taxes from $40,000 to $70,000 for all homeowners who qualify. Homeowners ages 65 and older and the disabled would see their additional exemptions jump from $10,000 to $30,000.
Elderly and disabled homeowners would see their school property tax bill cut by about $516 while all other homeowners would see a $324 cut to their tax bill.
“It’s a fabulous day,” said said Houston GOP Sen. Paul Bettencourt, lead author of three of the pieces of legislation. Sen. Tan Parker, R-Flower Mound, authored the fourth, which would confer $1.5 billion of property and franchise tax breaks on businesses.
“But wait there’s more,” has been the excited refrain from Bettencourt since he lifted the curtain on the Senate tax relief proposal earlier this month. Bettencourt has led property tax cut efforts in the Senate for several sessions, including previous bumps to the homestead exemption as well as measures that tightened tax revenue caps on school districts, counties and cities.
The bills also shuffle $5.75 billion in sales tax and other state tax revenue to school districts to offset local property taxes schools collect. The cut would shave about 7 cents per $100 valuation off a portion of school property taxes.
The combined total could save the average Texas homeowner $756 in the first year and an elderly homeowner more than $1,000, according to Lt. Gov. Dan Patrick’s office.
“This historic $16.5 billion tax relief package is responsible and does not trade Texas’ future for a better today,” Patrick said in a statement. “Senate Bills 3, 4, and 5 decrease the size of government and ensure that Texas moves forward conservatively and on stronger economic footing.”
Using state money to maintain school funding while reducing local property taxes is palatable this year after tax collections topped expectations and gave lawmakers a record breaking budget surplus. However, continuing to use state taxes to offset local property taxes could become burdensome in leaner years.
“Eyes wide open as we enter this,” said Sen. Nathan Johnson, a Dallas Democrat. “We’re doing something that’s popular. We’re doing something that provides genuine tax relief for people, and it could require us to make some difficult decisions in the future.”
Property taxes weren’t the only target of the cuts. SB 5, which Parker authored, takes aim at business taxes, increasing the business inventory tax credit and an increase in business property tax exemptions. Parker said it would save businesses $1.5 billion.
“This will impact businesses of all sizes,” he said. “It is the people’s money and so making certain that our business climate continues to be second to none. … And that’s what this incredible, historic day is all about for Texas businesses.”
The Senate’s approved tax cuts may face choppy waters in the Texas House. There, the leading proposal favors lowering the cap on increases to home appraisals from 10% to 5% to limit increases in tax bills.
Bettencourt said that the idea provides no relief for elderly homeowners, whose taxable home values are already frozen.
A spokesperson for the office of House Speaker Dade Phelan refused to comment for this story.
Dallas Democratic Sen. Royce West called the passage of the Senate proposal “the most significant bipartisan effort so far this session on property tax relief, but I think we can do more.”
West and Edgewood Republican Sen. Bob Hall have proposed a half-cent reduction to the state sales tax. He said his office continues to pursue that proposal in Senate Bill 1000 as well as expanding sales tax holidays.
“With the record surpluses we have, I think we must look at more avenues to lower taxes,” West said. “A reduction in sales tax, which I hope to do with Senate Bill 1000, is one way that we can provide further relief to taxpayers,” he noted.
