Texas’ Proposed Property Tax Bill Calls For Significant Tax Reductions

Proposed Property Tax Bill

A proposed property tax bill by the Texas House Speaker, Dade Phelan, offers a $17 billion cut on school district property taxes and a tighter cap on how much school district taxes can increase each year.

proposed property tax bill
The proposed property tax bill would be carried in the House by state Rep. Morgan Meyer, a Dallas Republican. (Photo: Texas Tribune)

Under the proposed property tax bill, the value of a homeowner’s primary residence taxed by school districts can rise no more than 5% per year instead of the current 10%. The cap would also apply to commercial properties, including grocery stores, apartment complexes, and rental homes. The move is an attempt to deliver tax cuts to taxpayers across the board.

Proposed Property Tax Bill Could Face Opposition

The proposed property tax bill could face stiff opposition in the Senate, where Lt. Gov. Dan Patrick and State Senator Paul Bettencourt have expressed skepticism about lowering the appraisal cap, Texas Standard reported. Critics warn that lowering the cap would have severe ripple effects, such as creating vast inequities in who pays property taxes and upending the state’s housing market. Tightening the appraisal cap would only exacerbate the disparity of tax benefits from the state’s current 10% appraisal cap, which flow disproportionately to wealthier households.

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Tax experts and real estate industry analysts also warn that lowering the appraisal cap could lead to higher home prices, as it did in California, and fewer homes on the market, leading to higher home prices due to a tighter supply of homes. According to critics, local governments and school districts might increase their tax rates to avoid potential revenue losses resulting from the reduced cap, which would maintain tax bills at a minimum level.

Republicans in Texas are grappling with how much of the state’s nearly $33 billion surplus to spend on cuts. Before Thursday, House and Senate leaders, along with Governor Greg Abbott, had arrived at a consensus for a total dollar amount to spend on property taxes over the next two years, which was $15 billion. However, the budget proposals in both chambers did not specify how the remaining amount would be used.

The proposed property tax bill has gained bipartisan support in the Senate, with unanimous support from Republicans and Democrats in the chamber. The Senate has put forward the idea of putting $3 billion toward raising the state’s homestead exemption, which is the dollar amount of a home’s value that can’t be taxed, from $40,000 to $70,000 on school district property taxes. This would result in an owner of a home in a district with the state’s average school tax rate saving $341 on their annual tax bill.

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