Between three different bills — Senate Bills (SB) 3, 4, and 5 — plus an enabling constitutional amendment, the Senate’s model for tax relief includes $6.1 billion to continue previous levels of rate compression, $5.4 billion for additional compression, $3 billion to raise the school district homestead exemption, $500 million to raise the over-65 and disabled homestead exemption, and $1.5 billion to increase the business personal property tax exemption and create an inventory tax credit.
The slate also reduces the number of schools subject to recapture — a redistribution system that takes funding from wealthier districts and shepherds it to poorer ones — by lowering district’s maximum compressed rate in the school finance equation.
Sen. Paul Bettencourt (R-Houston), author of SBs 3 and 4, said in a statement, “The Senate’s Property Tax Relief package moved through the Senate like a bullet train 124-0 because all 31 Senators know Texas homesteaders and business owners need real property tax relief, and what this package delivers to Texans is permanent, off the chart’s tax relief.”
The four proposals each passed the 31-member body unanimously, amounting to the “124” number in favor of the plan. Per his estimates, if passed and approved by voters, the average homeowner will see about $800 less on their property tax bills than they otherwise would have. For an over-65 or disabled homeowner, Bettencourt says that number would eclipse $1,000.
The proposal also writes in a “go-forward” provision that’d eliminate the state’s need to amend the constitution any time it wishes to raise the homestead exemption, rather than just pass a standard bill.
On the business tax side, SB 5 is the Senate’s answer to a portion of the House’s proposal that’d reduce the appraisal cap from 10 percent to 5 percent and extend it to all property, not just homesteads. That bill is Sen. Tan Parker’s (R-Flower Mound) first legislation passed after making the jump across the Capitol rotunda.
“Small businesses are the bedrock of our economy, and they have been hit hard by record inflation,” Parker said in a statement. ”SB 5 will provide meaningful tax relief for businesses across Texas, helping them stay afloat, creating more job opportunities for Texans, and keeping Texas a competitive global player as the 8th largest economy in the world.”
The Senate’s preference is to raise the business personal property tax exemption — levied on all property a business owns other than the land on which it operates — from $2,500 to $25,000; it was $500 until last session.
Gov. Greg Abbott has called for it to be increased to $100,000, but the Senate has chosen to create a tax credit — an idea senators said came from the business community — to pair with the exemption increase. But there were a number of small business owners who testified in favor of the House’s plan during the committee hearing.
Bettencourt told The Texan it’s an “extremely well-balanced plan” and that “it’s no question, permanent exemptions reductions out perform appraisal caps.”
Senators and Lt. Gov. Dan Patrick have said that they used to favor appraisal cap reduction, but have since changed their minds.
The arguments against it include the “inequity” of its effect of properties of widely variant value, namely that low-value properties increase beneath or in line with percentage caps while high-value properties appreciate in value well above the cap’s limit; that its inapplication to over-65 and disabled homeowners’ whose taxable values are currently frozen; and that they distort the property market by further untying taxable and actual value.
The House’s plan — which has 71 joint or co-authors, five short of a majority — has passed out of the Ways & Means Committee and awaits action by the Calendars Committee before it can move to the floor for a vote.
While the two chambers are largely aligned on the feature of the property tax reform, compression, they are very divided on the appraisal side of the issue.
There are 68 days left to reach a compromise.
Editor’s Note: This article has been updated to include comment from Sen. Parker.
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Brad Johnson
Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.
