The Great Property Tax Stand-off of 2023, Part 2: The Show so far…

By Ashley Bean Thornton

I am fascinated by the current stand-off between the Texas House of Representatives (and Governor Abbott) and the Texas Senate (and Lieutenant Governor Patrick) regarding property taxes.  In my last blog I took a little time to understand my property tax bill.  In this post I am attempting to explain the possibilities for reform that have been proposed. – ABT

A whole bunch of money!

According to the Texas Comptroller website, Texas collects her revenue from “over 60 different taxes, fees and assessments.” In 2022, Texas took in over $370 billion in revenue – resulting in an historic budget surplus of $37.2 billion.  The folks at the Texas Tribune have calculated that if we split that up evenly among all of us Texans, we would each get $1,088.

Where did all that extra money come from?  Texas State Comptroller Glen Hegar says most of it is the result of inflation.  Higher prices for goods and services resulted in more sales tax revenue.  So, at the risk of stating the obvious, it mostly came from us.  By “us” I mean “we the people” – all of us tax-paying folks: poor people, rich people, old people, young people, citizens, immigrants, people who smoke and drink, business owners, homeowners, renters etc. etc.

As the 88^th Texas Legislative session drew closer, people suggested all kinds of different ways to spend that surplus: raise teacher pay, fix the electricity grid, broadband infrastructure, etc. etc. As far as I know, nobody recommended just sending us each a check for $1,088.

The Governor did, however,  recommend in his 2024-25 budget that the state give $15 billion of it back to some of us in the form of reduced property taxes.  Lieutenant Governor Dan Patrick and most of the legislators in the House and the Senate seemed to think some kind of property tax relief was a good idea.

This is where it gets a little weird…

Our Governor and our Lieutenant Governor are both Republicans.  Both the Texas House and the Texas Senate are majority Republican.  So, it seems like any idea that the Republicans all think is a good idea could find it’s way into a bill that the Republicans could agree to pass. Property tax relief seems like just such an idea.  Good grief!  Even quite a few Democrats think it’s a good idea.  But for some reason the whole 5-month 88^th Legislature regular session passed into history without that happening.   The Governor immediately called a special session — which also came and went without passing a property tax reduction bill. Why couldn’t everyone get their heads together and pass a bill?

What do they agree about?

The House and the Governor have one idea about how to do property tax relief; the Senate and the Lt. Governor have a different idea.  We’ll talk about those two different ideas in a minute. One thing they agree about though is that whatever change is to be made should be made to the way property taxes are collected for school districts.

You may remember from my previous blog about Property Taxes that our property taxes go to support several entities – among them our local school districts.

The school finance system in Texas is super complicated, but to drastically over-simplify…the state establishes an amount they think a school district needs to provide a decent education for all the students in the district.  That amount is based on average daily attendance and about a jillion other factors.  Local property taxes pay a chunk of that amount – usually the biggest chunk.  For districts that can’t pay the whole amount through property taxes, the state “tops it off” and provides the rest.  In other words, the more the local property taxes cover, the less the state has to kick in and vice versa.

Through the years as property has steadily increased in appraised value, property taxes have paid for a bigger and bigger part of the education bill, the state has paid for less and less.

Most of the ideas for property tax relief that have been floated in the legislature have to do with reducing the amount of property taxes collected to support the local school system, and having the state make up the difference using the surplus money.

So, what do they disagree about?

The House Plan – The House and the Governor favor a plan that would “compress” (reduce) school district tax rates by 0.162%.  The 2023 WISD tax rate I used as an example in my last blog was 1.241869%.  If this plan had been in effect, that rate would have been reduced to 1.079869%.  That would have saved me $228.59 on my WISD property tax.  This plan would benefit everyone who pays property taxes – homeowners, landlords, business owners, etc.  Everyone would get the same reduction in rate.  The more property you own the more you would benefit – so, arguably, it would benefit property rich people more than it would benefit people with less property, people like me – whose only property is my home.  This plan is popular in the business community, and, of course, there are some benefits to all of us if the business community stays happy.  The house passed this plan on the first (and last) day of the special session, and then they promptly adjourned.  This left the Senate to “take it or leave it” – since the House is no long in session to consider any changes proposed by the Senate.

The Senate Plan – The Senate and the Lieutenant Governor favor a plan that would compress school district tax rates by 0.10% and also expand the homestead exemption from $40K to $100K ($110K for taxpayers who are 65+ or disabled).  Using the example property tax bill from my last blog, this plan would have saved me $826.23 on my WISD property tax.  This plan benefits everyone who pays taxes (businesses, etc.), but not by as much as the House plan.  It sweetens the deal for people like me whose only property is my home by greatly expanding the homestead exemption. Arguably this plan favors people with less money, since they are the ones less likely to have multiple properties beyond their “homestead.”  The House adjourned without considering these possible changes…and the Senate refuses to sign off on the current bill without including the changes…and so we are stuck.

What’s next?

Nothing will be done about property tax relief unless the House, the Senate, and eventually the Governor can agree on a bill.  It looks like that will require at least one more special session.  I’m not quite sure what would keep that special session from ending in the exact same stalemate as this one – maybe a mass crisis of conscience that would compel multiple people to feel responsible for getting something done?

As I understand it, a change to the homestead exemption would require a constitutional amendment which would have to be on the ballot in November for it to go into effect for next year’s taxes. So, there is a little bit of time pressure on the folks who want a homestead exemption.  Maybe that will help ootch things forward.

In the meantime, it’s interesting to think about which plan I might like best and why.  I’ll do that in my next blog post.