Property tax appraisal fight moves back to Texas Senate

With an overwhelming vote, the Texas House gave unanimous final approval to its twist on the Senate’s priority property tax plan on Friday.

The two chambers have grappled over the issue — locked in a stalemate for weeks — with competing and diametrically opposed views on how to reform the appraisal system in Texas. 

The bill passed by the lower chamber on Friday is its House Bill (HB) 2 repackaged with the addition of a $100,000 homestead exemption, double the standard exemption found in the Senate’s plan.

This proposal is an effort by the House to make the adoption of a 5 percent cap on the taxable value of all property — the appraisal-focused aspect of the House’s plan — too good to pass up. The Senate and its leaders, Lt. Gov. Dan Patrick and Sen. Paul Bettencourt (R-Houston), have remained staunchly critical of that part of the House’s plan and show little sign of giving ground.

The bill now moves back to the Senate to see if the upper chamber concurs with the House’s changes, or triggers a conference committee to hammer out a final compromise.

Phelan said after the passage, “Our chamber looks forward to working with the Texas Senate in these final days of the 88th regular legislative session to send what would be the largest property tax cut in state history to Governor Abbott’s desk.”

As passed, the House’s substitute for Senate Bill (SB) 3 would apply $16.3 billion in new rate compression and the homestead exemption increase, paired with about $5 billion in the state budget to continue past rate compression — amounting to $21 billion total. The House’s official numbers estimate the average homeowner would see a $2,800 lower property bill than they’d otherwise receive without the reform. The Senate estimated its plan’s “savings” to be about $800.

When the bill first passed the House on Thursday, Rep. Morgan Meyer (R-Dallas) called it the “largest property tax cut in Texas history.”

From a raw number perspective, that is true by about $7 billion — so long as the continuation of previous tax rate compression is included. The current largest tax cut came in the mid-aughts to the tune of $14 billion.

It’s been a touchy subject with the tens of people in the Texas legislative sphere who pay close attention to the issue. Those critical of the “historic cut” line say that accounting for inflation, the Legislature would have to hit $20 billion to overcome that record $14 billion cut.

Critics also object to including the $5 billion in previous compression in the overall total accounting. As always, beauty is in the eye of the beholder and that debate will continue until the cows come home — even if the House has been lauded by those critics for moving in the “right direction.”

Regardless, it’s a lot of money being put toward the issue, a main subject of the record-breaking $32.7 billion projected treasury surplus for the state.

Politically speaking, the ball is now back in the Senate’s court. It’s been tough sledding for the House’s appraisal cap in the upper chamber, and so far there’s been little indication that will change — despite the carrot of the $100,000 homestead exemption to get the Senate on board.

That raises the question of whether or not there might be a stick to follow when it comes to other bills on the Senate’s priority list awaiting passage in the House.

There already appears to be a special session on the horizon for school choice, and if this attempt stalls in the upper chamber, leaving the two deadlocked, then property tax reform will be added to that slate of issues sure to bring legislators back to Austin later this year.