Texas voters approve $18 billion property tax cut

The average Texas homeowner will see roughly $1,200 in “savings” on this year’s tax bill after voters approved the Legislature’s $13 billion relief plan that caused a massive, collective headache for state legislators this year.

In the end, Lt. Gov. Dan Patrick got much of what he wanted — the $100,000 standard homestead exemption — and Speaker Dade Phelan (R-Beaumont) got some of what he wanted, namely a three-year trial run on a 20 percent appraisal cap for businesses worth $5 million or below.

The fight over a homestead exemption increase versus an appraisal cap wreaked havoc on the Texas Legislature during the 88th regular session — a feud wrought with name-calling; passive-aggressive but also aggressive-aggressive press releases; and infantile memes.

But with Proposition 4’s overwhelming passage on Tuesday, with 84 percent of the vote in support, the $13 billion plan for additional property tax relief is complete.

Sen. Paul Bettencourt (R-Houston), the upper chamber’s architect of the plan, spiked the football on its passage Tuesday night, saying, “This is record property tax reduction in the United States! There is one State in the Union that just voted for $18.1 billion of property tax reduction, Prop. 4, and that’s the State of Texas! As I predicted, Proposition 4 was passed tonight by a supermajority of voters because of the State’s surplus they will see eye-popping savings!”

That “savings” is a reduction compared with what tax bills would be without the reform, not a strict reduction compared to last year’s bill. However, depending on individual household situations, some taxpayers could actually see a decrease.

Legislators appropriated more than $7 billion to compress the school district Maintenance & Operations rate, which is the largest component of tax bills; that comes on top of $5.3 billion approved in the budget to maintain the 2019 compression levels.

The body then put $5.7 billion toward the $60,000 increase to the homestead exemption and added a $1.47 million increase to the franchise tax exception, alongside a requirement for local Appraisal Review Boards to have at least three elected positions.

The reform also fixed a glitch in state law that prevented elderly and disabled homeowners from immediately feeling the exemption increases; their homestead exemption now amounts to $115,000. “Savings” for the average elderly or disabled homeowners is estimated to be over $1,400.

In order to maintain this compression, the Legislature will have to continue to appropriate that money going forward, lest property tax bills rise substantially in future years — just as it did this year with the 2019 compression.

But with the proposition passing, the Texas Constitution is now amended to require the $100,000 homestead exemption in perpetuity along with the elected appraisal offices — the latter of which will be on the ballot next spring.

The appraisal cap trial run — called a “circuit breaker” — begins in 2024 and will run through the end of 2026, at which point the Legislature can choose to continue it. Phelan pushed for that hard during the standoff, citing constantly rising appraisals as wiping away the very “savings” the Legislature previously handed out. Originally, the speaker wanted a 5 percent across-the-board appraisal cap, something at which the Senate balked.

While it was a significant reform of the property tax system, it did not move the ball any closer to “eliminating property taxes” — a notion with which Gov. Greg Abbott has flirted and Patrick has called a “fantasy.”

The months-long deadlock and rhetorical brawl is emblematic of how intertwined local government financing is with property taxes — and how intertwined the state is with school finance.

But for now, taxpayers will surely rejoice at the changes, most notably the sizable “savings” on the amount of money paid to their local school district — a sum the state is reimbursing for now.

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