With the Texas Senate tax appraisal reform plan already approved and sent to the Texas House of Representatives, it’s now the House’s turn to make their case.
The dueling proposals are centerstage during the 2023 Texas legislative session with tax reform a priority of Gov. Greg Abbott.
The House is preparing to lay out its solution to heavy tax burdens borne by Texas taxpayers on the floor on Thursday after having passed committee with only one vote against. Its plan would lower the annual homestead appraisal increase cap from 10% to 5% for all residential and business property. But when a property is sold, it reverts to the current market value for the next owner.
Speaker Dade Phelan claims the House plan would save the average property taxpayer $542 per year. Opponents have called it a market distortion that would make things difficult for first-time homebuyers.
The Senate’s plan, rather than rely on caps, aims to increase the school district homestead exemption by $30,000, the disabled and elderly exemption by $20,000, and the business exemption by $22,500, with the addition of a business inventory tax credit for those who qualify of up to $400 million. The plan appears to be a “buy-down” which relies on additional state funding to sustain.
Prior to the beginning of the legislative session in January, Comptroller Glenn Hegar announced a surplus larger than the budgets of some states. Calls were immediate to dedicate a large percentage of that to tax relief.
From the hip: Saying these plans are “dueling” is no exaggeration.
The latest jab: Lt. Gov. Dan Patrick‘s (that’s the leader of the Texas Senate for those not familiar) preferred pollster released survey responses on Tuesday that claim a whopping 82% of “likely voters” support the Senate plan. That seemed high to us.
The poll, sponsored by the Texas Association of Property Tax Professionals, framed the House plan as “adopt[ing] California’s property tax law, which led to the largest divide between rich and poor in the nation with older, higher income property owners getting the biggest tax breaks while lower income and younger people pay significantly more in taxes than they otherwise would without an appraisal cap.” This no doubt swayed the roughly 800 persons surveyed to choose the Senate plan.
Theatrics aside, any plan adopted by the legislature this year would complement similar legislation passed last session and by voters in 2021, which “compresses” property taxes. Add that to a snowball of ever-growing tax laws and regs in the Lone Star State.
Capping the amount property taxes can be raised has resulted in county tax appraisal districts spreading out tax increases year-per-year. Protesting one’s appraisal, before only done if one’s valuation went suddenly through the roof, has now become par for the course. Under previous reforms, taxes have basically drag-chuted the rate of acceleration personal property taxes have been increasing. But it was technically relief.
What is needed is not a drag chute but a retro rocket — to use the surplus to give some relief to Texas taxpayers, coupled with a reduction in the size of state government and government spending. Fat chance of that happening, though the Senate plan seems closest to that ideal.
We are curious as to what kind of compromise is reached, and whether it will make any practical (or coherent) sense when all is said and done.
Stay tuned. The Texas lege gavels out on May 29, any summertime special session calls notwithstanding.