Texas House passes $12 billion property tax relief package

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A $12 billion proposal aimed at providing property tax relief to Texas homeowners and businesses cleared a major hurdle in the Texas House on Friday, setting up a showdown with the Senate over competing tax cuts. Began.

House Bill 2, sponsored by Speaker Dade Phelan and sponsored by state Rep. Morgan Meyer, both Republicans, passed the full chamber by a vote of 139-5 after receiving initial approval in the House a day earlier. It has passed.

The bill proposes pumping $12 billion into Texas school districts and lowering property taxes for homeowners and business owners. For owners of $350,000 homes, the package could save more than $1,000 over two years, Phelan's office said.

Reducing the state's high property tax burden is a top priority for Texas Republicans this legislative session. HB 2 is a key part of the House's proposed $17 billion package on how Congress should approach the issue.

But HB 2 has drawn considerable criticism from housing experts, business groups, and even some tax cut advocates like Lt. Gov. Dan Patrick, who predict dire consequences if it goes into effect. Contains clauses.

The controversial idea would tighten the state's “assessment cap” on how much a home's taxable value can increase each year. The House proposal would lower the cap from 10% to 5% and extend benefits to owners of commercial properties such as grocery stores, restaurants and apartment complexes.

Phelan and Meyer say the cap reduction is a response to property owners' response to the staggering rise in property valuations in recent years, a sign of rapid economic growth and a cooling housing market in the pandemic-era deep red state. It says the aim is to allay concerns.

“We want to put a cap in place to bring predictability and stability to property owners,” Meyer said Thursday on the House floor.

If the measure passes both houses of Congress, the question of whether to tighten the cap will go to voters in November.

But experts warn that tightening the cap on valuations could create huge inequities among property owners and drive up home prices. These were the effects that occurred in California in the decades following a landmark vote in the late 1970s that capped housing taxes.

House Republican leaders dismissed those concerns Thursday.

“You can't compare California's tax system to Texas' tax system,” Phelan told reporters after Thursday's first vote. “An apple and a bowling ball.”

Republican leaders in the House and Senate have clashed publicly over the proposed rating cap. Patrick said at a news conference ahead of Thursday's House vote that the idea died on arrival in the Senate, arguing it would not benefit seniors whose assessed values ​​were already maxed out.

“We can negotiate on almost anything, but we don't negotiate on miscalculations,” Patrick said.

Phelan remained defiant.

“That should … send a message,” Phelan said after Thursday's vote.

Under the House proposal, home and business owners would receive larger tax breaks the longer they own their property, shifting much of the burden of paying property taxes to new home and business owners. It turns out. The state's 10% cap already benefits wealthy households, according to the Texas Comptroller's Office.

Critics also warn that halving the cap would cause house prices to rise. Homeowners are encouraged to hold onto their homes for longer periods of time to maintain their tax benefits, resulting in fewer homes available for sale and higher home prices.

Additionally, critics argue that lowering the assessment cap would not effectively reduce taxes because cities, counties, and school districts would simply have to raise their tax rates to make up for lost revenue. .

The Texas Senate has a different proposal. The senators want to increase the state's homeownership exemption, the amount of home value that school districts cannot tax, from $40,000 to $70,000. Seniors will receive an additional $20,000 increase. and give tax credits to businesses. The ideas are part of the Senate's $16.5 billion property tax measure, which passed the House last month but has yet to receive a hearing in the House.

Some House Democrats also tried unsuccessfully Thursday to give homeowners more peace of mind with their bids on HB2.

State Rep. Trey Martinez Fisher, a San Antonio Democrat who chairs the House Democratic Caucus, sought to increase the residential property tax deduction to mirror the increase proposed by the Senate. He also proposed lowering the assessment cap for homeowners and business owners to 7.5% instead of 10%. Another of his amendments would completely eliminate the idea of ​​tightening the assessment cap and instead increase the residential property exemption to $100,000.

“The homestead exemption has a much better effect on working and middle-class families,” Martinez-Fisher said, adding that lawmakers should either increase the homestead exemption amount or tighten the cap on the assessment. He added that there is no need to choose between the two. “We can do both.”

The idea died on a 77-65 vote.

House leaders argue that the idea loses its merit in an era of rapidly rising real estate values. But Phelan indicated Thursday he remains open to increasing the homestead exemption amount. A similar proposal passed the House two years ago.

“You can make that argument,” Phelan said. “We're not stopping it in the Texas House. But let's look at all the taxpayers. Let's look at the renters, let's look at the people who own the timber. Let’s look at all the people who own farmland, let’s look at all the people who pay taxes.”

Both chambers agreed to spend $5.3 billion to continue paying for previously approved tax cuts. Like the House, the Senate also wants to spend additional money on school tax cuts, but would allocate $5.38 billion to do so instead of the $12 billion proposed by the House.

The House also rejected an amendment by state Rep. Chris Turner, D-Grand Prairie, that would have lowered the assessment cap from 10% to 5% but limited the benefit to homeowners.