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A Conservative Approach to Property Tax Reduction

Throughout my first term in the Texas House, a few issues are as important to the constituents of my district as substantive property tax relief. An earlier column detailed the history of the property tax system and what the Texas Legislature is doing to address the situation. Over the course of nine months, a pandemic, quorum break, and once in a lifetime winter storm, the Texas Legislature delivered on its promise, passing over 75 pieces of legislation relating to property taxes and totaling over 675 changes to the property tax code ─ two of which are on the May 7th ballot for voter approval.

Proposition 1 reduces the limitation of ad valorem taxes a school district can impose for operation and maintenance costs on homesteads for the disabled or residents ages 65 or older. In simpler terms, the proposition ensures those who are disabled or elderly are eligible for identical property tax reductions on their homestead that they were omitted from in 2019. During the 86th Legislative Session, House Bill 3 by Representative Dan Huberty provided a long-overdue measure to reform the school finance system in Texas. The legislation also compressed local ISD property taxation rates to balance the rising increases in property values resulting in lower tax rates across the state. Unfortunately, those who are disabled or elderly were excluded from this reduction, as their property tax rates are frozen insofar as they do not make any substantive changes to their homestead. As a result, thousands of Texans did not see a decrease in their property tax bills in both 2019 and 2020. If passed, Proposition 1 will correct this oversight, and provide tangible property tax relief to those who were previously unable to receive it.

Proposition 2 increases the homestead exemption on the taxable value of a home from $25,000 to $40,000 ─ an increase of sixty percent. Under current law, the homestead exemption is the amount of your home’s appraised value that is excluded from taxation. This means that if you own a home, you are taxed at the value of the homestead minus $40,000. Time and time again, voters have proven that increasing the homestead exemption is the most consistent and targeted approach to directly cutting your property tax bill. Unlike other “progressive” tax reforms, the homestead exemption is considered a “flat-dollar reduction.” Regardless of whether your property is worth $100,000 or $1,000,000, the reduction you receive is the same.

To compensate for lost local revenue, the State of Texas expects to match state school districts dollar for dollar, a commitment that is projected to cost approximately $1.45 billion by 2025. Fortunately, unlike many other states, Texas’ economy rebounded more robustly than ever in the wake of the pandemic, resulting in a nearly $8 billion surplus for the biennium. This means that the Legislature can cover the cost of lost revenue by expanding property tax relief at no additional cost to the taxpayers, which is a win-win for every Texan. Additionally, the 87th Legislature enacted Senate Bill 1336, instituting strict spending limits and capping the total amount of state expenditures in each biennium. This measure ensures that the state will always be in a position to compensate for expanded property tax relief without imposing additional taxes on the average Texan.

With voter approval, during the local election, Texas taxpayers will be able to take advantage of this decreased taxation almost immediately. Prior to the 87th Legislative Session, decreases in an individual’s property tax did not take effect until the following January 1st after qualification. In many cases, homeowners were expected to wait for up to a year to see any substantial decrease on their property tax bill. To address these concerns, the Texas Legislature also passed Senate Bill 8, during the second called special session, to remove the wait time for property tax relief, allowing Texans to receive exemptions on ad valorem taxation immediately. Without delay, homeowners can expect to see immediate, tangible cuts to their property tax bill.

Despite the robust reforms to the property tax system this session, much more work needs to be done. During the second and third called special sessions, I coauthored House Bill 122 by Representative Oliverson to commit ninety percent of the $8 billion state surplus to completely buy down local school district’s operations and maintenance tax. I also joined with Chairman James White in joint authoring House Bill 117, which would phase out the property tax system entirely and create a consumption system where Texans are only taxed for what they purchase, not what they already own. While these measures did not make it across the finish line, I am confident that conservative, innovative methods of delivering on property tax reduction are possible in the upcoming biennium ─ starting with passing Propositions 1 and 2 in May.

As Texas receives over a thousand new residents a day from those fleeing restrictive states, such as California and New York, the housing market will continue to inflate. As a result, the root cause of skyrocketing property taxes will continue to squeeze out many middle-class and fixed-income homeowners across the state. Heading into the 88th Legislative Session, the Texas Legislature is moving in unison to address the root causes of this crisis and finally provide Texans with a permanent tax reduction instead of temporary tax relief.

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