The Texas House and Senate differ on how to cut property taxes. Here’s what their proposals say.

An aerial image of a suburban neighborhood in San Marcos on October 18, 2021. (Jordan Vonderhaar For The Texas Tribune, Jordan Vonderhaar For The Texas Tribune)

Sign up for The Brief, The Texas Tribune’s daily newsletter that keeps readers up to speed on the most essential Texas news.

Recommended Videos

The Texas House and Senate have finally unveiled their proposals to lessen property owners’ tax burden on the table — and there’s a wide gulf between them when it comes to their big-ticket items.

Property tax warriors in the Senate want to raise the state’s homestead exemption on school districts, which would reduce the amount of a home’s value that can be taxed. Senators would boost that benefit even further for seniors.

Meanwhile, House leaders have thrown their weight behind a proposal to tighten a cap on how much more school districts can tax property owners each year — an idea that has proven controversial even among die-hard proponents of property tax cuts.

But there’s some agreement between the two chambers. Leaders in both chambers want the state to spend $5.3 billion to extend existing property cuts and dedicate an additional amount to further cut school property taxes.

Here’s what you need to know about each proposal.

Senate wants to raise the state’s homestead exemption 

Senate Republicans laid out a $16.5 billion package this week to expand tax benefits for homeowners as well as property tax exemptions and credits for businesses.

One priority proposal for Lt. Gov. Dan Patrick that has gained unanimous support from Republican and Democratic senators would increase the state homestead exemption for school property taxes — or the dollar amount of a home’s value that can’t be taxed to pay for local schools — from $40,000 to $70,000. The proposal would save a homeowner who pays the state’s average school tax rate an additional $341 on their annual tax bill.

Senate lawmakers also want to triple the homestead exemption for seniors, which would raise the amount of that benefit from $10,000 to $30,000. The increase would save those homeowners another $227 each year. In all, senior homeowners wouldn’t be taxed on the first $100,000 of their home value if both homestead exemption measures prevail.

“These are substantial and unprecedented numbers,” said state Sen. Paul Bettencourt, a Houston Republican and Patrick’s main property tax lieutenant in the Senate.

Another bill would put $5.38 billion toward lowering school property taxes by pumping more state dollars into schools in addition to the $5.3 billion already set aside for that purpose in both chambers’ budget proposals — a benefit that would apply to homeowners and businesses alike. That measure along with the homestead exemption bill cleared the Senate Finance Committee on Wednesday.

But critics have noted that renters would not benefit from the homestead exemption or from broader tax cuts. According to the National Apartment Association, some 14 cents of every rent dollar a tenant pays go toward property taxes.

Tax-cut proponents have argued that reducing landlords’ school district property taxes would trickle down to renters in the form of gentler rent increases. But critics say there’s no guarantee landlords in a still-hot Texas rental market would pass their savings on to tenants.

Another measure by state Sen. Tan Parker, a Flower Mound Republican, calls for about $1.5 billion in business property tax cuts.

House pitches appraisal cap increase

Texas House Speaker Dade Phelan’s main property tax proposal calls for $17.3 billion in cuts and a stricter cap on how much more of a home’s value can be taxed each year.

Phelan’s proposal — carried by House Ways & Means Chair Morgan Meyer, a Dallas Republican — calls for $12 billion in school property tax cuts on top of the $5.3 billion laid out in the House’s budget proposal. If it passes, the owner of a $350,000 home would see total annual savings of nearly $1,300 over the next two years.

But a key part of Phelan’s proposal has been met with opposition from tax-cut advocates and groups representing businesses like the ones the bill intends to benefit.

Texas has an “appraisal cap” on how much the value of a homeowner’s main residence that can be taxed by school districts can rise each year. The House proposal — which has gained support from 57 other members of the House, including a handful of Democrats — would lower that cap from 10% to 5% for homeowners and expand the benefit to owners of commercial properties like restaurants and apartment complexes.

During a Ways & Means committee hearing Monday, Meyer said tightening the appraisal cap “protects homeowners and businesses from the shock of rapidly rising property values, while also making it easier to plan for future investments and economic growth.”

But there’s been vociferous skepticism of the idea in the weeks since Phelan put the measure in the spotlight.

On the Senate side, Patrick and Bettencourt have said that the appraisal cap proposal would undo progress the Legislature has made in recent years toward slowing property tax growth — progress made by limiting how much cities, counties and school districts can grow their property tax revenue each year. Some proponents of lowering property taxes have warned that reducing the appraisal cap would prompt local governments to raise their tax rates in order to make up for any revenue lost to appraisal caps.

“The only way you can impact tax bills is by slowing the growth of government,” Bettencourt said.

Property tax experts also say that raising the cap would make the property tax system more unfair and eventually create drastic inequities. For example, a first-time homeowner would face a substantially higher tax bill than a neighbor who’s owned their home for 20 years and benefited from decades of capped values. Those same inequities arose in California after voters in the late 1970s imposed caps on how much their homes could be taxed.

That’s a concern Glenn Hamer, the head of the Texas Association of Business, raised to the Ways & Means committee this week, testifying that the cap would “create an unequal distribution of taxes” among business owners and homeowners.

“Caps do not provide proportionate relief,” Dale Craymer, president of the business-backed Texas Taxpayers and Research Association, told the Ways & Means committee. “In fact, they create substantial inequities across taxpayers.”

So far, Meyer has stuck by the proposal.

“We are slowing growth,” Meyer said in response to Craymer. “That is why, with all due respect, sir, I don’t agree with your analysis.”

The Senate’s homestead tax exemption and the House’s appraisal cap proposal would ultimately be decided at the ballot box if they clear both chambers.

Disclosure: Texas Association of Business and Texas Taxpayers and Research Association have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

We can’t wait to welcome you Sept. 21-23 to the 2023 Texas Tribune Festival, our multiday celebration of big, bold ideas about politics, public policy and the day’s news — all taking place just steps away from the Texas Capitol. When tickets go on sale in May, Tribune members will save big. Donate to join or renew today.