Texas lawmakers fail to reach last-minute deal to cut property taxes

A view of an East Austin neighborhood. (Shelby Knowles For The Texas Tribune, Shelby Knowles For The Texas Tribune)

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After weeks of public bickering, chaos and a stalemate, Republicans in the Texas House and Senate ran the clock out Monday without coming to terms on a key GOP priority: using a large part of the state’s historic surplus to lower property taxes for Texas homeowners and business owners.

And then Gov. Greg Abbott immediately called lawmakers to a special session to strike a deal on property taxes.

The final hours of this year’s regular legislative session came with high drama on property taxes — with Abbott and Lt. Gov. Dan Patrick taking negotiations public to Twitter and lawmakers waiting on a potential deal for hours after they otherwise would’ve left Monday afternoon. The last day of the session is typically more ceremonial — not filled with tough negotiations on leaders’ top priorities.

At one point, a path to compromise seemed to emerge: sending all $12.3 billion that lawmakers had set aside in the budget for property tax cuts to school districts to lower their tax rates — which would result in all property taxpayers paying a lower rate. Abbott signaled that was his preference in a tweet, but Patrick fired back that it was a nonstarter without a homestead exemption boost sought by Senate Republicans.

[Gov. Greg Abbott calls immediate special session to address property taxes and border issues]

“This is not acceptable to the Senate,” Patrick said.

After hours of suspense, Texas House Speaker Dade Phelan gaveled out Monday — adjourning the chamber for the session, though he told House members to expect Abbott to call them back soon.

Phelan told House lawmakers that he expects “a proclamation from the governor in the next 12 hours, so I would not pack your bags just yet.”

In the Senate, Patrick had a similar message before adjourning the chamber.

“I would encourage you to stay close,” Patrick said.

Abbott made it official a few hours later on Monday night, and lawmakers will return on Tuesday.

“Texans want and need a path towards eliminating property taxes,” the governor said in a statement. “The best way to do that is to direct property tax reduction dollars to cut school property tax rates.”

Texas Republicans came to Austin this year with a big promise to use a sizable chunk of the state’s nearly $33 billion budget surplus to cut property tax bills for homeowners and business owners. Abbott made property tax cuts a pillar of his reelection campaign last year and vowed that the state would put half of its surplus toward tax cuts. But for months, lawmakers couldn’t come to terms on just how to do so.

For much of the session, the heart of the dispute was Phelan’s proposal to tighten the state’s appraisal cap and extend the benefit to owners of business properties like grocery stores, apartment complexes and movie theaters. Phelan backed the idea in response to complaints from homeowners and business owners about their rising appraisals, which they fear will result in higher tax bills.

But the House’s proposal was a nonstarter for Patrick and his chief tax-cut writer, Paul Bettencourt, a Senate Republican from Houston who argued that appraisals don’t play as big of a role in determining property tax bills as they used to, owing to state laws passed in 2019 that limit how much local governments and school districts can collect each year.

The appraisal cap proposal also horrified tax policy experts from across the political spectrum who warned that the idea would have substantial negative side effects while doing little, if anything, to actually lower property owners’ taxes. Tightening the appraisal cap, critics added, would lead to major inequities among homeowners and business owners, plus higher housing costs.

But the House wound up dropping the cap proposal by the last day.

The biggest stumbling block to a final deal was the Senate’s refusal of any agreement that didn’t include an increase in the state’s homestead exemption on public school taxes — the portion of a home’s value that can’t be taxed by school districts. The idea was popular in both chambers but was left out of the final proposal under the $12.3 billion plan backed by Abbott and the House.

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