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In Texas House, property tax proposals range from minor tweaks to abolishment

After a proposal to give a property tax exemption to Purple Heart recipients hit a snag on the House floor Monday, a committee considered a more radical idea: eliminating school district property taxes altogether.

State Rep. Matt Schaefer, R-Tyler, speaks with his House colleagues Rep. Carol Alvarado, D-Houston and Rep. Drew Darby, R-San Angelo, at a Texas Tribune events at the Austin Club on July 19, 2017. 

*Correction appended.

Last week, amid a flurry of votes on more than a dozen other issues, the Texas Senate passed its main measure addressing Gov. Greg Abbott's call to reform the laws related to property taxes.

On Wednesday, members of the House took a far more expansive approach, considering proposals ranging from the narrow (carving out a new exemption for Purple Heart recipients) to the explosive (abolishing school property taxes altogether).

And with only two weeks left in the special session, challenges remain in getting many of these proposals to Abbott's desk.

Take House Bill 72. There was pushback Wednesday on the legislation, which would let voters decide whether Purple Heart recipients should get property tax exemptions. State Rep. Scott Sanford successfully amended the bill to only allow spouses married to Purple Heart recipients at the time of the soldier's injury to receive the tax benefits.

“Because we have so many gold diggers looking for Purple Heart recipients?” state Rep. Nicole Collier, D-Fort Worth, cracked.

“We don’t want people to go shopping for tax exemptions,” answered Sanford, R-McKinney. 

State Rep. Matt Schaefer had broader concerns with the bill, which he argued “gets into making value judgments about people’s service. And that’s an impossible task for this body.” The Tyler Republican also questioned what the cost would be to the cities who would lose property tax revenues from Purple Heart recipients' properties. He then tried to amend the bill to extend the exemptions to the children of Purple Heart recipients. 

State Rep. Dwayne Bohac ultimately withdrew the bill and a related resolution. He said he would bring them back to the floor on Friday. 

"We don't want to make a mockery of this bill," the Houston Republican said.

State Rep. Dennis Bonnen, chair of the House Ways & Means Committee which deals with property tax proposals, fared better with his House Bill 32, which would overhaul several aspects of the property appraisal and notice processes in an attempt to help Texans better understand how property values and tax rates each contribute to their tax bills. 

One of the key provisions would require local governments to announce a “no-new-revenue” tax rate each year and compare it to the rate they’re actually proposing. Taxpayers would get that information ahead of time so that they could intervene with local governments before the rates were finally set. The lower chamber gave initial approval to that bill Wednesday. 

“This will be the most clear and simple process we’ve ever had in the area of property taxes,” Bonnen said. 

That legislation is among dozens of property tax and appraisal bills the lower chamber is still working on as the special session heads into its second half.  On Tuesday, Bonnen's Ways and Means Committee dramatically reworked Senate Bill 1, the Senate's leading property tax bill, which could set up another battle between the chambers akin to the one that helped prompt this summer's special session in the first place

In the House version, SB 1 would require cities and counties to hold an election if they plan to increase their property tax revenues 6 percent, regardless of whether they are increasing the actual tax rate or just taking advantage of rising property values. The Senate had set that trigger at 4 percent. Patrick portrayed that version of the bill as something that would provide Texans with “dramatic reductions” in their property taxes.

"It will be the strongest tax reform and tax relief bill ever passed out," Patrick said in an online video this week. 

But the legislation is only poised to slow future tax increases by focusing on the amount of revenues local governments bring in from all existing land and buildings in their jurisdictions. Revenues – and individual tax bills – can rise with property values even if actual tax rates stay flat or are lowered.

During the regular session, Patrick said similar legislation would save the average Texas homeowner $20,000, a claim that fell apart under scrutiny

Bonnen expressed concern that voters will mistakenly expect to see lower property tax bills if any version of SB 1 that becomes law. 

“What’s frustrating is that SB1 doesn’t provide relief, it provides protection, and the last thing I want is property tax payers to believe that we are doing something to reduce or lower their tax burden. We’re not,” Bonnen said. “We don’t have the ability to do that, but what we do have is the ability to give it protections and transparency.”

But Bonnen's Ways and Means Committee could face an impossible battle addressing education funding, which makes up the bulk of property tax bills in Texas. House education leaders have argued the Legislature cannot provide tax relief without addressing school funding. As the state pays a progressively smaller percentage of operating costs for public schools, school districts have had to raise their local property taxes to make up the funding.

The committee Wednesday afternoon considered legislation proposing ways to ultimately get rid of the local property tax altogether, in most cases replacing it with revenue from a higher sales tax. State Rep. Andrew Murr's House Bill 285 would increase state and local sales taxes enough to garner about $22 billion, enough to completely replace property tax revenue school districts collect to operate.

"It won't happen in the special session," the Junction Republican acknowledged.

State Rep. Drew Darby, R-San Angelo, went further: He proposed legislation recommending the complete elimination of the property taxes by school districts as a way to pressure legislators into coming up with an alternative system.

"I don't have the answers, but I know this Legislature relies too heavily on local property taxes to fund our schools, and we need more direction to go forward," he said.

What would replace that funding in the meantime?

“This bill does not give us a plan,” Darby said.

By the end of the day, that committee was slated to have held hearings on 25 property tax bills in addition to the 18 it has already sent on to the House. More than 50 other bills have been referred to the committee.

SB 1 is the only property tax legislation passed from a Senate committee. Two other bills are pending in the upper chamber's Select Committee on Government Reform. But Bonnen isn’t worried that the House is going to leave the Senate little time to consider what could become a bevy of bills headed its way as the special session nears its end. He pointed to how the Senate quickly passed measures addressing nearly all of of Abbott's 20-item agenda in the first part of the session.

“The Senate has proven that it can move anything at lightning speed,” Bonnen said. “So they have more than enough time to do that.”

Correction: An earlier version of this story misidentified the author of House Bill 72.

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