Skip to main content
Texas Legislature 2019

Analysis: Property tax relief — but not for all Texas taxpayers

Giving every property owner in Texas a significant tax cut is expensive, but there are less ambitious plans under consideration along with the big ones.

Lead image for this article

Texas Legislature 2019

The 86th Legislature runs from Jan. 8 to May 27. From the state budget to health care to education policy — and the politics behind it all — we focus on what Texans need to know about the biennial legislative session.

 More in this series 

Editor's note: If you'd like an email notice whenever we publish Ross Ramsey's column, click here.

Cutting taxes is expensive.

And there are not many viable options for state leaders hoping to reduce Texans’ property tax bills. Raising sales taxes to cut property taxes ­— an approach proposed by the public education chairmen in the House and Senate — ­­isn’t the only way to get there.

You can always increase the size of homestead exemptions, giving homeowners a path to lower taxes without giving the benefit of that tax loophole to renters or to business property owners — one option the Texas Senate is working on.

But it looks like a dinky tax cut.

This one would add $10,000 to the state’s mandatory homestead exemption — meaning a total of $35,000 would be deducted from the value of your home for taxable purposes instead of the current $25,000.

That works out to be a tax reduction of just about $230 per year, given the state comptroller’s estimated average property tax rates for school districts, cities and counties in Texas. That’s under $20 a month; it’s not nothing, but it’s not the kind of property tax break some voters have demanded.

They’d get the money by diverting some of the oil and gas severance taxes that now go into the economic stabilization fund — the fancy-pants name for the state’s savings account. That diversion, over the first two years, would total $1.49 billion, according to the fiscal note on Senate Bill 5.

Even if you think it’s good policy to divert rainy day money that’s generated from a tax on business to give a minimal tax break to homeowners, it’s a questionable political move.

The recipients might never even spot the windfall, spread over a year’s mortgage escrow payments and maybe consumed quickly by tax increases and rising property values. It could anger some, particularly if lawmakers leave Austin crowing about tax cuts, creating expectations that taxpayers are in for something really good.

This is the problem with property tax relief. It’s expensive.

This particular plan is not only smaller than some others, but it has a smaller impact on a much smaller group of property owners.

Another idea, floated in the House by state Rep. Dan Huberty, R-Houston, and in the Senate by state Sen. Larry Taylor, R-Friendswood, would cut school property tax rates by about 20 cents, which would cut the taxes on $250,000 in taxable property by $500. That’s great, but it would cost around $5 billion, and the money would come from a one-penny increase in the state’s already high sales tax.

When it comes time to vote in 2020, the danger of a big tax swap is that taxpayers won’t remember the property tax that was cut but will remember the sales tax that went up. The danger in the homestead exemption is that it’s small; that it ignores renters, commercial and industrial property taxpayers; and that it redirects money that now goes into the state’s savings — even as lawmakers are using that account to cover costs from Hurricane Harvey, catch up on teacher pensions and handle other one-time “emergency” expenses.

Business groups want an across-the-board tax cut, if there is a tax cut. Some are also pushing an idea — “compression” — that’s in the House’s school finance package and was also in the report from the governor’s commission on school finance. It doesn’t cut taxes, but it adjusts school finance formulas so that increases in property value benefit local school districts instead of the state’s budget. Right now, when property values increase faster than enrollment, state funding drops. If those value increases were used to “compress” or lower tax rates, with the state making up the lost funding, it would lessen pressure to raise local property taxes.

“Property taxes are still too damn high,” said Dale Craymer, president of the Texas Taxpayers and Research Association, which represents businesses on fiscal policy. “But at least they wouldn’t be getting higher as fast.”

So far, limits on property tax increases have dominated lawmakers’ attention more than cuts. A Senate committee approved a bill that would require voter approval of property tax revenue increases of more than 2.5 percent, but that’s languishing on the Senate calendar, for now, for lack of support. A House committee could act as early as today on a related bill.

But note the caveat above: “It doesn’t cut taxes.”

Limiting future increases might help make future property tax increases less onerous, but a lot of Texas lawmakers are scratching around for ways to give taxpayers a noticeable cut in the price of government. They’ve proposed other ideas, like raising sales taxes on gasoline — on top of the gas tax already in place — to letting local voters swap out property taxes for local sales tax increases. Some proposals get more attention than others, but it would be a leap to say anything has really caught on. And there is significant support in the Legislature for using any available money not for tax cuts but for public education.

It’s hard to sort out, Craymer acknowledges. “Some people call it crazy,” he said. “I call it March.”

Disclosure: The Texas Taxpayers and Research Association has been a financial supporter 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.

Quality journalism doesn't come free

Yes, I'll donate today