Texas Republicans want more property tax cuts. Here’s how they may do it.

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DALLAS — Texas’ top officials have pledged to cut property taxes for homeowners and businesses this year, building on a mammoth package of tax cuts lawmakers passed two years ago.

Signaling his urgency around the matter, Gov. Greg Abbott on Sunday declared property tax cuts an “emergency item” for the Texas Legislature — a label that enables lawmakers to fast-track legislation. He called on state legislators to put $10 billion toward cutting property taxes.

“Texans are facing an affordability crisis,” Abbott said in a video published Sunday. “That’s especially true as it concerns the affordability of owning a home or renting a home. And one reason for that crisis is because of skyrocketing property taxes.”

Texans pay among the highest property taxes in the country — in part because the state doesn’t have an income tax and relies heavily on property taxes to pay for public schools and other public services.

Texas Republicans have been on a crusade the past six years to rein in property taxes. That push reached a high-water mark in 2023 when lawmakers adopted a massive $18 billion tax-cut package, including substantial breaks for homeowners.

There's an appetite for more. Half of Texans surveyed in January by the Hobby School of Public Affairs at the University of Houston want lawmakers to use the state’s $24 billion budget surplus to send more tax relief to homeowners.

“Property taxes people pay is a concrete issue that affects every homeowner’s life directly,” said Mark Jones, a political scientist at the University of Houston. “Even if the relief isn’t huge, it’s relief – especially if it’s reducing what might have otherwise been.”

State lawmakers don’t have as much money to plug into tax cuts as they did two years ago.

Texas still boasts a budget surplus, but it’s not as large as the $33 billion the state had heading into the 2023 legislative session. Lawmakers have set aside $6 billion in the state’s upcoming two-year budget to put toward new tax cuts. Of that, $3 billion is already spoken for — leaving $3.5 billion for lawmakers to toy with. Given Abbott’s decree to spend $10 billion, lawmakers will likely be under pressure to find more money to pay for cuts.

Lt. Gov. Dan Patrick, who leads the Texas Senate, has made his opening bid for what should be done with that $3.5 billion: a boost in the state’s main tax break for homeowners and targeted tax cuts for businesses. House lawmakers under new Speaker Dustin Burrows haven’t yet unveiled their banner tax-cut proposal, which is in the works.

Lawmakers have sunk tens of billions of dollars — and a lot of political capital — into curtailing the state’s high property taxes. Of the state’s upcoming $333 billion budget, legislators expect to spend upwards of $51 billion to maintain existing tax cuts, including to property taxes, and enact new ones over the next two years. For roughly every six to seven dollars the state plans to spend in the next two years, one dollar will pay for tax cuts.

Texas doesn’t collect property taxes; school districts and local governments do. Texas lawmakers in recent years have sent billions of state dollars to school districts, which make up the bulk of a given property owner’s tax bill, to replace funds that otherwise would have been collected via property taxes — compelling districts to lower their tax rates.

That price tag speaks to how difficult and expensive it is to cut property taxes, said state Sen. Paul Bettencourt, a Houston-area Republican who is Patrick’s chief lieutenant on the property tax issue.

That amount “basically says that we just need to continue to make progress,” Bettencourt said. “But it's not like there's some giant panacea out there that if we just, oh, spent one more billion dollars, everything's going to go away.”

For others, putting so much money toward cutting property taxes is a shaky proposition. Texas has seen massive budget surpluses amid strong economic growth in recent years — which lawmakers have used to fund tax cuts. That money won’t always be there, said Shannon Halbrook, a fiscal policy expert at the left-leaning Every Texan.

“There's going to be an economic downturn, there always is,” Halbrook said. “And then we're going to be stuck holding the bag on these tax cuts. More tax cuts are, I think, irresponsible in the long term.”

Recent tax cuts 

Two years ago, state lawmakers passed $12.7 billion in new tax cuts. That included a big boost in the state’s main tax break for homeowners. The state also sent billions of dollars for school districts to drive down the amount of taxes they collect from property owners.

Those efforts appeared to translate into lower tax bills for homeowners in 2023, according to a Texas Tribune analysis of homeowners’ tax bills.

Signs abound that tax bills are on the rebound. After falling by more than 10% in 2023, schools’ property tax collections grew by more than 6% last year, according to estimates from the Texas Comptroller’s office.

The typical Dallas County homeowner, for example, saw their tax bill fall by about 7% in 2023, according to a Tribune analysis of appraisal and tax rate data. But that bill grew by about 10% in 2024, adjusted for inflation. Local tax rates have fallen for several years, said John Ames, Dallas County tax assessor-collector. But growth in property values in 2024 ate into those gains.

“If you're in a zone where the properties are just selling like crazy and the values are going up year after year, it doesn't matter how much they lower the tax rate,” Ames said. “Your taxes are going to go up.”

What’s on the table this year?

Lawmakers in the House and Senate expect to send an additional $3 billion to school districts over the next two years so they can bring down their tax rates — a cost lawmakers committed to in previous sessions.

The price tag lawmakers are weighing for brand new property tax cuts is significantly less than it was two years ago — $3.5 billion, compared with $12.7 billion in 2023.

One reason for that: The tax cuts lawmakers enacted in 2023 cost about $4.7 billion more than they anticipated, owing to a mathematical error by the Texas Education Agency.

For tax-cut proponents, that news is a mixed bag. On one hand, lawmakers cut taxes more than anticipated. On the other, the state now must pay for that amount going forward — and there’s less wiggle room this legislative session to enact new cuts, about $3.5 billion.

The Senate’s main tax-cut proposal would use $3 billion to expand the state’s primary tax break for homeowners — its homestead exemption on school district taxes, which exempts a portion of a home’s value from being taxed by public schools.

Senate lawmakers want to boost that exemption from $100,000 to $140,000. The owner of a home valued at the median sales price last year — $339,000 — would have saved about $393 on their 2024 taxes had the additional homestead exemption been in effect, according to a Texas Tribune calculation.

Senate budget writers have also set aside $500 million to pay for tax cuts for businesses.

House lawmakers haven’t laid out their proposal for how to use the $3.5 billion. Burrows, who previously chaired the chamber’s tax-writing committee, said he is “working with House members to identify additional funding for property-tax relief within our base budget.”

“As Speaker this session, it is now up to my colleagues in the House to hammer out the details of a tax-cut package and work with our counterparts in the Texas Senate to provide all Texans with meaningful property-tax relief,” Burrows said in a statement.

What other ideas will gain traction remains to be seen.

Abbott on Sunday called on lawmakers to make it harder for local governments to raise their property tax rates — requiring cities and counties to get approval from a two-thirds majority of voters if they want to hike rates. City and county tax rates have fallen on average since 2019 — when state lawmakers passed legislation aimed at slowing growth in tax bills and driving down tax rates.

Some legislators have once more introduced proposals to limit how quickly property values can grow as a means to slow rising tax bills — a notion that tax-cut experts and proponents across the political spectrum is a bad idea. Lawmakers have long been drawn to the idea because homeowners and property owners routinely complain about rising appraisals, which they perceive as the root cause of their growing tax bills. Senators and House members have introduced bills to reduce the state’s cap on annual increases to a home’s taxable value from 10% to 5%.

“We think the goal should be to lower property taxes overall and appraisal caps don't do that,” said Jennifer Rabb, who heads the business-backed Texas Taxpayers and Research Association. “They only shift one person's property tax over to another person.”

Some conservative lawmakers have long dreamed of getting rid of property taxes altogether — and have once more filed long-shot bills to do just that.

Eliminating property taxes would be prohibitively expensive. Texas would need to spend about $81.5 billion a year to get rid of property taxes collected by school districts, cities and counties, the Legislative Budget Board told Senate lawmakers last year. Legislators would likely have to significantly hike the state sales tax — an idea that has proven politically toxic in the past, in part, because doing so would fall hard on lower-income families.

Unlikely to see direct tax relief are the state’s 4.2 million renter households. Though tenants pay property taxes via a portion of their monthly rent, Texas doesn’t provide direct tax relief to renters as some other states do. Tax-cut proponents have argued that landlords pass along benefits from property tax cuts to renters to stay competitive.

Disclosure: Every Texan, Texas Taxpayers and Research Association and University of Houston 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.