A Texas Senate committee on Tuesday swiftly and unanimously permitted a measure geared toward easing the burden of excessive property taxes for householders throughout the state. The proposal seeks to offer billions in tax aid by growing the homestead exemption for varsity district property taxes.
Senate Invoice 4, the Senate’s flagship property tax-cut measure, would increase the state’s homestead exemption from $100,000 to $140,000. This implies householders would see a bigger portion of their property worth shielded from faculty district taxes. The Senate Native Authorities Committee gave the inexperienced mild to the invoice with a 6-0 vote, sending it to the total Senate for additional consideration.
“That is actual cash for people to maintain them of their houses,” mentioned Sen. Paul Bettencourt, a Houston Republican and the invoice’s writer.
Property tax aid stays a excessive precedence for Texas lawmakers this yr, with Gov. Greg Abbott designating tax cuts as an “emergency merchandise.” This designation permits for expedited legislative motion, and Abbott has urged lawmakers to allocate billions towards lowering property tax burdens. The Senate’s proposed finances contains $3 billion particularly to extend the homestead exemption over the following two years. In keeping with estimates from the Legislative Funds Board, the exemption enhance may price the state $7.7 billion by 2030.
Along with elevating the homestead exemption, legislators plan to allocate one other $3 billion to highschool districts to assist decrease native tax charges—honoring commitments made in prior legislative classes. If these measures had been in place final yr, a Texas house owner paying the common faculty district tax fee would have saved roughly $528, based mostly on a Texas Tribune evaluation.
Texas constantly ranks amongst states with the very best property taxes, a consequence of its lack of an earnings tax. Native governments rely closely on property taxes to fund important companies similar to public schooling, regulation enforcement, and infrastructure. Between 2010 and 2023, the median property tax invoice for Texas householders surged almost 30%—outpacing the nationwide common almost threefold, in accordance with U.S. Census Bureau information.
Republican lawmakers have lengthy sought to rein in rising property tax payments, culminating in final yr’s passage of $12.7 billion in tax cuts. That package deal included a rise to the homestead exemption and billions in funding for varsity districts to decrease property tax charges. In keeping with a Texas Tribune evaluation, many owners throughout the state have begun to see the advantages of these cuts, alongside different tax aid measures carried out since 2019.
Nevertheless, property tax collections by faculty districts rose once more in 2024 after a brief decline the earlier yr, in accordance with estimates from the Texas Comptroller’s workplace. Moreover, tax payments for householders in Harris, Travis, and Dallas counties continued to rise, partly as a result of growing property values. Some native jurisdictions in Harris and Travis counties additionally raised tax charges, additional including to the burden.
Whereas the homestead exemption enhance will instantly profit householders, Texas’ 4.2 million renter households aren’t eligible for comparable aid. Tenants successfully contribute to property taxes via their hire funds, however state regulation doesn’t present direct tax aid to them. In response to a query from Sen. Molly Prepare dinner, a Houston Democrat, Bettencourt argued that landlords would go alongside financial savings from tax cuts to renters in an effort to stay aggressive. He pointed to slowing hire development in main Texas metros, with Austin experiencing almost two years of declining rents.
Supporters of the invoice say the elevated exemption would supply much-needed aid to householders grappling with rising housing prices, together with greater property insurance coverage charges. Advocates additionally argue that it may make homeownership extra attainable for Texans struggling to enter the housing market.
“It’s not a panacea, but it surely definitely makes a distinction,” mentioned Dixon Holman, an Arlington actual property agent and board member of Texas Realtors.
Nevertheless, some analysis means that growing tax exemptions may have unintended penalties. A research from New York College and the College of Hamburg discovered that bigger tax breaks could discourage householders from promoting, lowering housing stock and driving up house costs. Whereas Texas presently has extra houses available on the market than in the course of the COVID-19 pandemic, the state nonetheless faces a major housing scarcity.
The Senate has additionally allotted $500 million for enterprise tax cuts, although the specifics of that plan stay unclear as the required laws has but to be filed.
In the meantime, the Texas Home has but to disclose its strategy to property tax reform this session. With newly elected Home Speaker Dustin Burrows, R-Lubbock, nonetheless within the means of forming committees, legislative motion within the Home stays on maintain. How the decrease chamber will deal with property tax cuts stays to be seen because the session progresses.
