With only months before the next legislative session, advocates are urging lawmakers to explore ways to decrease or reform Texans’ property taxes.
They spoke before the Senate Finance Committee on Wednesday, where topics ranged from increasing the homestead exemption to tax compression to eliminating property taxes altogether.
Texas Taxpayers and Research Association President Jennifer Raab and Vance Ginn of the Ginn Economic Consulting Firm were among the first to speak at the hearing.
Raab expressed skepticism about raising the homestead exemption, which is the amount a homeowner can take off the value of the house they live in before it is taxed.
Currently, the exemption sits at $100,000—a $60,000 increase that came into effect when Gov. Greg Abbott signed Senate Bill 2 last year.
She argued that SB 2, while mostly good, created a “burden shift” in the tax system from individual taxpayers to businesses
“In 2023, 43 percent of homestead value was on the tax rolls, and 93 percent of business property was on the tax rolls. And since general revenue is the only source of money to fund that relief, that’s what makes this a part of the structural problem. This is a setback for attracting capital investment that the state wants,” said Raab.
The general revenue funding relief that Raab is talking about comes primarily from state sales tax, which is then given back to school districts so they can decrease the rates of local maintenance and operations taxes in a process known as “tax compression.”
Instead of raising the homestead exemption, Raab recommended to lawmakers that other avenues be considered, like exempting some business personal property alongside the existing homestead rate.
State Sen. Paul Bettencourt (R-Houston) took issue with some of Raab’s calculations in her testimony. He noted that Senate Bill 3 exempted 67,000 additional businesses from franchise tax obligations to free up roughly $600 million.
“We should probably get credit for that in your calculation,” Bettencourt told Raab.
Ginn, unlike Raab, called for more aggressive methods to cut property taxes. He suggested that instead of increasing the homeschool exemption, lawmakers should consider capping property taxes to a no-new-revenue rate, freezing local M&O taxes, and cutting spending.
“Property taxes are not just a financial burden, they are fundamentally immoral,” stated Ginn.
He added that the current “system makes it difficult for families with lower fixed incomes to build and pass on a legacy.”
“Last session, despite a $32.7 billion surplus by the state, new property tax relief was limited to just $12.7 billion. … Although this was the second-largest tax relief amount in Texas history, property taxes increased by $165 million last year from excessive spending by local governments,” Ginn continued.
John Bonura, a policy analyst for the Texas Public Policy Foundation’s Taxpayer Protection Project, pointed out Texas’ current ranking as the state with the sixth-highest property taxes in the country and urged lawmakers to utilize more tax compression.
“Last year, when the historic property tax bill was passed of $18 billion, much of that was spent on tax rate compression and the homestead exemption. If there were to be a change-off between those proportions, we would favor heavily leaning … to tax rate compression as opposed to furthering the homestead exemption,” explained Bonura.
Bonura also explained that the Taxpayer Protection Project is dedicated to seeing reforms in how M&O rates are changed by localities, including lowering the threshold to trigger a voter-approved tax rate election.
During Texans for Fiscal Responsibility President Andrew McVeigh’s testimony, he recommended that “going forward, putting Texas on a permanent path to eliminating school M&O property taxes must be the objective.”
“First, reverse the trend of rapid state spending increases by freezing state appropriations and cutting spending, and thereby growing the surplus that is available for tax relief,” outlined McVeigh. “Second, curtail local government spending by capping spending increases at least to the rate of population growth plus inflation at a minimum.”
Like Ginn, McVeigh suggested that school M&O taxes be frozen. He additionally proposed that the Legislature use 90 percent of future surplus revenue to compress M&O rates “until the tax is eliminated entirely.”
McVeigh was joined by TFR contributor Bill Peacock during his public testimony, who highlighted the growing property tax burden in Texas.
While property tax revenue is up $20 billion since 2018 and even increased in 2023—despite the tax relief bill—Peacock noted that “real income is down during this period.”
His solutions are similar to McVeigh’s: freeze the school M&O property tax levies, require local taxing entities to get voter approval for increases in property tax revenue, and limit state spending growth to two percent annually so 90 percent can be used to pay down M&O.
The decision to host a hearing on the homestead exemption and other property tax relief comes several months after Lt. Gov. Dan Patrick tasked the Senate with looking into the costs involved in eliminating property taxes.
“Come January 2025, the Senate will hit the ground running at the start of the 89th legislative session,” wrote Patrick in an April news release. “The priorities of the conservative majority of Texans will be accomplished, including school choice, continued property tax relief and strengthening the power grid.”
