Texas senators on the Local Government Committee have sent approximately $6 billion in new property tax relief proposals to the full chamber for a vote.
State Sen. Paul Bettencourt (R-Houston), who chairs the committee, oversaw its first hearing of the 89th Legislature on Tuesday. After the hearing, members voted 6-0 to advance the proposed increases to the state’s homestead exemption and school tax rate compression.
The billions the committee approved are contingent on funding set aside in the Senate’s preliminary budget proposal, Senate Bill 1. Lt. Gov. Dan Patrick flagged increasing the homestead exemption as a top priority this session, designating it as Senate Bill 4.
SB 4, approved by the committee on Tuesday, would raise the homestead exemption to $140,000 for adults and $150,000 for seniors and those with disabilities, for a total of roughly $3 billion in relief.
The homestead exemption refers to the amount a homeowner can deduct from the value of his or her house before it is taxed. Currently, the exemption is $100,000 for adults and $110,000 for seniors and those with disabilities.
The exemption—only $40,000 prior to 2023 and $25,000 prior to 2021—applies only to school district taxes and does not apply to county, city, or special district taxes.
In addition, SB 4 provides $3 billion for school districts to pay down their tax rates, taking the average school district tax rate from $0.9766 to $0.9086.
The process, known as tax rate compression, is implemented in SB 4 to disincentivize school districts from raising their tax rates on homeowners in response to the increase in the homestead exemption.
The measure also includes a provision guaranteeing that any funding shortfalls resulting from the exemption increase will be fully covered by the state, according to a press release.
Bettencourt’s office estimates that the homestead exemption increase and tax rate compression combined will result in $496.57 in annual school property tax savings for the average Texas homestead. Of that number, approximately $363 comes from the homestead exemption.
“The only way that the taxpayers get this money, in the case of the homestead exemption, will be if the House passes it like the prior homestead bills and the public votes for it. And then, of course, the tax bills will go out with the higher homestead exemption, which generates the actual cut for the homestead exemption of $363,” said Bettencourt at the committee hearing.
James Quintero, policy director for the Taxpayer Protection Project at the Texas Public Policy Foundation, testified before the committee that he fully supports SB 4’s increase to the homestead exemption.
“I actually hope that you do even more,” Quintero told lawmakers, adding that “lawmakers come in with a $24 billion general revenue-related surplus, in addition to an ESF [Economic Stabilization Fund] balance that is expected to reach $28.5 billion by the end of fiscal year 2027.”
“Those are incredible figures that speak volumes about the strength of the Texas economy and the soundness of the policy framework that undergirds it. And I hope the committee today will consider those encouraging features and return at least $10 billion back to taxpayers this session.”
Along with SB 4, the committee passed an accompanying constitutional amendment—Senate Joint Resolution 2—to codify the increase in the exemption.
Beyond raising the homestead exemption and compressing tax rates, the Senate has only committed $500 million in additional tax relief in its preliminary budget proposal. This money is slated to go toward tax cuts for businesses.
The House’s preliminary budget proposal, House Bill 1, includes no increase to the homestead exemption and roughly $6.5 billion in total tax compression, with $3.5 billion contingent upon new legislation.
While senators have held budget-related committee hearings for over a week, the House has not yet assigned members to its committees.
Gov. Greg Abbott already endorsed $10 billion in property tax relief this session during his State of the State address, outdoing the preliminary House and Senate budget proposals.
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