The Texas Senate swiftly passed its first budget item, approving billions in new property tax relief through the homestead exemption and tax rate compression.
Senators voted 30-0 to pass Senate Bill 4 by State Sen. Paul Bettencourt (R-Houston) to provide property tax relief under the Senate’s preliminary budget proposal, SB 1.
Just two days earlier, lawmakers on the Senate Committee on Local Government heard testimony on SB 4 before unanimously sending it to the full Senate.
The measure passed Thursday alongside its companion, Senate Joint Resolution 2, a proposed constitutional amendment that would codify the changes made by SB 4 if voters approve it in November.
“This follows on the passage of SB 2 in 2023—the now record $22.7 billion property tax reduction passed by the Texas Legislature … which included an increase to the current homestead exemption level of $100,000,” said Bettencourt. “It was approved by the voters by an astonishing 83 percent of the vote in 2023. So, we’re back with another increase.”
SB 4 would raise the homestead exemption to $140,000 for adults and $150,000 for seniors and those with disabilities, for an estimated $3 billion in relief designated as contingent in SB 1.
In addition, the measure would approve another estimated $3 billion for school districts already outlined in SB 1 to reduce their tax rates, bringing the average school district tax rate from $0.9766 to $0.9086.
Known as tax rate compression, the process involves “paying down” the school district tax rate with state revenue—largely state sales taxes. For SB 4, this is done to disincentivize tax rate hikes on homeowners in response to the increase in the homestead exemption.
Bettencourt’s office estimates that SB 4’s homestead exemption increase and rate compression would save the average Texas home around $496 in annual school property taxes.
“We saved … $1,266 for the average homeowner in Senate Bill 2. So, we’re now topping $1,762 in tax relief in just two sessions for Texas homeowners. That’s over $150 a month that they don’t have to pay,” continued Bettencourt.
Bettencourt proposed floor amendments to clarify the cost of the homestead exemption and ensure that appraisal districts, tax assessor-collectors, and others will notify homeowners of the $140,000 exemption.
State Sen. Lois Kolkhorst (R-Brenham) said she believes SB 4 will benefit the average homeowner. However, she expressed concerns that the Senate has not done enough to combat out-of-control appraisal districts, which could offset the effects.
“What good is it if we give more of a homestead exemption, but my appraisal goes up? Or the other taxing entities go up? So, in the end, it’s what’s coming out of my pocketbook—your wallet, my purse. And how do we make that right?”
Bettencourt responded: “The first tax cut … we checked two years into Harris County, and $944 of that ISD [Independent School District] tax cut remained. That was after two years of appraised value growth.”
That is without even considering the savings generated by later increases to the homestead exemption, according to Bettencourt.
Before 2023, the amount a homeowner could deduct from the value of his or her house before it was taxed was $40,000. Before 2021, that amount was $25,000, and before 2015, it was $15,000.
Kolkhorst clapped back.
“I certainly appreciate the history lesson there,” said Kolkhorst. “What I would like to say is, don’t take a victory lap today because our work is really just beginning on what we can do on this.”
The two proceeded to butt heads over the effectiveness of the appraisal district reform outlined in SB 2. Since its implementation in 2023, both Harris County and Travis County have still raised property taxes by nearly nine percent.
State Sen. Kelly Hancock (R-North Richland Hills) called the lingering issues in recent appraisals a “learning curve” and noted that in his jurisdiction in Tarrant County, “they actually lowered rates this year.”
“And so while many of you that represent Harris County and many of you that may represent Travis County may have your homeowners complaining to you, I’m pleased to live in Tarrant County,” said Hancock.
State Sen. Joan Huffman (R-Houston) highlighted Comptroller data from December, showing that while school district taxes as a percentage of total tax levies went down between fiscal years 2022 and 2023, tax levies from other jurisdictions went up.
“I think it’s critically important that we try to get a handle on what’s going on at the local level,” pleaded Huffman.
The Senate adjourned until Tuesday, February 18, at 11:00 am.
Lt. Gov. Dan Patrick stated after the vote that “it is clear Senators from both sides of the aisle understand that when an increased Homestead Exemption and more compression are combined, homeowners receive maximum tax relief benefit.”
Andrew McVeigh, president and CEO of Texans for Fiscal Responsibility, told Texas Scorecard the organization supports SB 4 but stressed that “relief efforts like the homestead exemption tend to only provide temporary relief, if any, and shifts the tax burden to other taxpayers.”
“We encourage the Legislature to take up Gov. Greg Abbott’s emergency legislative priority and expand relief through tax rate compression, which provides longer-term relief to all property owners, as well as provides most of the State’s surplus back to taxpayers,” stated McVeigh.
“That, in conjunction with other reforms such as requiring voter approval for any new property taxes and reigning in government spending, will help put Texas on a pathway to property tax elimination so Texas families can truly own their property,” he added.
SB 4 and SJR 2 will now be sent to the House, which has developed its plan for property tax relief in House Bill 1—the chamber’s preliminary budget proposal.
The House plan notably includes no increase to the homestead exemption and roughly $6.5 billion in total tax compression, with $3.5 billion contingent upon new legislation.
