Leading into the 88th Texas Legislative Session, the Texas Comptroller announced a surplus of $32.7 billion, leaving lawmakers to deliberate over the allocation of the surplus funds. Gov. Greg Abbott made alleviating property taxes a top priority in his State of the State Address, calling for record-breaking property tax cuts. On March 22, the Senate announced it had approved $16.5 billion worth of tax cuts, unanimously passing three property tax relief proposals prioritized by Lt. Gov. Dan Patrick. The target for both the House and Senate appeared to have been and be around $15 billion of which encompasses past tax relief, tax compression and increasing the homestead exemption.
A handful of organizations have been advocating for fiscal responsibility from Texas lawmakers and using a large portion of the surplus to alleviate property taxes. One of these organizations, Texans for Fiscal Responsibility (TFR), argues that property taxes are not proportional to the population size and inflation rate. In TFR’s Texas Prosperity Plan, they state that since the start of the 21st century, the state’s budget has increased by almost 170% while the population has only grown by 40%. TFR argues that due to a combination of government overspending and current inflation rates driving up cost of living rates, Texans are drowning and action must be taken.
"TFR has made the restoration of private property rights of all Texans by eliminating the property tax a policy priority," TFR President Tim Harden told Lone Star Standard. "This starts with phasing out the school M&O portion of the property tax by using the existing budget surplus to compress the school M&O tax rate and move it to GR. Although we commend the efforts of both the Texas Senate and House in providing property tax relief during the ongoing legislative session, neither of them have made eliminating the school M&O portion of the property tax a priority. To make matters worse, both are playing games with the overall amount of purported property tax relief as they have chosen to incorporate the previously added tax relief to fluff up their current overall number."
"We believe the reason for doing so is in an attempt to hit the $15 billion target in relief in order to claim it as the largest property tax break in Texas history. There are two problems with this. 1) They are using old compression to make it appear as they are offering at least $15 billion in relief, but the reality is both legislative chambers fall short when that number is subtracted and the real amount of relief is revealed. 2) The actual number for the biggest property tax cut in Texas history: When you adjust for inflation is just under $20 billion. Adjusting for inflation is a normal practice that takes place in almost all budgets in Texas, as well as office allocations in both legislative chambers. Why would we not want to be consistent here? TFR favors compression above all other methods of tax relief and neither legislative chamber is offering enough. We ask the Texas Legislature to come through for Texas taxpayers this legislative session. They have a historic opportunity to offer at least $20 billion in compression to hit the historic mark. We see this as the minimum that can be done overall, as there is a $32.7 billion budget surplus, representing an overcollection of tax dollars, that can be used to restore private property rights to all Texans."
A recent Texas Public Policy Foundation (TPPF) research paper argued that increasing the homestead exemption is not the better route for lawmakers. The paper stated that tax compression is “superior” and would be more effective statewide. When the paper was published in February, both the House and Senate had proposed $3 billion to go toward raising the homestead exemption from $40,000 to $70,000. TPPF found based on housing data that “at least 35 counties would still pay higher taxes, given the projected appreciation for the average home for next year surpasses the homestead exemption increase.”
TPPF’s research paper showed that using a significant portion, 90%, of surplus funds for property tax compression (buying down school district maintenance and operations tax) through the 2028-29 biennium would eliminate school district M&O property taxes, which make up more than half the total property tax levy. The plan put forward by TPPF would require the state to manage its spending and follow rules that were put in place last session like “population times inflation.”
On Jan. 17, Abbott delivered his State of the State Address saying, “We now have the largest budget surplus in the history of our state, but make no mistake, that money does not belong to the government. It belongs to the taxpayers.” Abbott continued, “We will use that budget surplus to provide the largest property tax cut in the Texas history.”
According to the TPPF the largest property tax cut on record is $14.2 billion for the period of 2008-09. That same tax cut, if adjusted for inflation, would be worth $20 billion today.
