Title: Texas Governor Abbott Signs $18 Billion Property Tax Cut, Stirring Relief and Controversy
Texas Governor Greg Abbott has officially signed into law an $18 billion tax cut aimed at benefiting property owners in the state. This move has sparked a mix of relief and controversy among Texas residents. The tax cuts, which will be subject to voter approval later this year, are expected to provide significant financial relief to homeowners, smaller businesses, and other nonhomesteaded properties.
The tax cut package utilizes $12.6 billion from the state’s budget surplus to lower school taxes for all property owners. It is projected to reduce property taxes by over 40% on average for approximately 5.7 million Texas homeowners. Additionally, it introduces new tax savings for smaller businesses and commercial and nonhomesteaded properties.
Governor Abbott signed Senate Bill 2, known as the property tax cuts bill, and Senate Bill 3, a franchise tax relief bill, after weeks of negotiations between the state’s top Republicans. House Joint Resolution 2, the third measure, will be presented to voters in a constitutional election scheduled for November. The approval of this resolution is crucial for the tax cuts to take effect this year.
At a time when Texas has one of the nation’s highest property tax rates and lawmakers face immense pressure to alleviate financial burdens for their constituents, the tax cut initiative serves as a centerpiece for Governor Abbott’s 2022 reelection campaign and resonates with many state lawmakers.
The most significant component of the package is a $5.3 billion expansion of the state’s homestead exemption. This increase raises the amount that cannot be taxed to pay for public schools from $40,000 to $100,000. On average, homeowners, known as homesteaders, can expect to save around $1,300 per year in property taxes due to the combined effect of the new exemption and school tax cuts. Moreover, seniors and property owners with disabilities will experience additional cuts, leading to an average annual savings of approximately $170.
One notable feature of the tax cut plan, introduced for the first time on Monday, is a temporary 20% cap on appraisal increases for properties valued at $5 million or less, excluding homesteads. This provision applies to second homes, vacation properties, rental houses, and commercial retail or business properties.
Apart from the $5 billion approved four years ago, the legislation will allocate nearly $12.6 billion to reduce the school property tax rate by 10.7 cents per $100 valuation for all homeowners and business properties. These funds will be distributed to school districts, enabling them to lower taxes for property owners while shifting a portion of their maintenance and operations costs to the state. However, critics argue that the package does not provide any new funding for schools, highlighting that Texas ranks near the bottom in per-student education spending compared to other states.
While the tax cut proposals primarily focus on property owners, there has been no targeted tax relief for the state’s 3.7 million renter households included in the legislation passed by both chambers. House Democrats attempted to introduce their own versions of tax relief. Among these proposals was a tax-cut package sponsored by Representative John Bryant, which aimed to provide cash refunds to tenants equivalent to 10% of their previous year’s rent. Furthermore, it sought to increase the homestead exemption to $200,000, double the current bill, and allocate additional funds for teacher pay raises and increased school funding.
Governor Abbott’s decision to sign the $18 billion property tax cut bill has elicited a mix of reactions. Supporters applaud the substantial relief it offers to homeowners and smaller businesses, easing their financial burdens. However, critics argue that the package fails to address the crucial issue of inadequate education funding in the state. Texas will now head towards the constitutional election in November, where voters will have the final say on whether these tax cuts will be implemented.
