between Lt. gov. Dan Patrick and House Speaker Dade Phelan are growing at odds over how to lower property taxes
The Senate wants to raise the homestead exemption. The House of Representatives wants to tighten the assessment ceiling. The chairmen of both chambers are skeptical about each other’s proposal.
Austin, Texas – (The Texas Tribune)
speaker Dade Phelan and Lt. gov. Dan Patrickthe two leading Republicans in the Texas legislature, have debated how to lower the tax burden on homeowners — with dueling proposals on how to do so and an unclear path to a possible compromise.
Patrick wants to increase the state’s homestead tax exemption — the dollar amount of a home’s value that can’t be taxed — to the school district’s property taxes, with an extra boost for seniors. Phelan advocates tightening the state’s “estimate cap” on how much the value of a homeowner’s primary residence taxed by school districts can increase each year. Each says the other’s proposal wouldn’t lower taxes meaningfully.
Patrick has strongly opposed Phelan’s proposal for a rating cap, and this week threw a spanner in the works by promising not to compromise the idea with the House of Representatives.
“I can’t compromise on what I know isn’t the right policy,” said Patrick, a Republican from Houston. to the Dallas Morning News. “There are other things we can work on with the house, but that…I would say that’s not one of those things because the math is the math.”
Meanwhile, Phelan doubled down on his proposal. The Beaumont Republican hasn’t written off raising the state’s homestead exemption, as Patrick would like, but he did wonder how much relief owners would actually get from it. Phelan argues that tightening the cap would do more to slow or lower the tax burden on homeowners by protecting them from skyrocketing home values.
“It is our job in the Texas Legislature to do everything in our power to maximize tax savings for Texas taxpayers,” Phelan wrote in a comment published Wednesday in The Houston Chronicle.
The standoff between the two chambers is high-stakes. Lowering the state’s property taxes, which are among the highest in the country, has been a cornerstone of the government. Gregory Abbottrunning for reelection last year — and Abbott has pledged to spend at least half of the nearly $33 billion federal surplus on property tax cuts.
Abbott was clear about which idea he prefers, but noted during a San Antonio Chamber of Commerce event earlier this month that he’d heard “countless times on the campaign trail” that home valuations were too high.
Observers believe Abbott won’t let lawmakers leave Austin without putting a tax cut bill on his desk — and could call a special session if the two sides can’t resolve their differences.
“Republicans don’t want to break those promises,” said Brandon Rottinghaus, a political science professor at the University of Houston. “Property tax breaks were the number one topic in the campaign. If they can’t keep that, they’ll not only look stupid for not making it, but like they broke their promise to the Texans.”
Abbott’s office did not respond to an email requesting comment Friday.
Raising the state’s homestead exemption is a key component of the Senate’s $16.5 billion property tax package in this session. The proposal – supported by the state Sen. Paul Bettenhof, a Houston Republican — would increase the value of a home that cannot be taxed by school districts from $40,000 to $70,000, with an additional $20,000 increase for seniors. A homeowner paying the state’s typical school tax rate would pay $341 less on their annual tax bill than they would without the increased exemption; Seniors would save an additional $227.
Senate tax cut advocates argue that a fixed dollar exemption will help homeowners every year, no matter what happens to home values.
“The most powerful tool you have as a tax clerk is a tax exemption,” Bettencourt said during a March 22 debate on the measure. “These exceptions are unprecedented in every respect. This is a historic, unprecedented increase in homeowner tax exemptions in the state.”
But House tax advisors are skeptical of that argument, saying home tax breaks won’t help homeowners in a sizzling housing market like the one in Texas last year. As home values soar, so does the tax burden on homeowners, they say—and the higher a home’s value gets, the less the homestead exemption will be.
Phelan and State Rep. Morgan Mayera University Park Republican who carries the main House tax bill, argue their proposal is tailored to address homeowners’ concerns.
“No one has ever come up to me and said, ‘Morgan, man, we have to do something about our Homestead Liberation,'” Meyer said NBC DFW on Sunday. “But they come and they say to me, ‘Morgan, what’s up with our reviews?'”
Tax-cut campaigners in the House of Representatives want to lower the annual cap on the state’s estimate of the taxable value of a home from 10% to 5% — and expand the benefit for owners of commercial properties like shops, restaurants and apartment complexes.
Tax experts and corporate lobby groups like the Texas Association of Realtors have warned that lowering the cap would have devastating effects that would create significant injustices among homeowners and upend the housing market – results that California in the decades after the decision of cap voters saw how high their homes could be taxed in the late 1970s.
Experts say the introduction of a stricter valuation cap would result in greater tax breaks for homeowners and businesses who own their property for longer, meaning the burden of paying property taxes would fall heavier on new homeowners and business owners. The difference between the taxes that neighbors on the same block pay could be drastically different, said Lynn Krebs, an economist at Texas A&M University’s Texas Real Estate Research Center.
“While their homes may have similar market values, the new neighbor will pay a significantly higher property tax bill and receive the same public services,” Krebs said.
A tightening of the cap would also likely result in an even more expensive housing market, critics warn, as homeowners would be encouraged to hold on to their property to retain their tax advantage – resulting in less churn in the market, fewer homes available and higher home prices .
And finally, critics say, halving the rating cap wouldn’t lower tax bills, as cities, counties and school districts could increase their tax rates to make up for lost revenue.
Despite the disagreements over the homestead exemption proposals and rating cap, there is some overlap between the House and Senate proposals. Both chambers have earmarked $5.3 billion for school district property tax cuts in their proposed budgets for the next two years, which would benefit homeowners and business owners alike.
The Senate tax cut package would pump another $5.38 billion into that cause — and save the owner of a $300,000 home who pays the state’s average school district tax rate of about $210 on his annual tax bill. It also includes $1.5 billion in commercial real estate tax cuts.
The House of Representatives’ key tax cut proposal would also put an additional, but much larger, sum – $12 billion – into lowering property taxes for schools. According to Phelan’s office, this would save a $350,000 home owner more than $1,000 over two years.
The leaders of the House of Representatives have not closed the door on a possible compromise with the Senate.
“It’s a process,” Meyer said. “We will still be talking about homestead exceptions. We will still talk about different assets [and] facets of the plans because that is our job and our obligation to our constituents is to get something done.”
So far, the Senate is moving faster with its tax cut proposal, passing its package in full chamber last week. Two days earlier, a House committee had defeated the House’s key tax cut proposal by a vote of 10-1, but it’s not yet clear when the bill will make it into the House.
Disclosure: Texas A&M University, the Texas Association of Realtors, and the University of Houston were financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization funded in part by donations from members, foundations, and corporate sponsors. Financial backers play no part in the Tribune’s journalism. find a complete one list of them here.
https://www.kvue.com/article/news/politics/texas-legislature/rift-grows-between-lt-gov-dan-patrick-and-house-speaker-dade-phelan-over-how-to-cut-property-tax/269-b1492f16-06d7-440e-a2b4-9ee628de0531 between Lt. gov. Dan Patrick and House Speaker Dade Phelan are growing at odds over how to lower property taxes