New effort to lower property taxes moves through Texas legislature

AUSTIN, Texas - A new effort to lower your property tax bill is moving through the state legislature. 

On Tuesday, a hearing was held on SB 4, which could increase the homestead exemption.

SB 4 promises to provide more tax relief for homeowners and cash payments to local schools to replace a chunk of the revenue stream districts would lose.

Texas lawmakers debate on SB 4

What they're saying:

Texas homeowners currently have a $100,000 homestead exemption that’s applied to their school property tax. SB 4 would increase the exemption amount to $140,000. That would provide an estimated savings of $363.44 on an average homeowner's school tax bill. 

State Sen. Paul Bettencourt filed SB 4.

"Yes, Christmas could come early," said the Houston republican during a Tuesday hearing before the Senate Local Government committee.

Bettencourt predicted SB 4 will address affordable housing, especially for first-time buyers.

"Literally for starter homes, which is about the average home. You take what was a $4,100 tax bill and all of a sudden, it's $1,800," said Sen. Paul Bettencourt.

For older Texans, SB 4 could keep them from being taxed out of their homes.

"A lot of seniors now are moving into the homeless category," said Chales Scoma, who was among those to testify before the committee.

Scoma is with the Texas Silver-Haired Legislature. He noted how tax values would be adjusted for those over 65 and for homeowners with disabilities.

"I'm going to say it's probably going to take out 80 or 90% of the 60 and older population. They will have no property tax because of this," Said Scoma.

For school districts, SB 4 will be sliced into a primary revenue stream. A cut, state Senator Mayes Middleton said, is being addressed.

"It's kind of an ancillary benefit of this legislation that we're actually keeping the school district whole. We're relieving that local property tax share and making sure they don't end up with any less dollars at all at the ISD level," said the Republican from Galveston during the hearing.

The other side:

A broader real estate ripple effect may also happen, according to Dixon Holman of the Texas Association of Realtors.

"And it will also incentivize those who are in their homes if the tax burden is less, if they want to buy a more expensive home, it allows for transitioning in the marketplace," said Holman.

Some of the benefits of previous tax cuts ended up being undercut by new local tax hikes. Renters were cut out of the previous tax cuts and are out again under SB 4. That brought a suggestion during public comment from taxpayer advocate Shannon Halbrook.

"We think it's time to sort of take a step back and think about, should we be continuing to do more tax cuts or should we think about some of the other priorities for the state, namely investing in our public education system, in our state workforce, in our infrastructure and our health care system, etc.," said Halbrook.

By the numbers:

For state lawmakers, this is not their first property tax cut rodeo. 

In 2015, the homestead exemption went from $15,000 to $25,000. In 2022, it increased to $40,000, and that was followed by a Special Session jump to $100,000. 

The last Senate plan sparked a war of words between Governor Greg Abbott and Lt. Gov. Dan Patrick. The debate under the Capitol Dome increased the Senate’s rift with members of the state House who were pushing a different tax cut proposal.

The three adjustments that happened between 2015 and 2023 came with a $51 billion price tag. 

What's next:

Sen. Bettencourt told the committee lawmakers will see legislation this session that will protect the new tax cut plan by putting new taxing restraints on local governments. 

SB 4 was passed on a unanimous committee vote and could come up on the Senate floor before the end of the week. 

As with the previous homestead adjustments, if SB 4 is signed by the governor, voters will have to approve it as a Constitutional Amendment in a November general election vote. The expected approval will be noted in local tax calculations that are down in July. 

The back-build approach caused some confusion for county tax officials, and also brought about a court challenge by tax reform advocates. 

The committee was warned a similar reaction could happen again.

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