Texas Senators Include Greater Property Tax Relief for Businesses in Fresh Pitch to House

On Tuesday, the Texas Senate passed a bill that would reduce property taxes for all landowners in the state. However, the House of Representatives has been out of session for weeks, so the bill’s fate is uncertain.  Both the Senate Finance Committee and the whole Senate unanimously approved the $12.7 billion proposal.

During a press conference after the vote, Lt. Gov. Dan Patrick, along by Senate Republicans and Democrats, urged the House to return to the Capitol in Austin for the remaining days of the special legislative session to approve the measure. “The taxpayers are waiting for their tax cut and the clock is ticking,” Patrick stated on Tuesday.

State Senator Paul Bettencourt, a Republican from the Houston area and the Senate’s point person on property tax cuts, proposed a new plan that would provide targeted tax relief to homeowners in Texas, send state dollars to school districts so that they can cut tax rates, and provide a break on franchise taxes for more businesses. In an effort to significantly reduce tax rates, the measure also places tighter income limitations on school districts.

This is about as win-win-win as you can get,” Bettencourt remarked on the Senate floor on Tuesday. Though Patrick said on Tuesday that the Senate proposal included “the best of what there was quite a bit of agreement on” between House and Senate negotiators who met over the weekend, it was not immediately obvious whether the idea would be acceptable to Texas House Speaker Dade Phelan or Gov. Greg Abbott.

The tweet below verifies the news:

On Tuesday, Abbott’s spokeswoman Renae Eze reiterated the governor’s preference for a tax cut proposal that only sends money to school districts to lower their tax rates. Such a plan could pave the way toward eventually eliminating the school maintenance and operations tax, which makes up the bulk of a typical school property tax bill and is something conservative Republicans in the state have long wanted to get rid of.

Eze said that the Governor “has also been clear that the only way a property tax bill gets to his desk is for the Texas House and Texas Senate to agree on a bill and get a bill to the Governor’s desk,” adding that the Governor encourages the two chambers to work together to find a solution.

Since the House has already left for the rest of the special session, it is also unclear how the bill would pass both chambers. It’s possible the House might find a way around the rules and call a special session, but no one has expressed interest in doing so.

On Tuesday, the House took its own action to reduce property taxes. Phelan appointed a committee on “sustainable property tax relief” on the same day that the Senate finance panel met, but he made no remarks about the Senate’s proposal to reduce property taxes.

“The burden of rising property taxes weighs heavily on our state’s property owners, and it is imperative that we look beyond the current special session to identify long-term, sustainable solutions to this evergreen problem,” Phelan said in a statement.

The top Republicans in Texas have been at odds for months over how to reduce the state’s high property taxes, and the fight heated up in late May when Abbott joined in. Abbott and Phelan agreed to support a plan that would reduce taxes by sending $12.3 billion to local school districts.

While the Abbott-Phelan plan is more business and affluent homeowner friendly, it would reduce property taxes for all Texans. When Abbott called for the special legislative session in late May, he emphasized the importance of enacting a tax cut proposal that included only compression measures.

The House swiftly agreed and left town, sending a message that it was not inclined to bargain any further with the Senate. Patrick and Senate proponents of tax cuts pushed back against the all-compression proposal, arguing that any tax cut package must include special relief for homeowners through an increase in the state’s homestead exemption on school district taxes.

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The current tax cut proposal in the Senate would increase the homestead exemption to $100,000, which is exactly what Patrick has been advocating for over the past few weeks. A constitutional amendment allowing for such an increase would need voter approval.

Patrick has stated that lawmakers have around six weeks to adopt the legislation so that it appears on this year’s ballot in time for the November election. The Senate plan would reduce the allowable annual increase in property tax income for school districts from 2.5% to 1.75% in an effort to reduce tax rates in those jurisdictions.

The new Senate package broadens the range of entities eligible for a state franchise tax exemption, fulfilling a key demand from Abbott and Phelan. Currently, franchise taxes are not required of companies that earn more than $1 million annually in revenue.

According to Bettencourt, the plan would increase that threshold to $2.47 million in revenue, relieving 67,000 business owners of the responsibility of paying franchise taxes.

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