A landmark $18 billion tax cut for property owners in the state is headed to Gov. Greg Abbott’s desk late Thursday, ending a monthslong stalemate among the state’s top Republicans with a deal that drew near-unanimous support from legislators.
Both chambers adjourned sine die Thursday evening, ending the second special session Abbott had called this summer to hammer out an agreement on property tax relief.
“We knew … the most contentious issue that we faced was how to return these dollars to the taxpayers,” House Speaker Dade Phelan told House members after they approved the bills Thursday evening. “Congratulations to you, but more importantly, congratulations to the taxpayers of Texas. They are the big winners.”
During floor debate Thursday, Democrats attempted to insert benefits for renters, teacher pay raises and more money for public education into the tax-cuts package in a series of floor amendments but were unsuccessful.
A cheer went up on the chamber floors upon the passage of the three bills that make up the package: Senate Bill 2, which details the proposed property tax cuts; Senate Bill 3, a franchise tax relief bill; and House Joint Resolution 2, a constitutional amendment required to authorize the tax cuts.
“We now have a record-setting plan that will affect every family, every individual, every business, every operation in this state pretty much, for the next several decades,” said Houston Republican Sen. Paul Bettencourt, an architect of the package. “Every Texan deserves it because it’s their money.”
The package puts $12.6 billion of the state’s historic budget surplus toward making cuts to school taxes for all property owners, dropping property taxes an average of more than 40% for some 5.7 million Texas homeowners, and offering brand-new tax savings for smaller businesses and other commercial and non-homesteaded properties. The voters would need to approve the package in November for the cuts to take effect this year.
At a time when the state has some of the nation’s highest property taxes and lawmakers face massive political pressure to ease the financial suffering of their constituents, Abbott said he will sign the legislation — a cornerstone of his 2022 reelection campaign and that of most state lawmakers for several cycles now.
“The Texas House and Senate fulfilled our promise with an agreement that delivers a comprehensive, long-lasting solution to increasingly burdensome property tax bills,” Abbott said in a statement after the bills passed. “I thank my partners in the Texas Legislature for coming together to honor the best interests of hardworking Texans who want to own their property—not rent it from the government.”
The package’s marquee item is a $5.3 billion expansion of the state’s homestead exemption from $40,000 to $100,000. Bettencourt said the new exemption combined with the school tax cuts would save homesteaders — Texans who live in a residence they own — an average of $1,300 a year in property taxes.
It also offers additional cuts for seniors and property owners with disabilities, averaging about $170 more per year, Bettencourt said.
The most novel part of the plan, an idea introduced publicly for the first time on Monday, is a first-ever temporary 20% cap on appraisal increases for properties valued at $5 million or lower that aren’t considered homesteads. Those would include second homes, vacation properties, rental houses, or commercial retail or business properties.