Texas lawmakers are in the midst of their , and lowering property taxes is one of the main goals Gov. Greg Abbott has directed them to address.
鈥淲e must deliver meaningful property tax cuts this session,鈥� said Abbott in his keynote speech at the Texas Public Policy Foundation鈥檚 recent in Austin, just weeks after he declared property tax relief one of his for state lawmakers this session.
For those who closely watch Texas politics 鈥� or even just those focused on their own annual property tax bill 鈥� this may seem like d茅j脿 vu. After months of wrangling during 2023鈥檚 regular session and a special session, Abbott that was touted as a major win for Texas homeowners. But the results didn鈥檛 meet lawmakers鈥� expectations. In the years since, some Texans still saw in taxes from local municipalities who said they needed to make up for lost revenue.
How Texas has tried to curb property taxes
The state has been chipping away at property taxes over time. Last session, they the homestead exemption from $40,000 to $100,000. The reduces how much of a home鈥檚 value owners can be taxed on. Since Texas has no income tax, increasing this is one of the few effective ways lawmakers can provide tax relief to residents.
This session, Gov. Abbott wants to increase the 鈥� something the Texas Senate has already passed a bill on. The move would ultimately billions of dollars.
In theory, that should decrease property taxes. But that wasn鈥檛 the case when the legislature put $18 billion towards homestead exemptions in 2023. Texans for Fiscal Responsibility, a conservative-leaning policy group, from the Texas Comptroller's office showing that the savings didn鈥檛 match up with what lawmakers had promised.
Those upset about the raise have complained to Texas legislators. In turn, state lawmakers have pointed the finger at local taxing districts. Both the disappointment in the lack of savings and the shifting blame were on display at the Texas Policy Summit.
鈥淛ust out of curiosity, who saw a tax cut after the legislature passed that big $18 billion dollar tax relief measure?鈥� asked the group鈥檚 James Quintero, who moderated a panel on reducing property taxes.
A little over half the audience raised their hands. During the Q&A session, a woman in the audience expressed her frustration.
鈥淭his session is called how to make property tax relief permanent, I haven鈥檛 heard that from you guys today. I鈥檓 tired of the locals pointing the fingers at you guys, and you guys pointing the finger at the locals,鈥� she said.
Sen. Paul Bettencourt, a panelist and Houston Republican, reiterated the point.
鈥淚 ain鈥檛 pointing the finger at city or county or special districts. I don't have to, it's on the back of your tax bill,鈥� said Bettencourt.
While that鈥檚 true, the reason local taxing entities say they need that money is because they have to pay for the services they provide: from local law enforcement, fire department to public schools, all of these things take money to run. And in a state with no income tax, sales tax and property taxes are the only funding sources for the government.
Chandra Villanueva with Every Texan, a progressive policy organization, refers to these taxes as a three-legged stool.
鈥淚f they get rid of the property tax, then we're gonna be stuck with a pogo stick, basically just a sales tax that is the most volatile of all three of those taxes,鈥� said Villanueva.
How school funding impacts property taxes
That brings us to another one of the big issues lawmakers have said they want to tackle this year: Increasing funding for the state鈥檚 public schools, including .
Villanueva told The Texas Newsroom that she believes 鈥� if the state put more money towards funding schools 鈥� the districts wouldn鈥檛 need to raise taxes. At least not, 鈥渋n the same way they do because of the under funding from the state.鈥�
Since 2019, the legislature hasn鈥檛 given . Instead, they鈥檝e been replacing the funds school districts lose out on from reduced property tax revenue. This is done through what鈥檚 called a hold harmless provision.
鈥淏asically (with the hold harmless provision), any taxation lost at the school district level the state will make up in general revenue,鈥� said Brandon Rottinghaus, a political scientist at the University of Houston.
So, while the legislature is technically sending the state鈥檚 public schools more money than it was before 2023鈥檚 property tax changes, that money is only replacing funds they would鈥檝e already received had the state not increased homestead exemptions. It鈥檚 more money, but it鈥檚 not additional money.
If property taxes keep being cut, some are concerned about what could happen to school funding down the line. Right now, the state has the extra money it takes for increased homestead exemptions 鈥� and the hold harmless provision 鈥� because Texas has a financial surplus. The latest report from the Texas Comptroller shows the state has , which is basically a savings account for the state.
But Rottinghaus says the path the state is on to bring down property taxes isn't a very stable method.
鈥淪o the issue is that the states on the hook forever for this money, that might mean that it could be a financial problem in the future where the state coffers are not as full,鈥� said Rottinghaus. 鈥淎nd they still have to pay for these tax cuts.鈥�
In the end, John Craft, a superintendent of Southside ISD in San Antonio says that 鈥� because there hasn鈥檛 been more funding for schools from the state since 2019 鈥� they're in a deep hole. Estimates show the state would need to add an additional $24 billion into public education to get schools back to the spending power they had in 2019.
鈥淭he reality is鈥� in order to solve the problem and have the resources to take care of the infrastructure needs, the water needs, health and human service needs, public education needs we need to generate a whole lot more revenue,鈥� said Craft.
Exactly how the state will begin to generate more revenue while continuing the promise of cutting property taxes is uncertain.
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