Lawmakers will debate how to spend $3.5 billion in proposed tax cuts, a legislative priority for Republican leaders.
Texas House lawmakers unveiled a business-friendly package of property tax cuts Monday, setting up a fight with the Senate over how to bring down the state’s high property taxes.
The House wants to send billions of dollars to local school districts so they can lower their tax rates, per a proposal filed Monday by state Rep. Morgan Meyer, a Dallas-area Republican who heads the House’s chief tax-writing committee. That proposal would spread out tax relief across homeowners and business owners.
A second Meyer bill would give business owners bigger tax breaks on personal property they need to run their businesses like furniture, computers, tools and vehicles.
“This session, the Texas House is taking action to reduce Texans’ property tax burden and keep our state the best in the nation for starting and growing a business,” House Speaker Dustin Burrows, a Lubbock Republican, said in a statement.
Texas lawmakers have pledged to once more tackle the state’s high property taxes. Gov. Greg Abbott has declared property tax cuts an “emergency item” for the Texas Legislature, which means lawmakers can fast-track legislation to cut taxes.
School districts and local governments collect property taxes, not the state. To try to rein in property tax bills, state legislators in recent years have sent billions of dollars to school districts to replace money that districts otherwise would have collected using property taxes — intended to drive down tax rates.
Each chamber plans to send at least $3 billion to school districts over the next two years so they can bring down their tax rates, an amount lawmakers already committed to in previous years.
The debate between the House and the Senate boils down to how to use an additional $3.5 billion set aside for tax cuts. The proposals largely mirror a similar divide from two years ago when the chambers could not agree on a path to cut taxes. The debate forced lawmakers into overtime, with Abbott calling several special sessions to resolve the debate. Then and now, the fight will likely focus on whether homeowners or businesses will get a bigger tax break.
House tax-cut writers want to use that $3.5 billion to further drive down tax rates, a tax-cut method referred to as “compression,” and targeted tax breaks for businesses.
The Senate’s tax-cut proposal would give targeted tax breaks to homeowners in the form of a boost to the state’s homestead exemption, which lowers the amount of a home’s value that can be taxed to pay for public schools. The Senate tax-cut package would boost that exemption from $100,000 of a home’s taxable value to $140,000. Texas senators passed that bill last week by a 30-0 vote.
Each chamber has signaled an appetite to deliver targeted tax breaks to businesses. The House proposal would exempt up to $250,000 of businesses’ personal property from taxation. Senate budget writers have set aside $500 million for business tax cuts, but lawmakers haven’t settled on how to deliver those cuts.
Neither the House or Senate tax-cut proposal would provide direct relief to the state’s 4.2 million households that rent. Unlike other states, Texas doesn’t give direct tax breaks to renters, who pay property taxes via their rent. Tax-cut proponents argue that cutting tax rates benefits renters because landlords would otherwise pass on the cost of higher rates to their tenants.
Whichever proposal prevails, Texas lawmakers are slated to spend at least $51 billion to maintain existing tax cuts, including to property taxes, and provide new ones over the next two years. Texas lawmakers have tapped large state surpluses to fund tax cuts in recent years. Budget analysts and some state legislators have warned that the state wouldn’t be able to maintain those cuts in the event of an economic downturn.
Source: Joshua Fechter, The Texas Tribune
Photo Credit: The Texas House on Monday released its priority tax cut legislation. The two chambers will debate their dueling proposals that aim to offer relief to home and business owners. Evan L’Roy/The Texas Tribune
