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Texas House advances cut in property taxes

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AUSTIN — The House tentatively approved a property tax break Sunday that would be worth about $125 a year for the average Texas homeowner.

A pair of unanimous votes advanced two key parts of the grand bargain that may allow lawmakers to finish their work and avoid a special session. The House approved a constitutional amendment and a bill to increase homestead exemptions on school property taxes.

If voters approve the amendment on Nov. 3, the exemptions would increase to $25,000. They are currently $15,000.

House members have pushed for a cut in the sales tax instead, but agreed to the Senate’s homestead exemption increase while winning their version of a business tax levy. Sponsor Rep. Dennis Bonnen, R-Angleton, reflected the chamber’s coolness to the homeowner break.

“You are reducing the pain in a small way, and we should do that,” said Bonnen, who heads the tax-writing Ways and Means Committee. But he said it should not be oversold as major or lasting property tax relief.

The amendment now heads back to the Senate for final approval, and the bill will follow, after one last House vote, likely Monday.

Democrats generally supported the legislation, but some warned that cutting taxes during prosperous times is almost sure to force budget cuts if the economy droops or oil prices go lower.

Reducing the state’s revenue base is just a way to relentlessly shrink government’s size, said Rep. Garnet Coleman, invoking the name of a national tax-cut crusader who has pushed GOP lawmakers around the country.

“Grover Norquist is alive and well — and winning,” he said.

Bonnen and other GOP leaders, though, have said tax cuts would help create jobs. Other states are cutting their taxes, and Texas, to preserve its economic boom, needs to do likewise, they have warned.

The higher homestead exemptions on school property taxes would cost the state $1.24 billion over two years. The state would give school districts that much more aid to make up for their lost local revenue.

Rep. David Simpson, R-Longview, said that cast doubt on the idea.

“Is this really a tax cut when we’re making it up with state funds?” he said.

Bonnen acknowledged that the approach is “shifting the tax burden.” He went on to note that the state would be on the hook to “back fill” school districts’ lost revenue.

“It goes on forever,” Bonnen said of the state’s

commitment. But he said property tax bills “would be less than it would have been.”

Under the package, tax assessors would prepare 2015 tax bills as if the $25,000 exemption is in effect. The “provisional” tax bills would inform voters how much the higher exemption would save them.

If voters reject the plan, assessors would send homeowners a supplemental tax bill showing why amounts owed went up.

Lt. Gov. Dan Patrick and many senators have championed the higher exemption. They say property taxes squeeze people on fixed incomes.

Senators had hoped to “index” the cut as a percentage of the statewide median home value to keep it from being eroded by rising property appraisals. But business groups balked, arguing that it would, over time, shift more of the tax burden to businesses. The House insisted that the idea be dropped. But it went along with senators’ demand for a plum for Realtors — adding to the constitutional amendment a ban on taxing real estate transfers.

The property tax relief is part of what was being touted as late as Friday as a $3.8 billion, two-year tax-cuts package.The Senate voted late Sunday, 24-6, for a measure that would cut business-franchise or “margins” tax rates by 25 percent across the board. It would cost $2.56 billion over the next two years. It now goes back to the House for a final sign-off.

At the Senate’s insistence, the package also includes a bill that would require a 60-percent vote by a local governing body before it could increase property-tax revenue.

But the House made the package more expensive by voting, 131-6, for an amendment by Rep. Senfronia Thompson, D-Houston. It appeared to add $400 million to the two-year cost of the homestead exemptions legislation.

In 1979, the Legislature forced appraisers to use real market values in determining appraisals. That caused big increases, as expected. Lawmakers allowed school districts to increase homestead exemptions to up to 20 percent of homes’ values.

In some of the early years, the state repaid the districts for half of the cost of those optional tax breaks. In recent years, though, the districts have borne the costs themselves.

Thompson’s provision would restore the reimbursement for half of the higher exemptions’ cost — a boon to big-city school districts such as those in Houston and Dallas. It’s unclear, though, if the Senate will go along.

Follow Robert T. Garrett on Twitter at @RobertTGarrett.

Category: Taxes

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