Texas Senate Approves Property Tax Cuts Benefiting Homeowners and Businesses

The Texas Senate has approved a $16.5 billion property tax relief package, providing significant benefits to homeowners and businesses in the state. The package consists of three priority bills aimed at leveraging the state’s nearly $33 billion surplus to reduce property taxes. The proposal is expected to inject billions of dollars into public schools while offering larger tax breaks for property owners.

The first component of the package, Senate Bill 3, would impact the state’s homestead exemption. The bill would increase the portion of a home’s value that cannot be taxed from $40,000 to $70,000, with an additional $20,000 increase from $10,000 to $30,000 for seniors and those with disabilities. This measure would save homeowners an additional $341 annually on their tax bill, with disabled and senior homeowners saving an extra $227 each year.

Senate Bill 4, on the other hand, would cut school property tax rates by $0.07 per $100 valuation (from $0.8941 per $100 of valuation). The state would provide school districts with at least $5.38 billion to make up for the lost revenue. This would result in a $210 annual property tax reduction for the owner of a $300,000 home.

Senate Bill 5 is intended to increase the business personal property tax exemption—or the portion of a business’s personal property that cannot be taxed—from $2,500 to $25,000. Business owners would also receive a 20% credit for the taxes they pay on inventory and property.

The property tax relief package also includes efforts to lower property-wealthy districts’ payments through the recapture program, informally known as “Robin Hood.” This program redistributes tax surplus from property-rich districts to property-poor districts.

While these measures have garnered support from both Republicans and Democrats, some critics argue that the long-term sustainability of these tax breaks is uncertain. However, proponents of the package believe that Texas’ booming economy will enable the state to honor its commitments.

The bill package is heading to the Texas House. If House lawmakers approve the Senate’s package, the final decision would be up to Texas voters in November 2023. The Senate package moves forward to the House, where legislators have proposed alternative approaches to reducing property owners’ tax burdens.