How Do the House and Senate Tax Proposals Impact Rural Texans

The Texas Legislature is now fully underway and the clock is ticking down as State Lawmakers work to take care of their business before the end of the 140-day regular legislative session. The state has a significant budget surplus and leaders in both the Texas House and the Texas Senate agree that relief for taxpayers and additional funding for schools are top priorities that need to happen.

The leaders in both chambers have placed $5.3B in the base budget to extend that relief, and they agree there needs to be more relief given. However, there currently is strong disagreement on how to get it done. Here’s a breakdown of the proposals in both chambers and some information on how the plans might impact those of us living in rural Texas.

Senate Plan

The proposal in the Senate provides tax relief by raising the state’s homestead exemption for school property taxes from $40,000 to $70,000. The Senate proposal would also raise the exemption rate for seniors from $10,000 to $30,000 and put an additional $5.38 billion toward lowering school property taxes by pumping more state dollars into local schools.

Supporters of the Senate’s homestead exemption proposal say it will give significant and unprecedented relief to every Texas taxpayer. Opponents of a higher homestead exemption point out that this approach has flaws because it excludes renters in particular, and more than 40% of Texans rent their homes.

The Senate Plan was passed through the Senate on Wednesday with all Senator’s voting for the bills. The Senate Plan is made up of three bills that total $16.5B in property Tax relief. SB 3 contains the homestead exemptions for property owners ($70,000) and seniors ($30,000) and SB 4 contains the “compression” component cutting 7 cents per $100 valuation and lowering the recapture or “Robin Hood” payments schools are required to make. A third proposal in SB 5 would provide $1.5 in business property tax relief.

House Plan

In the House, the leadership is pushing a different approach, through a proposal to lower the appraisal cap from 10% to 5% and extend the appraisal cap to commercial properties. The House plan also recommends putting an even larger amount towards “rate compression” which will help lower the local school taxes. The House proposal calls for $17 billion overall in school property tax cuts.

Supporters of the House bill say that appraisal caps protect homeowners and businesses from the shock of rapidly rising property values and make it easier to plan for the future. Opponents of the House plan say appraisal caps create an unfair system with inequities in taxation amongst taxpayers and they do little to slow the growth of revenues, which make the tax cuts less impactful.

This week the House Appropriations Committee passed their version of the Budget which included the $17B buy down of local school property taxes.

It is unclear which plan will make it through the legislative process. The governor has made tax relief one of his top priorities but has yet to weigh in on which plans he supports. The proposals, If passed and signed by the governor, would require a constitutional amendment that would be approved on a Statewide Ballot by Texas voters next November.

Rural Texas

Both the Senate and House plans provide benefits to rural Texans as they both increase the state’s commitment to putting money into education and reducing the tax burden on homeowners and business owners.

The Senate proposal will provide significant relief to homeowners, and seniors in rural communities, especially those with low residential values. For someone over 65 in a $100,00 valued residential home, the Senate plan effectively eliminates your school tax bill.

The House’s appraisal cap proposal applies to all property, which includes your home, your farm or ranch, business property, ect, so landowners and business owners would reap benefits under this plan, especially in a rural community where land prices may be going up but residential properties stay stagnant. Plus under the House Plan the state will pick up a greater share of the local school tax burden giving local taxpayers impactful relief.