NEWSFLASH, TEXAS RESIDENTS!
After the regular session ended May 29th, Texas Governor Greg Abbott called for two additional special sessions, in June and July, to address one of his top priorities going into the 88th Legislative Session—property tax relief.
The Texas Senate and Texas House never reached an agreement during the regular session, so they tried to hash it out in June—which didn’t work—and reconvened this month to take another stab at it. As they say, the third time was a charm.
Both the Texas House and Senate came to a mutual property tax bill agreement on July 10th, and they both eventually passed their agreed upon version in both chambers.
It is no secret that property taxes have skyrocketed out of control over the past several years, and there seemed to be no end in sight to the ever-increasing tax liabilities, without significant legislative action being taken.
Many Texas residents found themselves struggling to keep up with the increased tax liabilities, which came as a result of booming appraisal values, and the different tax rates being levied from the various taxing entities.
Having the Texas legislature look at introducing any form of property tax relief plan for Texans during the 88th Legislative Session was a long-overdue conversation to have, especially with them going into the legislative session with a historic $32.7 billion surplus.
So now that the bill has passed, the burning question everyone has is: What’s in It for Me?
Let’s break down the details of this historic and massive $18 billion property tax relief bill to better understand how this can impact all Texas residents and businesses, if approved by Texas voters in November.
That’s right, the bill will be on the November 2023 ballot to be voted on by Texans, but before we get into those specifics about the November election, let’s get into the meat of how this property tax relief bill will directly impact Texans.
In a nutshell, this property tax relief bill will reduce the property tax rates that are paid for school taxes, increase homestead exemptions, implement a pilot appraisal cap plan, and increase franchise exemptions for businesses.
This property tax relief bill will provide direct property tax relief to property owners by doing the following:
- Increasing the current homestead exemption from $40,000 to $100,000, which means, for example, if your current homestead property (where you physically reside and pay taxes) is valued at $250,000, you will only pay school property taxes on $150,000 instead of the $250,000 appraised value. Another example would be if your homesteaded property is currently valued at $100,000 or lower, you will NOT be required to pay any school property taxes but will still be responsible for paying taxes to other taxing entities, where applicable (county, city, community college, MUD, etc.).
- Subsidizing public education with an additional $12 billion to the education budget, which will offset the same amount of money that Texas school districts would have received from property tax revenue prior to the bill going into effect.
- Decreasing the school property tax rate by approximately 10 cents for every $100 in home valuation.
- Instituting a 20% cap each year on appraisal value increases for all non-homesteaded properties that are valued under $5 million, which would be applicable to rental properties, businesses with properties, or those owning any other parcels of land (this would start off as a 3-year pilot program from 2024 to 2027).
- Exempting businesses with an annual revenue of less than $2.47 million from the state’s franchise tax, which is an increase from the current $1.23 million exemption threshold.
Unfortunately, the bill does not impact or help renters in any way, although there was a failed effort to try and include a rebate for them during negotiations.
To get a clearer understanding of whether this bill will be good for African Americans in Texas, the Forward Times spoke with State Representative Ron Reynolds (TX-27), who also serves as the Chair of the Texas Legislative Black Caucus, to get his analysis.
Rep. Reynolds states that the passage of the historic $18 billion property tax relief legislative package is good for African Americans and will provide financial relief and savings to Black homeowners, as well as significant savings for Black small business owners.
“The 44 percent of Black Texans that own their home will see their homestead exemption increased from $40,000 to $100,000,” says Rep. Reynolds, who voted for the bill. “In combination with the proposed $7 billion school tax cuts, the average homeowner will save an estimated $1,300 a year. This will allow Black Texans the opportunity to keep more money in their pockets.”
Rep. Reynolds also touts the significant impact this bill will have on Black businesses in Texas.
“This legislative tax relief package will double the franchise tax exemption to 2.47 million from 1.23 million, resulting in an estimated 67,000 businesses no longer paying a franchise tax, which represents 40% of those that pay this tax,” says Rep. Reynolds. “In addition, it eliminates a ‘nuisance-tax’ for 1.7 million taxpayers filing the no-tax-due forms for franchise taxes.”
For the record, Texas has the second most small businesses owned by Black, Indigenous, and people of color in the nation, according to a new report based on Small Business Administration data. Texas also has approximately 1.1 million BIPOC-owned businesses, which make up 39.3% of all the small businesses in the state.
Unfortunately, Rep. Reynolds feels the impact of this historic bill will be short lived.
“With our extreme growth in Texas, property values will continue to rapidly increase,” says Rep. Reynolds. “Much of the exemption increase will quickly be eroded by the increasingly high property values. Although, the state is responsible every biennium to replace the school property tax monies that school districts will lose from the tax compression savings.”
So, what’s next?
Per Article 8 of the state of Texas constitution, an amendment for consideration must appear on the ballot after the governor signs any new legislation that impacts the state budget, and only Texas voters can approve that amendment to the constitution.
So, if Texas residents believe this is a positive thing, they would have to go the polls and approve it during the November 7, 2023, election. If voters do approve it, it will take effect for the 2023 tax year, and Texans will see the immediate savings on their 2024 property tax bills.
The ballot language that Texas voters are slated to see on the November ballot will read:
“The constitutional amendment to authorize the legislature to establish a temporary limit on the maximum appraised value of real property other than a residence homestead for ad valorem tax purposes; to increase the amount of the exemption from ad valorem taxation by a school district applicable to residence homesteads from $40,000 to $100,000; to adjust the amount of the limitation on school district ad valorem taxes imposed on the residence homesteads of the elderly or disabled to reflect increases in certain exemption amounts; to except certain appropriations to pay for ad valorem tax relief from the constitutional limitation on the rate of growth of appropriations; and to authorize the legislature to provide for a four-year term of office for a member of the board of directors of certain appraisal districts.”
Make your voices heard at the ballot box on November 7, 2023, and let Texas lawmakers know if this historic property tax relief bill is what Texas residents truly want and need.