Governor Greg Abbott backed up his threat to veto additional legislation in a bid to force a compromise between the House and Senate amid debate surrounding property tax relief plans, as he rejected four bills on Thursday afternoon.
Prior to asking both chambers to come to an agreement, Abbott had sided with the House whose members adopted his suggestion of providing property tax cuts in the form of tax compression or lowering the public school district taxes to reduce all property taxes.
Abbott still appeared to favor the House and Speaker Dade Phelan – as a majority of the bills he has rejected in the last several days were Senate bills. Which he said, could be reconsidered after property taxes were settled.
Dr. John Diamond, director of public finance at Rice University’s Baker Institute for Public Policy said despite Abbott’s request, both sides are “dug in” to their respective positions.
“As far as a resolution, it’s hard to know where they’re going to strike common ground right now,” he said.
The Senate included tax compression in their last property tax relief proposal – Senate Bill 1 – but clung onto Lieutenant Governor Dan Patrick’s priority measure of increasing the state’s homestead exemption from $40,000 to $100,000 and slightly more for those over 65.
However, Phelan struck this proposal down as it was not what the Governor had asked for. The House then adjourned after passing a new bill that did not include their prior plan of reducing the state’s appraisal cap from 10 percent to 5 percent — and instead provided property tax cuts by compression only.
This left the Senate backed into a corner, where they are having to depend on a potential negotiation or not act on property taxes altogether – something they already failed to do so in the regular session.
Diamond said the chambers’ pending compromise will boil down to the only real distinction in the matter: who the lawmakers want to benefit the most from these property tax cuts.
He said the Senate wants assistance to go primarily to the homeowner – specifically those older than 65; as increasing the homestead exemption would return more money to a smaller pool of people.
Their plan would permanently give $1,200 to $1,450 back to the homeowner, whereas the House wants to cater to a wider group of taxpayers including homeowners, businesses owners, renters and landlords. This would only return $740 to those who own a home.
“It’s important to the House that renters see some of those benefits, that we give businesses some too, which increases employment and other positive things for all Texans, not just homeowners,” Diamond said.
Despite the Senate’s plan only providing the increased homestead exemption to homeowners, it provides the same $100,000 no matter the cost of the house, according the to lieutenant governor’s tweet.
Another component to the compromise that could be factored in are the appraisal caps previously pulled out of proposed legislation by the House. Several House GOP freshmen suggested bringing the appraisal caps back, if the Senate wanted to reach an agreement — which they said could incorporate all three methods of providing property tax cuts.
Diamond said appraisal caps being back in negotiations could be a good thing, as they reduce the amount of property tax that can increase while a homeowner has their home, but can create a “lock in” effect.
“If I am a homeowner, and my property taxes are capped, and I’m looking at buying a new house, in that process of a home sale, the home will be revalued to its market value,” he said. “So, you can get in a situation where taxpayers and homeowners will choose to stay in their house, instead of moving somewhere else because if they move, they’re going to face a higher property tax.”
This could accelerate house costs of the properties available and create inequalities between what taxpayers pay depending how long they’ve owned the property.
Diamond said it is likely since appraisal caps just re-emerged in the conversation that they will be the first to be dropped from the chambers’ finalized agreement.
“They may end up playing a role, but I doubt it, they don’t have the money to do all three either and I kind of see the appraisal cap as the odd one out and the first policy they will put aside,” he said.
Diamond said both the House and the Senate are likely to work on developing a plan that would either include a little less tax compression or a little less of an increase to the homestead exemption, but that it should include fractions of both methods.
“It may just take the governor having to call special session after special session until he wears everyone down and they finally just compromise between two policies,” Diamond said.
The Senate did convene Thursday morning, for about five brief moments and gaveled out of session, standing adjourned until next Tuesday, June 20.
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This article appears in Jan 1 – Dec 31, 2023.
