Many Roads to Property Tax Relief
The Texas Legislative session is entering its final month and important deadlines are quickly approaching. Among the many issues discussed this session, none has received more attention that property tax relief. The House and Senate have both passed their proposals out of their respective chambers. What the final compromise will be remains to be seen. While the discussion on these bills and resolutions continues, I also want to highlight other roads to property tax relief for Texans.
The main components proposed by the House include cutting the appraisal caps from 10% down to 5%, limiting the increase in value that may be taxed by a local taxing entity. The House is also proposing increasing the state's share of public education to more than 50%, choosing to buy down the local tax compression. This comes from an increase in funding by the state with targeted relief on the local maintenance and operation costs for local districts. The overall increase would be from a 10-cent compression up to a roughly 25-cent compression. In the Senate, the main component of the property tax relief proposal is to increase homestead exemptions again. The increase would be from $40,000 to $70,000 for most homeowners, and up to a $100,000 homestead exemption for seniors.
Why are the chambers taking these separate approaches; and why are they independently good ideas? Let's take a look at them individually.
Cutting the appraisal caps on residential property appraisals for ad valorem taxes in Texas would provide significant benefits for homeowners. Appraisal caps limit the amount by which property values can increase from year to year, thereby reducing the property tax bills for homeowners. By reducing the cap, property owners would be able to benefit from the true value of their property without the threat of soaring property taxes. This would provide a welcome relief for many Texas residents, particularly those who have been affected by rising property values in recent years.
Increasing the homestead exemption from $40,000 to $70,000 would also be a significant benefit for Texas homeowners. This increase would provide an additional layer of protection against rising property taxes by reducing the taxable value of a homeowner's property. By lowering the taxable value, homeowners would be able to keep more of their hard-earned money while still being able to afford their homes. Seniors who downsize their homes have a greater potential to remove or limit their property tax burden.
What else can we do to provide long-term property tax relief? One of my priorities this session has been working on solutions to increase the supply of available housing. It's a hot topic in the legislature as we hear debates on everything from short-term rentals and accessory dwelling units to permitting fees and inspection timelines. All of these relate to the supply and the continued demand for housing, despite the recent cooldown of real estate markets.
Increasing the supply of available housing in Texas would have a positive impact on property taxes. Increasing the supply would help to reduce the market factors that are driving increased appraisals and higher property tax bills. This would be because an increase in supply would decrease demand and thus, lower the price of houses, making homes more affordable for everyone. It would also have a positive impact on the economy, as it would create more jobs and increase economic activity.
Ultimately, cutting the appraisal caps on residential property appraisals and increasing the homestead exemption in Texas would provide significant benefits for homeowners in the short-term. Additionally, increasing the supply of available housing would help to reduce the market factors that are driving increased appraisals and higher property tax bills. These changes would have a positive impact on Texas residents by reducing the financial burden of homeownership and making housing more affordable for everyone.