SENATE SWEETENS PROPERTY TAX PROPOSAL
(AUSTIN) — More than 60,000 small businesses would come off the franchise tax rolls under the Senate’s latest property tax proposal. Tuesday, the Senate gave unanimous support to a measure that would still increase in the homestead exemption from $40,000 to $100,000 but includes a number of changes to the state’s business tax and raises the total amount of tax relief under the Senate’s plan to $18 billion – a world record tax cut according to Lt. Governor Dan Patrick. “We ask our colleagues in the House to come back and give this bill serious consideration,” said Patrick. “The taxpayers are waiting for their tax cut, and the clock is ticking.”
The Senate again approved a bill, by Houston Senator Paul Bettencourt, that would raise the homestead exemption to $100,000 but this proposal would also exempt almost 70,000 small businesses from the state franchise tax.
In addition to the homestead exemption, the bill also lowers the threshold to trigger a rollback election. Under current law, voters must approve any tax increase that exceeds 2.5 percent. Under the Senate’s new plan, that number would come down to 1.75 percent. “That’s a permanent 30 percent reduction in the growth of taxes,” said bill author and Houston Senator Paul Bettencourt. The bill also includes further compression of local school property tax rates by ten cents per $100 valuation. Combined with ongoing compression set out in 2019’s school finance reform legislation, the bill would include a total compression of 21 cents per $100. Taken with the proposed homestead exemption, Bettencourt says the Senate proposal would save the average homeowner in Texas more than $1200 on their annual property tax bill this year.
The changes to the state’s franchise tax are the most significant new provisions in the bill and look to compromise with the House’s plan to lower appraisal caps for all real properties, including commercial properties. The bill doubles the exemption threshold, excluding businesses that make less than $2.47 million in total revenue, which Bettencourt said would move 67,000 small businesses off the state franchise tax rolls representing about 40 percent of those businesses currently paying the tax. The bill also looks to save business owners time by getting rid of the tax filing requirement for businesses that owe no franchise taxes to the state. Bettencourt called this a nuisance tax. “One point seven million businesses have to turn that form in and if they don’t, they get a $50 penalty,” he said. “All that’s gone in this bill. So, we’re saving businesses not only money but their time.”
Though it was passed unanimously by the Senate Tuesday, these efforts will come to naught if the House doesn’t return to Austin before the current special session ends next week. Governor Greg Abbott limited property tax legislation to compression only, and the House passed a bill that would compress property taxes by $17.4 billion and adjourned sine die on the very first day of the special session. Throughout both the regular session and the first called session, the Senate has unanimously supported a homestead exemption in addition to new and ongoing tax compression, with the latest plan representing roughly a 30/70 split between the homestead exemption and compression. Lt. Governor Dan Patrick said this is a fair compromise that both the governor and the House should accept. “I know that the governor and the House wanted all compression, under our plan, about 71 percent would go to compression,” said Patrick. “These members are not going to give up the homestead exemption.”
Patrick and other members emphasized the significance of all 31 members of the Senate, both Democrats and Republicans, standing united in favor of an increase in the homestead exemption. “This is one that we agree upon for all of our constituents,” said Dallas Senator Royce West. “My constituents understand getting a $100,000 homestead exemption. They understand that and appreciate that.”
If the session ends next week with no property tax compromise, Abbott has said he will continue to call special sessions dealing with property taxes until a deal is reached. Because these measures will require voter approval, Patrick said there is a functional deadline of about six weeks to pass a bill and put the question before voters in the November election.
The Senate will reconvene Wednesday, June 21, at 10 a.m.