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Seal of the Senate of the State of Texas
Welcome to the official website for the
Texas Senate
July 14, 2023
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(AUSTIN) — The average Texas homeowner could see annual property tax savings close to $1,300 if voters approve an increase in the homestead exemption in the upcoming November election. That’s part of the sweeping tax cut package passed by both houses of the Legislature on Thursday, ending a months-long impasse on how to distribute $18 billion in state revenue surplus set aside in this session’s budget. “We have a Texas-sized property tax relief package that is unparalleled in the world,” said bill author and Houston Senator Paul Bettencourt. As in previous versions, the legislation continues the ongoing reduction of local school property tax rates begun in 2019 and doubles the franchise tax exemption, but the final version sent to the governor includes two new significant provisions.

The first provision would answer the House’s demand for a limit to property appraisal growth. Current law caps yearly home value growth to no more than 10 percent of the previous year, but the House passed legislation during the regular session to lower that number to five percent and extend it to all real property. This was one of the major sticking points between the chambers, as Lt. Governor Dan Patrick held that such caps may allow taxing entities to raise rates in a way that they cannot under revenue growth limits passed in Austin in 2019. Ultimately, the chambers agreed on a 20 percent appraisal growth cap for all real properties with a valuation of no more than $5 million. Homeowners would still be under the 10 percent cap set for homesteads. This provision is set to expire in 2026, allowing legislators to gauge the impact of the new caps over the next three years.

The second provision seeks to add more public input into the appraisal process by adding three elected members to the boards of each appraisal district in counties exceeding a population of 75,000.

The third measure in the tax cut package would cut the number of small and medium businesses on the state’s franchise rolls by 40 percent. SB 3, also by Bettencourt, would exempt businesses that bring in less than $2.47 million in annual revenue from the franchise tax, double the current exemption. Bettencourt says that will apply to 67,000 additional businesses in Texas. It also removes a requirement that businesses that owe nothing submit a “no taxes due” form to the state or face a $50 penalty.

Lt. Governor Patrick said this week that face-to-face negotiations between himself and House Speaker Dade Phelan, as well as tireless work by Bettencourt and his House counterpart Representative Will Metcalf resulted in the compromise on this historic tax cut. “When you have $18 billion you don’t decide it in six days, or six weeks, or six months,” Patrick said before adjourning the second called session Thursday. “Of all the different variations of bills that [the House] sent us and we sent [them], this was the best bill of them all.”

Governor Greg Abbott is expected to sign the measures quickly. He released a statement following Thursday’s passage praising the package. “I thank my partners in the Texas Legislature for coming together to honor the best interests of hardworking Texans who want to own their property—not rent it from the government,” he wrote. “I look forward to signing this legislation into law to provide Texans with the largest property tax cut in Texas history.”

While the tax compression, changes to the franchise tax, and most other components of the legislation can be enacted by statute, the homestead exemption requires an amendment to the state constitution. Voters must therefore approve the measure in November before it can take effect, but ballot initiatives to raise the homestead exemption in 2015 and 2022 each passed with more than 85 percent support. The bill is structured such that the cuts will apply to the current taxing year.

The Senate stands adjourned sine die.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.