Senate Wants Property Tax Cut This Year; House Wants to Delay It

The House and Senate negotiations over a tax cut deal have narrowed to a single sticking point: when a proposed property tax cut should go into effect.

Negotiators have already agreed to implement property tax relief, as favored by the Senate, instead of the House’s preferred sales tax cut, according to members involved in the negotiations. Under the new plan, Texas voters would be asked to approve amending the Texas Constitution to increase the statewide homestead exemption by $10,000, enough to save the average homeowner about $125 annually.

Both sides have also agreed to take the House's preferred approach to cutting the business franchise tax — a 25 percent across-the-board cut — rather than the Senate's approach, which would combine a smaller cut in rates and a provision freeing a large number of businesses from paying any tax at all.

The two sides are still at odds over when the property tax cut should go into effect. The Senate wants it to be implemented in time to impact this year’s property tax bills. The House wants to hold off implementation until next year. The difference is roughly $650 million — the cost of each year of the proposed homestead exemption.

“We've agreed on everything else,” state Sen. Kevin Eltife, R-Tyler, said. “To me that's pretty darn good.”

Those differences over timing appear to be the only major points of contention in talks to settle House-Senate differences over border security, restraints on local property tax increases, open carry of handguns, and prosecutions of corruption cases involving state officials. Separate negotiations to reconcile differences in the House and Senate budgets could also be completed soon, which might give lawmakers a solid idea of how big a tax cut they can afford.

The outcome of the debate will determine the cost of the tax cut this session as well as whether the state’s counties will have to hold a costly September special election and maneuver the difficulties of implementing the property tax cut on a tight schedule, according to various county officials.

Under the Senate’s preferred timeline, Texas would hold a special election on Sept. 12 to approve the homestead exemption increase. Under the House approach, the election could wait until Nov. 3, when counties already have a constitutional amendment election planned.

House Ways and Means Chairman Dennis Bonnen, R-Angleton, said he was persuaded that the increase in the homestead exemption should be delayed because of concerns raised by the Tax Assessor-Collectors Association of Texas. Members of the association have warned lawmakers that sending out this year's property tax bills and adopting property tax rates would be tricky following a September special election. Also, lawmakers have not publicly discussed reimbursing counties for the cost of holding a September special election, which some local officials have argued constitutes an unfunded mandate.

“We need to be respectful of our local jurisdictions that are responsible for getting tax bills done accurately and timely to our taxpayers,” Bonnen said.

Eltife said the special costs are a legitimate concern. "Our issue is, we have the money now," and want to see the homestead exemption in place sooner rather than later, he added. 

In recent weeks, county election officials around the state have begun planning for a possible September election, including looking at the potential cost. In Dallas County, an extra countywide election is estimated to cost about $2 million, according to Elections Administrator Toni Pippins-Poole.

“Our election workers are going to have to work overtime in order to prepare for that September election,” Pippins-Poole said.

Tarrant County Elections Administrator Frank Phillips estimates the extra election will cost $1.3 million. In Bexar County, the estimate is $850,000, according to Elections Administrator Jacque Callanen.

Delaying the implementation of the increase in the homestead exemption to next year would significantly reduce the state’s cost for the tax cut for the upcoming biennium. However, because the homestead exemption would be permanently increased by $10,000 if voters approve the change, the state would continue paying out to school districts to cover the lost tax revenue in perpetuity.

Jim Malewitz and Ross Ramsey contributed to this report.