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Texas Republicans have tried to rein in property taxes for five years. Has it worked?

 An aerial view of homes near Interstate 45 in Houston, on Sept. 16, 2019.
Miguel Gutierrez Jr.
The Texas Tribune
An aerial view of homes near Interstate 45 in Houston, on Sept. 16, 2019.

A longtime homeowner in McAllen. A senior living in southeast Austin. The owners of a home in a quickly gentrifying Dallas neighborhood.

Each saw a sizable cut in their property tax bill in 2023 after the Texas Legislature funneled billions of dollars into tax cuts, according to a Texas Tribune analysis.

For the past five years, Republican lawmakers have been on a crusade to rein in the state’s property taxes, among the highest in the nation. Last year, they went big with a $12.7 billion package comprised of tax breaks for homeowners and money for school districts to drive down how much they collect from property owners, which usually represents the biggest portion of Texans’ property tax bills.

For many homeowners, those efforts resulted in significant tax breaks.

The Tribune examined the tax bills of more than 50 homeowners across the state, attempting to capture a variety of locations and financial circumstances. The median value among those homes was $312,770 — close to the median sales price of a Texas home last year.

On average, the selected homeowners — whose property taxes peaked during the COVID-19 pandemic — saw their total property tax bill fall nearly 28% in 2023 compared with the previous year. When adjusted for inflation, most homeowners’ tax bills were lower in 2023 than in 2018 — the year before GOP legislators embarked on their current push to tamp down property tax bills.

Texas lawmakers last year expanded the state’s primary tax break for homeowners — its homestead exemption on school district taxes, which exempts a portion of a home’s value from being taxed by public schools. Voters approved a measure put forth by the Legislature in November to boost the exemption from $40,000 to $100,000. Lawmakers allocated $5.6 billion to pay for the bump in the exemption.

As part of that same proposal, voters also sent $7.1 billion to school districts to bring down their tax rates.

Tighter limits on how much more local governments and school districts can raise property taxes each year also played a role in at least keeping the growth of property tax bills in check — even as home values continued to rise — since they were passed in 2019, tax-cut advocates and property tax experts say. (State law also caps how much a home’s taxable value can grow each year to 10%.)

“The bottom line is that it's a much more taxpayer-friendly environment, particularly for homeowners, than it was before 2019, and even more so after last year's increase in the homestead exemption,” said Lynn Krebs, a research economist at the Texas Real Estate Research Center at Texas A&M University.

How much relief any given homeowner received from the latest round of tax cuts depends on a number of factors, including when they bought their home, where they live and how local taxing entities have responded to changes in state law that limit how much they can raise tax rates each year. But all homeowners whose tax bills the Tribune reviewed saw their property taxes go down as a result of the 2023 cuts.

A San Antonio couple who has owned their home in the city’s mostly Latino Dellview neighborhood since 2000 saw the market value of their home rise nearly 31% between 2018 and 2023. But their total tax bill was 17% lower last year than in 2018. They saw a cut of more than 18% in 2023 alone — largely owing to a decrease in the taxes they owed to San Antonio Independent School District, the result of a larger homestead exemption and the district’s lower overall tax rate.

A McAllen homeowner who bought her home in 2000 saw the market value of that home nearly double between 2018 and 2023. But the amount she paid in school district taxes dropped to almost zero in 2023, resulting in a nearly 28% decrease in her overall tax bill from the year before. She paid roughly 21% less in property taxes last year than she did in 2018.

The longtime owners of a home in the Gilbert-Emory neighborhood in west Dallas, which is quickly gentrifying, did see their school property taxes drop to zero last year. Their home’s market value more than tripled between 2018 and 2023, and their city and county taxes rose by double-digit percentages in that time. But their total tax bill was 22% lower at the end of that five-year period.

A homeowner in Lockhart, a town of about 15,000 outside of Austin, saw her property tax bill more than halved in 2023 compared with what she paid in 2018 — though the market value of her home had more than doubled in that time.

Seniors and homeowners with disabilities received additional tax relief under the 2023 tax law. The average tax bill for a Travis County homeowner who is a senior or has a disability fell by 22% last year, about double the savings the average homestead taxpayer saw.

Travis County Tax Assessor Collector Bruce Elfant said he saw that additional relief on his own tax bill — he just turned 65.

“I was pleasantly surprised with my tax bill,” Elfant said.

That effect was on display last year in the Dove Springs neighborhood in southeast Austin. A senior who bought his home there in 2011 saw his property tax bill slashed by 88% in 2023 alone, owing to the elimination of his school property tax bill.

Still unclear is how much state lawmakers’ property tax cuts have benefited renters. About 20% of every rent dollar paid by Texas tenants goes toward property taxes, according to the Texas Apartment Association — though that share can be higher in the state’s urban areas.

However, last year’s $12.7 billion tax-cut package did not include measures tailored for tenants of rental properties, who pay property taxes via their monthly rent but don’t have a way to seek tax relief as renters in other states do. Tax-cut proponents have argued that if landlords get a break, they’ll pass it along to renters.

Owners of rental properties aren’t eligible for homestead exemptions, and unlike homesteads, there aren’t any limits on how fast the taxable value of their properties can grow. However, they still benefited from last year’s tax cuts. For example, the amount of property taxes collected from multifamily rental properties to pay for public schools grew by 8.8% on average from 2019 to 2022, without accounting for inflation, figures from the Texas Taxpayers and Research Association show. But that amount rose only slightly between 2022 and 2023, according to the association.

The owner of a rental property in the gentrifying Greater Fifth Ward neighborhood in Houston saw their property tax bill triple between 2018 and 2023. Their property value in 2023 was more than twice what it was in 2018, though it dipped slightly last year. They paid slightly less in taxes in 2023 than in 2022.

Five years of tax cuts

Other signs abound that property tax bills for homeowners across the state have fallen from their pandemic highs.

In Travis County, the average tax bill property owners paid for the homes they live in was 7% lower in 2023 than in 2018 when accounting for inflation, according to figures provided by the Travis County Tax Assessor-Collector’s office.

The average Harris County homeowner paid almost 19% less on their 2023 tax bill than they did five years before, figures provided by the Harris County Tax Assessor-Collector’s office show.

“There's been some pretty substantial momentum increase in tax reductions statewide from the standpoint of what people are paying on their school tax bills,” said state Sen. Paul Bettencourt, a Houston Republican who authored the 2023 tax-cut proposal. “On that, there's no question.”

There are also signs that not every homeowner is seeing relief.

According to a recent analysis by property information firm CoreLogic, median property taxes on Texas single-family homes grew by 26% between 2019 and 2023, without accounting for inflation.

Some property owners in Harris County saw a higher tax bill in 2023 than they did the year before because of higher appraisal values, said Laura Smith, a spokesperson for the Harris County Tax-Assessor Collector’s office. But their tax bill likely would have been even higher if not for the 2023 legislation, she said.

Texas has some of the highest property tax bills in the country, owing to the state’s lack of an income tax and heavy reliance on property taxes to pay for government services like police, firefighters, sidewalks and, most prominently, public schools.

[In Texas, property tax levies can be as individual as homeowners themselves]

Homeowners’ property taxes marched upward for much of the 2010s as the state’s economy boomed and newcomers flocked to Texas. Home values, a key factor in how much homeowners pay in property taxes, rose — and so did the tax rates set by cities, counties and school districts to determine what percentage of a property’s taxable value will be subject to taxation.

Those growing bills resulted in growing pressure on lawmakers to do something to rein in taxes.

In 2019, lawmakers passed a pair of laws aimed at slowing the growth of property tax bills. Legislators injected $11.6 billion into public schools, including $5.1 billion intended to lower school district tax rates — a tax-cut method lawmakers call “compression.”

State lawmakers also enacted stricter limits on how much more cities, counties and school districts could collect in property taxes each year without voter approval. The idea was to keep tax bills from going up too quickly by effectively forcing local governments and school districts to lower their tax rates as property values rise.

On average, tax rates set by cities, counties and school districts climbed for most of the 2010s, according to data from the Texas comptroller’s office. But in the years since the Legislature enacted those limits, tax rates have declined. The average city tax rate, for example, grew by nearly 7% from 2010 to 2018. Last year, that rate sat more than 10% below where it did in 2018 — and school district and county tax rates fell even faster.

Those limits have helped keep property tax collections from growing faster than they did before they were enacted, according to the Texas Taxpayers and Research Association. Texas taxpayers in 2021 would have shelled out $6 billion more in property taxes than they did that year if not for the tighter limits, the association estimated. It’s likely that taxpayers would have paid even more because of rising property values in recent years, tax advocates and experts say.

“The Legislature has done a great deal to force property taxes to be lower than they otherwise would have been,” said Jennifer Rabb, who heads the business-backed Texas Taxpayers and Research Association.

Lawmakers have also sought cuts that benefit homeowners in particular. In 2015, the Legislature expanded the state’s homestead exemption on taxes paid to school districts for maintenance and operations from $15,000 to $25,000. Voters bumped it up again to $40,000 in 2022.

The homestead exemption had its biggest increase last year after voters approved boosting the exemption to $100,000.

That increase resulted in a substantial drop in property taxes. School district property tax levies on single-family homes fell by 17% between the 2022 and 2023 tax years, according to the Texas Taxpayers and Research Association.

However, critics question the wisdom of GOP leaders’ fixation on cutting property taxes. Dick Lavine, senior fiscal analyst at the left-leaning Every Texan, has often argued that putting so much money toward property tax cuts was a poor use of state dollars. Instead, he said, that money could have gone toward an increase in public education spending, an investment in the state’s future that would have gone further in the long run.

“It’s a mammoth example of short-term thinking,” Lavine said of the tax-cut push.

The future of property tax cuts

Republican lawmakers leaned on a record $32.7 billion surplus to finance the 2023 tax-cut package. Next year, they face pressure to not only maintain the current cuts but perhaps to cut them even further.

Gov. Greg Abbott signaled that he wants lawmakers to do just that when he said at an event last month that the Legislature should “continue to cut those property taxes until we get rid of the school property tax rate here in the state of Texas.”

Eliminating the property tax rate that pays for school districts’ maintenance and operations has been a long-held dream of some Texas conservatives — but proposals to do so have gone nowhere in the Legislature.

One reason: doing so would be massively expensive. Lt. Gov. Dan Patrick, who has expressed deep skepticism of doing away with property taxes, told the Texas Public Policy Foundation last year that the state would need about $55 billion to cover the tax collections needed to pay for schools districts’ maintenance and operations in 2024 and 2025 — nearly two-fifths of the state’s $144.1 billion general fund budget.

To do that, lawmakers would likely have to hike the state sales tax. A measure to that effect came before the Legislature in 2019 with the backing of the state’s top three Republicans, but it proved massively unpopular and failed. The burden of paying sales tax falls more heavily on poorer families. Sales tax collections are also a less reliable source of revenue given that they’re more susceptible to drops during economic downturns.

Nonetheless, Patrick wants lawmakers to discuss how much it would cost to do away with all property taxes ahead of next year’s legislative session — though he appears to maintain his opposition to ultimately getting rid of them.

“Last year, I stated that the sales tax increase required to eliminate all property taxes would be far too high for Texans to accept,” Patrick wrote on the social media site X earlier this month. “With so much discussion on this issue, the purpose of my interim charge is to determine what the true cost would be.”

The state would have had to spend nearly $138 billion to cover all city, county and school district property taxes collected in 2022 and 2023, according to a Tribune analysis of comptroller data — more than the state’s $119.2 billion general fund budget to cover state expenses those two years.

Bettencourt, Patrick’s chief lieutenant on property taxes, also remains deeply skeptical. A sales tax hike to make up for getting rid of property taxes, he said, “would not be palatable to most household budgets.”

“I can't see any way to get to [the amount of money needed] to eliminate all property taxes that's good public policy,” Bettencourt said.

Disclosure: Dell, Every Texan, Texas A&M University, Texas Apartment Association, Texas Public Policy Foundation and Texas Taxpayers and Research Association have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

This article originally appeared in The Texas Tribune at https://www.texastribune.org/2024/04/26/texas-property-tax-cuts-analysis/.

Copyright 2024 KERA. To see more, visit KERA.

Joshua Fechter | The Texas Tribune
Andrew Park | The Texas Tribune