Texans can rejoice as a groundbreaking legislation aimed at reducing property taxes is on its way to Governor Greg Abbott’s desk for final approval. This extraordinary $18 billion property tax relief package, slated for approval in November through a voter referendum, is set to become the largest tax relief initiative in the history of Texas. The recently concluded second special session called by Governor Abbott witnessed the House and Senate reaching an agreement on this crucial matter. Comprising three bills, namely SB 2, SB 3, and HJR 2, this comprehensive package promises substantial benefits for Texas farmers, ranchers, rural landowners, and millions of other citizens. In this article, we delve deeper into the details of each bill and explore how they are poised to transform the property tax landscape in the Lone Star State.
SB 2: Property Tax Cuts for All Homeowners and Businesses
The cornerstone of the relief package is Senate Bill 2 (SB 2), designed to significantly reduce the school property tax rate for homeowners and businesses alike. Notably, SB 2 includes a noteworthy increase in the homestead exemption, raising it from the current $40,000 to an impressive $100,000. This change is set to bring substantial relief to homeowners across Texas.
In addition to the homestead exemption increase, SB 2 provides a substantial $7 billion tax rate compression, wherein the state assumes a larger portion of the school budget. This move is expected to translate into lower school tax rates for all citizens, contributing to further tax relief.
Another significant provision in SB 2 prohibits school districts, cities, or counties from repealing or reducing optional percentage homestead exemptions granted during the 2022 tax year. This prohibition is set to expire on December 31, 2027, ensuring that the granted exemptions remain intact for a substantial period.
Furthermore, SB 2 introduces a temporary 20% circuit breaker, popularly known as an appraisal cap, specifically for properties valued at $5 million or less that are not considered homesteads. This includes second homes, rental houses, vacation properties, and commercial retail or business properties. The pilot project will span three years, offering the Legislature an opportunity to assess its impact.
The language of SB 2 also outlines an expansion of the appraisal district board of directors, increasing the total number of directors from three to nine. Among these, five will be appointed by taxing units, three elected by majority vote at the general county election, and the county assessor-collector will serve ex officio. However, this increase applies solely to counties with a population exceeding 75,000. For counties with a population under 75,000, the existing practice of members’ appointment to the appraisal review board by the local administrative judge will continue.
Importantly, these property tax cuts will not adversely affect school revenue, as school districts will be held harmless. Any loss in revenue due to these changes will be offset by the state, ensuring that local school districts remain unaffected by the tax reduction.
SB 3: Franchise Tax Relief for Texas Businesses
Senate Bill 3 (SB 3) constitutes the second crucial component of the property tax relief package, addressing the franchise tax exemption. The legislation raises the no-tax-due threshold for a franchise tax from $1 million to an impressive $2.47 million in total revenue. As a result, around 67,000 Texas businesses are expected to be exempted from paying the franchise tax, offering significant financial relief.
Another noteworthy aspect of SB 3 is the elimination of the no-tax-due report, perceived by many as a burdensome tax for those covered by the franchise tax. This move aims to alleviate unnecessary administrative burdens on businesses, further fostering a pro-business environment in Texas.
HJR 2: Constitutional Amendment for Property Tax Relief
HJR 2 plays a pivotal role in the property tax relief initiative, as it presents the constitutional amendment before voters on the November ballot. This amendment seeks to secure the legal foundation for the comprehensive relief package, offering citizens a chance to have a direct say in the matter.
Additional Constitutional Amendments: Broadband Services and Right to Farm and Ranch
The property tax relief package is just one of several vital constitutional amendments slated for the upcoming ballot. Other proposed amendments include those related to broadband services and the right to farm and ranch. For the farmers, ranchers, and rural Texans who form the backbone of Texas’s economy, it becomes imperative to cast their votes in support of these amendments in the fall elections.
With the $18 billion property tax relief package poised to become a historic reality, Texas is set to witness a transformative shift in its tax landscape. SB 2’s enhanced homestead exemption, tax rate compression, and appraisal cap, alongside SB 3’s franchise tax relief, promise substantial benefits for homeowners and businesses alike. As the relief package awaits final approval from Governor Abbott and the voters, Texans must recognize the significance of their votes in shaping the state’s fiscal future. Come November, citizens, especially farmers, ranchers, and rural Texans, must seize the opportunity to participate actively in this democratic process and secure a brighter, more prosperous tomorrow for Texas by voting to pass this legislation in November.
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