‘It’s crushing us’: Here’s what lawmakers plan to do about property taxes in Texas

There’s support among lawmakers for helping Texans with the costs of property taxes as the housing market booms. The question is how that will be done.

“It’s crushing us,” said Rep. Phil King.

The Weatherford Republican is running unopposed for a North Texas Senate district that includes part of Tarrant County, and said the issue is often brought up when meeting with voters. There’s a “100%” chance relief will be discussed in the coming session, King said.

Property taxes in Texas are used to fund schools, counties, cities and other entities like water and hospital districts. Texas’ property taxes are among the highest in the country.

The Legislature and local governments have worked to reduce them in recent years — including the passage of bills that correspond to two propositions on the May 7 ballot — but officials say there’s more to be done to offer relief for Texans.

That includes lowering taxes for those who live in Tarrant County, one of the fastest growing areas of the nation, where the median list price is $345,000.

With appraisal notices coming out Friday and tax rates being set in the months that follow, some may have sticker shock when they see their property tax statements.

City, County and Fort Worth school property tax rates have gone down overall since 2016, but most homeowners are paying more because of the skyrocketing property values.

“All of us have to be collaborative in nature,” said Fort Worth Mayor Mattie Parker. “I don’t want to take on the tactic of going to Austin and pointing the finger about who’s at fault. I don’t think that does us any good.”

Legislature will likely debate school maintenance and operation tax

Much of the debate in the Texas Legislature will likely focus on school districts’ maintenance and operations tax rate, which is the biggest portion of a tax bill.

The state is estimated to have a cushy surplus, and Lt. Gov. Dan Patrick wants legislators to study proposals to dedicate excess revenues in order to eliminate the tax.

Patrick’s interim charge has Parker’s support.

“I’m very pleased that emphasis is on how we fund public schools, because it is the majority of Texans’ tax bill,” Parker said.

Tarrant County Judge Glen Whitley encourages those in Tarrant County to call their state lawmakers and tell them to provide a free public education for all students in Texas.

“They’ve not been doing that,” he said. Instead, “local school districts have to pay for that.”

Having the state cover maintenance and operation costs could result in a major cut to property tax bills, Whitley predicted.

Some experts are wary of eliminating the tax completely. If that were done, schools would be totally dependent on the state for any dollar they spend, said Dale Craymer president of the Texas Taxpayers and Research Association. The association doesn’t support or oppose the idea, but believes there should be some local discretion in how much a community wants to spend on schools.

“If you eliminate that school tax entirely, you also eliminate that local discretion, you make them entirely dependent on the state for their budget, and I’m not sure from a policy perspective that’s entirely desirable.”

Tobi Jackson, president of the Fort Worth school board, said in an email exchange that the district “supports initiatives that will, at a minimum, maintain or increase funding for the District.” But any funding stream should be reliable and available on an annual basis, she said.

“Utilizing the state revenues in excess of the state spending limit is one way to eliminate the school district (maintenance and operation) property tax, however, this revenue stream needs to be evaluated to ensure that it is available, sufficient and reliable into the future to ensure public education is available for all children in the State of Texas,” Jackson said.

Could a change in the homestead exemption process help homeowners?

Whitley advocated for changes to the way homestead exemptions are calculated.

A homestead exemption cuts out part of a home’s value when calculating taxes, lowering the amount of property taxes paid. In addition to a required $25,000 homestead exemption for school districts, taxing units can opt to offer an exemption of up to 20% of a home’s value. But, no matter what the percentage is, the amount of an optional exemption cannot be less than $5,000, according to the comptroller’s office.

Whitley said the county in recent years has asked the state to allow it to offer a homestead exemption for a dollar amount rather than a percentage of a home’s value. The percentage model benefits those with more expensive homes.

Take a $300,000 home, for example. A 20% exemption means a homeowner wouldn’t pay taxes on $60,000 of their home’s value. But for the owner of a $1 million home, $200,000 is exempt from taxes.

Tarrant County lawmakers look ahead to 2023

Lawmakers have passed a number of policies in recent years addressing property taxes.

Two of the most significant pieces of legislation were passed in 2019. Senate Bill 2 limited the yearly increase in property tax revenue collected by cities and counties to 3.5%, unless otherwise approved by voters. House Bill 3 caps increases in school tax collections to 2.5% a year.

Property tax bills would have been 8% higher were it not for the recent policy changes, according to a report from the Texas Taxpayers and Research Association. But overall, property taxes were still higher, the report shows.

Next steps in property tax reforms will be subjects of study in both the House of Representatives and Senate in the coming months, according to interim charges from Patrick and House Speaker Dade Phelan.

King sees three primary areas for the Legislature to pursue property tax relief. First is buying down school property tax by better funding maintenance and operation for schools.

But he also thinks lawmakers should consider limiting appraisal increases to 5%, down from the 10% cap. He also thinks there should be a cap on the appraisal increases for businesses.

King praised the Legislature’s recent work to slow property tax growth.

“I think the lesson is that property taxes are just an inherently flawed way for governments to raise money,” he said. “In a perfect world, we’d have nothing but sales tax.”

Sen. Kelly Hancock, a Republican from North Richland Hills, said lawmakers will have a better sense of how to proceed after the May election.

One proposal would increase the homestead exemption for public schools from $25,000 to $40,000. The other effectively extends a property tax reduction passed in 2019 to elderly and disabled Texans.

“We’ve already done an enormous amount on both the appraisal process and reforming that, as well as property taxes, and we’ll continue to move forward based on what we see the impact is of past legislation.”

Lawmakers in 2023 should consider another increase in the homestead exemption, said Rep. Chris Turner, who chairs the House Democratic Caucus.

The equation is straightforward, he said. As local homestead exemptions go up, the more the state should allocate for education. With the expectations of a roughly $12 billion surplus and billions more in the Rainy Day fund — pool of state money reserved for emergencies — “the time is right to further invest state dollars in public schools,’‘ he said.

“A) to support public schools, which is what we should be doing, and B) to relieve pressure on homeowners that we can deliver through additional homestead exemption increases,” Turner said.