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Political fights over property taxes rage as Texas House and Senate rush bills forward

By Joshua Fechter and Alex Nguyen, The Texas Tribune

Political fights over property taxes rage as Texas House and Senate rush bills forward” was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.

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The Texas Legislature’s special session began Tuesday much in the way that the regular session ended a day before: with the Republican leaders of the House and Senate fighting over property taxes.

In fact, in the hours since Gov. Greg Abbott called them back Monday night to iron out a deal to reduce property owners’ tax bills, the acrimony has only appeared to grow as both chambers rushed to push through new proposals. Lawmakers already passed a state budget during the regular session that dedicates $12.3 billion in state funds to cover new property tax relief for Texans. The chambers remain at odds over how to dole that money out.

In one fell swoop Tuesday afternoon, the Senate filed, passed through committee and then unanimously approved on the chamber floor Senate Bill 1 — a measure that would lower school district property tax rates — the bulk of taxpayers’ bills — and expand an exemption that saves money for people who own the home they live in. The chamber then recessed until Friday.

“I have been crystal-clear that taxpayers deserve to receive the largest property tax cut in Texas history, and SB 1 delivers on that promise sustainably and responsibly,” Lt. Gov. Dan Patrick said in a statement following the vote.

Texans who own their primary residence currently get what’s called a homestead exemption, which allows them to deduct $40,000 from their home value before paying school district taxes. During most of the regular legislative session that ended Monday, the Senate proposed raising the school district homestead exemption to $70,000, plus an additional bump for seniors. In the Senate’s latest proposal passed Tuesday, they raised the proposed exemption to $100,000 and kept the additional increase for seniors.

According to the fiscal analysis of the Senate’s new bill, the proposal would direct $12.1 billion to pay for the homestead exemption hike and to help school districts lower their tax rates — an idea known as “tax rate compression.” It’s unclear how the remaining $200 million already allocated for new tax cuts would be used.

The House, moving about as quickly, planned to take up its own version a little more than an hour later. House Bill 1 would simply lower school district property tax rates across the board, essentially spreading out the collective $12.3 billion in savings to all property owners, including businesses who own commercial property, investors who own rental properties and people who own their primary residence. This was the strategy that Abbott sought when he called lawmakers back for the special session.

The House version does not include an expansion of the homestead exemption, a sticking point for Patrick, who wants homeowners living in their primary residences to receive more savings.

If the House moves forward as planned, that would leave the two chambers back where they were last week — with two separate bills and a need to negotiate to iron out the differences. On Tuesday, both sides seemed dug in.

In the morning, Patrick, who presides over the Senate, used a speech before a conservative think tank to criticize his counterpart in the House and promote his preferred approach to property taxes. Patrick declared that House Speaker Dade Phelan runs a “dysfunctional chamber.”

“It’s time to call some of these things out, because things have to change,” Patrick told a gathering of the Texas Public Policy Foundation in downtown Austin.

The swift action followed a remarkable final day of the regular session that saw the House and Senate publicly airing 11th-hour negotiations over property tax plans. Patrick was particularly visible, firing off multiple tweets about the state of negotiations, often jabbing at the House.

After the regular session ended without a deal, Patrick posted a tweet accusing Phelan of having “left a meeting in a huff with [Abbott] and me last night, killing the largest property tax cut in history.”

Patrick’s Twitter posts offered rare insight into typically secretive negotiations involving legislative leaders and the governor.

Patrick continued his offensive Tuesday, criticizing the House as a dysfunctional chamber and Phelan for giving too much power to Democrats, the minority party. Too many conservative priorities passed by the Senate were sunk in the House, he said.

“This should be easy,” Patrick said, noting that he, Phelan and Abbott belonged to the same political party. “It’s three Republican leaders. I shouldn’t need to take Tylenol three times a day.”

The lieutenant governor said the House needed to speed up action on legislation, particularly earlier in the session, and change rules that currently allow Democrats to undermine key conservative proposals with delaying tactics and points of order, a parliamentary challenge that aims to stall or kill legislation on a technicality.

“I’m tired of the dysfunction of the House in passing legislation to us in a timely manner,” Patrick said. “I’m tired of these points of orders that are called on good legislation.”

But Patrick spent much of his one-hour talk criticizing Phelan over how to best deliver property tax cuts to homeowners and business owners. Texans pay some of the highest property taxes in the nation, according to the conservative Tax Foundation.

Patrick and Senate Republicans wouldn’t accept the proposal if it didn’t include a boost in the state’s homestead exemption on school district taxes — the chunk of a home’s value that can’t be taxed to pay for public schools.

For much of the regular session, the Senate had sought to boost the state’s homestead exemption on school property taxes from $40,000 to $70,000, with another bump for seniors. That would have meant homeowners would have had to pay taxes only on the value above $70,000. That savings would have been available only to homeowners, not commercial or rental properties.

The House, meanwhile, wanted to limit the growth of tax appraisals for all properties to 5%, down from the 10% cap in current law. Patrick didn’t like that idea, in part due to fear that lowering the cap would incentivize people to stay in their homes in order to hold on to that savings. That could lower housing supply and drive up home prices.

In a move to get the Senate to accept a contentious part of the House’s tax-cut proposal, House lawmakers upped the ante by proposing a $100,000 homestead exemption.

But as lawmakers got down to the wire, the proposed homestead exemption fell by the wayside in favor of the cut-and-dry “compression” proposal. That proposal would have sent all $12.3 billion lawmakers set aside this year for new tax cuts to school districts so they could lower their tax rates — an idea known as “tax rate compression.” That savings would spread out the reductions beyond just homeowners to anyone who owned property in the state, including investors, businesses and trusts.

The idea was backed by Abbott and Phelan, but was a nonstarter for Patrick and senators, who wanted to concentrate more of the savings on homeowners.

On Tuesday, state Rep. Morgan Meyer, a Dallas Republican and the House’s main tax-cut writer, filed the same proposal in House Bill 1. The House Ways & Means Committee quickly voted to advance HB 1 the same afternoon.

Meanwhile, Patrick doubled down on the homestead exemption proposal Tuesday and presented figures showing that homeowners would pay $1,362 less over two years with a $100,000 homestead exemption.

“I know the governor must be on our side with this,” Patrick said. “I can’t imagine he wouldn’t be. I can’t imagine the governor will say to 5.7 million homeowners, ‘You’re not going to get a homeowner’s exemption.’”

The Senate filed its bill and an accompanying joint resolution with that proposal Tuesday, and they both passed unanimously after brief debate. Patrick said that it puts two-thirds of the $12.3 billion toward school tax-rate cuts and the remaining one-third toward a boost in the homestead exemption.

“Compression is fine, but it can’t be the whole thing,” Patrick said.

A representative for Abbott’s office did not immediately return a request for comment.

But Patrick also sought to settle some scores with Phelan over their dueling tax-cut proposals.

Phelan and House tax-cut proponents never presented figures backing up the appraisal cap proposal in negotiations with the Senate. Patrick all but accused Phelan — a real estate broker and partner in a real estate investment firm bearing his name — of trying to benefit himself with the cap proposal.

“In one of those meetings, he said, ‘I own a lot of property, not that it’s about me,’” Patrick said. “Now, anytime anyone says it’s not about me, it’s usually about them. … Now, I’m not saying he was doing that to benefit himself. But I could never figure out why he wanted to do that.”

A representative for Phelan’s office did not immediately return a request seeking comment.

Patrick Svitek contributed to this story.

Disclosure: Texas Public Policy Foundation has been a financial supporter 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.

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