Record $33 Billion Budget Surplus Fuels Talk of ‘Largest Property Tax Cut in Texas History’

Texas Gov. Greg Abbott speaks during a 'Get Out The Vote' rally at the Fuzzy's Pizza & Italian Cafe in Katy, Texas, on Oct. 27, 2022. (Brandon Bell/Getty Images)

Texas registered a record budget surplus during 2022–23 that topped earlier estimates by $5 billion and has triggered discussions on how best to utilize the excess funds, including using it for potential tax cuts and boosting the state’s infrastructure.

The $32.7 billion budget surplus is higher than the $27 billion estimate which state Comptroller Glenn Hegar had suggested last summer. It is now up to state lawmakers to decide how to spend the surplus. During an event hosted by The Texas Tribune on Monday, Lt. Gov. Dan Patrick said that any conversation on surplus spending must start with reducing property taxes.

“Every member of the Texas Senate will have ideas on how to use this unprecedented revenue,” Patrick said at the event. “We will introduce our budget in the coming days. As I stated previously in my November press conference, Texas taxpayers must first receive tax relief before we commit to any new spending.”

Republican Governor Greg Abbott, who was reelected for a third term in November, has been a strong supporter of cutting back on property taxes, and reiterated his stance after news of the budget surplus broke out.

“Texas has a record budget surplus of about $33 billion. But that money doesn’t belong to government. It belongs to taxpayers. I want to deliver the largest property tax cut in Texas history,” Abbott stated in a tweet on Jan. 11.

Tax Cuts, Other Spending

According to Dale Craymer, president of the Texas Taxpayers and Research Association, their calculations suggest that the state could have almost $50 billion more than what lawmakers are allowed to spend as per the state’s spending limits.

As such, lawmakers must make tax relief a top priority, he insisted, while adding that taxpayers should not be asked to pay money to the state that it cannot use. “A historic surplus calls for historic tax cuts,” he said, according to a press release on Jan. 9.

Texas does not have a personal income tax and is reliant on property taxes for revenue. Property taxes are levied at the local level. Hence, the state will have to implement an indirect way to provide such tax relief.

Some have suggested sending stimulus payments to property owners as a solution. However, since there is a limit on how much money the state can spend each year, large-scale stimulus payments are said to be an unrealistic option.

Meanwhile, Republicans are also batting for spending the surplus on infrastructure. Republican House Speaker Dade Phelan wants more investments in broadband and roads. He also wants to expand postpartum coverage for new moms to 12 months.

Lt. Gov. Patrick sees reinforcing Texas’s electric grid as a top priority. Back in 2021, the winter storm Uri had pushed the state grid to its limit, resulting in widespread blackouts. At its peak, almost 4.5 million homes and businesses were left without power, causing an estimated $90 billion in damages and 250 deaths.

Tax Collections

Texas is set to have $188.2 billion in revenues available for general-purpose spending during the 2024–25 biennium (a two-year period), according to Hegar’s Jan. 9th press release. This is an increase of 26.3 percent from the 2022–23 biennium.

Hegar attributes the surge in revenues to “vigorous economic growth” following the end of COVID-19 pandemic restrictions and a rise in prices of goods and commodities.

The biggest source of revenue was sales tax collection, which made up 53 percent of the total. Hegar advised the state legislature to exercise “some caution” in how the money will be used.

“Don’t count on me announcing another big revenue jump two years from now. The revenue increases that we’ve seen have been, in many ways, unprecedented, and we cannot reasonably expect a repeat. We are unlikely to have an opportunity like this again. This budgeting session is truly a once-in-a-lifetime session,” he said.