Texas Lt. Gov. Dan Patrick, Speaker Dade Phelan Reach Historical $18 Billion Property Tax Cut Deal

Texas Republican State Sens. Paul Bettencourt (center), Tan Parker (3rd from left) and Republican Lt. Gov. Dan Patrick (2nd from left) held a press conference at the Texas Capitol in Austin, Texas, on March 14, 2023. (Courtesy Team Bettencourt)

Lt. Gov. Dan Patrick and House Speaker Dade Phelan on Monday announced they reached a deal on a historic $18 billion tax-relief plan for Texas property owners.

The deal ends a monthlong stalemate that turned into a public battle between the state’s top GOP leaders over property taxes.

Mr. Patrick’s stance was focused on a plan that combined the compression of schools’ M&O taxes and increasing the state’s homestead exemption.

“I started working to reduce property taxes at a Capitol hearing in 2003, [four] years before I was elected to the Texas Senate. It has been a long road, but it has been a great day for all property owners. Speaker Phelan and I worked diligently over the last week on the final bill. It made the difference,” Mr. Patrick said in a joint statement. “It may have taken overtime, but the process has produced a great bill for homeowners and businesses.”

Mr. Phelan’s plan, backed by Republican Gov. Greg Abbott, was based on tax-rate compression that would provide the greatest benefit to wealthier homeowners and businesses.

“Reducing property taxes, providing relief to small business owners and reforming our appraisal system will ensure economic growth and prosperity, and this agreement is a significant victory for all Texans,” Mr. Phelan said.

Texas Speaker of the House Dade Phelan in the House Chamber at the Texas Capitol in Austin, Texas, on May 26, 2023. (Eric Gay/AP Photo)

The legislation also delivers on Gov. Abbott’s promise to cut property taxes with a large portion of the state’s record $32 billion budget surplus.

“I promised during my campaign that the state would return to property taxpayers at least half of the largest budget surplus we have ever had. Today’s agreement between the House and the Senate is a step toward delivering on that promise,” Gov. Abbott said in a statement. “I look forward to this legislation reaching my desk, so I can sign into law the largest property tax cut in Texas history,” he continued.

Mr. Patrick and Mr. Phelan said that they, along with members of both chambers, worked “day and night” last week to “reach a consensus.”

The proposed tax-relief legislation includes:

• Over $12 billion of the surplus will be spent on reducing the school property tax rate for all homeowners and business property owners.
• All homeowners who homestead their property (approximately 5.7 million homeowners) will get a $100,000 homestead exemption.
• Non-homesteaded residential and commercial properties worth $5 million and below will receive a 20 percent circuit breaker on appraised value as part of a three-year pilot project. A property tax circuit breaker limits or reduces the taxes when a property tax bill exceeds a certain percentage of the taxpayer’s income, according to the Institute on Taxation and Policy.
• The legislation will include franchise tax savings for small businesses and create newly elected positions on local appraisal boards.

Missing from the legislation was a teacher pay provision that the Senate had attached to Senate Joint Resolution 1, which passed unanimously last week.

House Democrat Chair Rep. Trey Martinez Fischer called out the omission as “inexplicable” and “cruel.”

“With billions of dollars to spend, it is inexplicable as it is cruel to remove compensation for teachers. House Democrats hope to see a final bill that doesn’t shortchange our kids and their schools, returning to the bipartisan plan first offered by the Senate. If not, House Republicans will have to answer why,” Mr. Fischer said in a statement.

The legislation called for a $2,000 payment to every full-time teacher in Texas and an additional $4,000 for teachers in districts with fewer than 20,000 students to help close the pay gap between urban, suburban, and rural teachers.

On WFAA’s Y'allitics podcast, Mr. Patrick said Mr. Phelan rejected the teacher pay provision in the amendment, adding that teacher raises would be taken up in a later session.

“The House decided they wanted just to keep separate from the property tax bill and I respected that,” Mr. Patrick said. “We will address that in a later session, and look, we’re going to get teachers a pay raise.”

Texas Lt. Gov. Dan Patrick speaks at a press conference in Austin, Texas, on June 16, 2021. (Mei Zhong/The Epoch Times)

Two Special Legislative Sessions

Late last month, Gov. Abbott called lawmakers back to work for a second legislative session after the House and Senate failed to reach a deal to reduce property taxes.

“I called another special session to deliver on our promise to provide the largest property tax cut in Texas history. Hardworking Texans deserve lasting property tax cuts. When the House [and] Senate come to an agreement [and] send a property tax bill to my desk, I will sign it,” Gov. Abbott wrote in a Twitter post on June 28.

The governor’s first 30-day special session, which ended June 27, was focused on reducing property taxes and border security, but the chambers failed to make deals on either issue.

Hours after the first special session ended, Gov. Abbott announced the second session and narrowed the focus to one item—property taxes. He vowed to continue calling sessions until the House and Senate came to an agreement on property tax reduction.

“Special sessions will continue to focus on only property tax cuts until property tax cut legislation reaches my desk,” Gov. Abbott said on June 27 in a press release announcing the second special session.

Texas Gov. Greg Abbott speaks at a press conference in San Antonio, Texas, on June 17, 2021. (Marina Fatina/NTD)

Proposed Legislation Approval?

The omnibus property tax relief bill and franchise tax relief bill, both originating in the Senate, were filed on Monday.

The constitutional amendment, House Joint Resolution 1, will originate in the House, according to the release. (pdf) The amendment allows the homestead exemption to be placed on the ballot on Nov. 7. Last year, Texas voters overwhelmingly approved a homestead exemption increase from $15,000 to $40,000.

The lawmakers said they expect to pass the proposed legislation later this week.