With Roadblocks Looming for Property Tax Relief, Will Lawmakers Decide to Increase Sales Taxes?
By: Rebekah Allen (Dallas Morning News)
AUSTIN — Texas’ top elected leaders made two key promises at the start of the legislative session: to boost funding for public schools and give property owners tax relief.
It appears more likely that a deal will be cut on school funding after the House passed its version of the bill Wednesday, but the path forward for the kind of property tax relief that Gov. Greg Abbott and Lt. Gov. Dan Patrick have been calling for is still rife with road blocks. Standing in the way could be a maverick GOP senator, Democrats, and city and county officials who say the bills are unfair.
The two priority bills, House Bill 2 and Senate Bill 2, would limit property tax growth for local governments at 2.5 percent a year. The proposals would not lower tax bills, just slow their rate of growth for property owners.ADVERTISING
“The 2.5 percent [cap] is dead because it’s punitive. It hasn’t moved very far yet,” said Sen. Kel Seliger, R-Amarillo. “And I don’t think I’m the only dissident at this point.”
Seliger’s opposition is significant, because 19 senators must agree to bring a bill up for a vote in the regular session. There are 19 Republicans in the Senate, so if the remaining Democrats in the Senate vote as a bloc to oppose the legislation — as they did in the last legislative session — then the bill might not see the light of day.
And even though the bill already passed out of Senate committee in February, it has yet to make it to the floor for a vote, a sign that the needed votes for passage are not yet there.
But advocates for the property tax bills remain confident.
“The reality is that property taxes are a bipartisan issue. It’s not simply Republican constituents that are screaming about their property taxes,” said Republican Sen. Kelly Hancock of North Richland Hills, a co-sponsor of the Senate’s property tax bill. “We’ll get it through because it’s the No. 1 issue.”
A potential Plan B may be brewing: a proposal gaining support in the House to increase the state sales tax by a penny and use the additional revenue to lower property taxes for schools. And there is another silver bullet that could be in play: a special session, during which only a simple majority of senators is needed to bring up a bill for consideration.
House Democrats resisting
Currently, all eyes are on the House — which is expected to vote on its version of the property tax bill on Thursday.
The original bill — and the version that is advancing in the Senate — puts a 2.5 percent cap on property tax growth for cities, counties, special taxing districts and school districts. If the government entities wanted to exceed the cap, they would hold an election to ask voters. The current limit for local governments is 8 percent property tax revenue growth before residents can petition for an election.
The House version of the bill was amended in committee to exempt schools, hospital districts and community college districts from the cap, leaving only cities and counties at the 2.5 percent cap.
House Democrats have largely resisted getting on board.
“Presently, there is a great deal of concern within the Democratic caucus around House Bill 2 and how it will impact cities and counties,” said Grand Prairie Rep. Chris Turner, who leads the caucus.
Rep. Trey Martinez Fischer, D-San Antonio, previously complained that the bill that was voted out of the Ways and Means Committee lacked bipartisan input.
“I can’t support the bill in its current form,” said Martinez Fischer. “There are very few things that the state of Texas does that affect people’s lives like police and fire, public safety, maintaining and operating jails and keeping parks open and clean. With a revenue cap, you limit a local government’s ability to deliver for its citizens.”
McKinney Mayor George Fuller is among the swarm of local leaders fighting the bill.
He pointed out that the state budget grows at a rate of about 6 percent every year, so a 2.5 percent cap on local governments is unfair and unreasonable.
Fuller said his residents want more police security at schools, and caps on his city budget could thwart those efforts.
“I don’t want my public safety budget in the hands of Austin, quite simply because they’re not here on the ground,” he said.
Ways and Means chairman Rep. Dustin Burrows, R-Lubbock, declined to comment on House Bill 2, which he authored, saying only that he expected a vote on Thursday.
Only two years ago, both Republicans and Democrats in the House refused to set a limit below 6 percent, which means Burrows will have to persuade a host of Republicans and Democrats to get on board.
At least two Democrats have indicated support of the bill. Rep. Ryan Guillen, of Rio Grande City, supported the bill in committee, and Rep. Terry Canales, of Edinburg, signed on as a co-sponsor.
Compromise likely
The path toward passing the property tax bill will likely require compromise. Patrick and Houston Sen. Paul Bettencourt, who authored the Senate version, have already indicated they’d be open to setting the revenue cap at 4 percent.
But Bettencourt expressed frustration over the House’s move to strip school districts from the bill.
“School districts on average account for more than half of your property tax bill and must be included as part of any property tax reform and relief plan,” Bettencourt wrote in a now deleted Facebook post. “However, school districts and most special districts were removed from the House version.”
Burrows responded on the post, “Send us the bill already — I thought the plan was. What is the delay?”
Bettencourt declined to comment on the exchange, but said in an email: “There are always paths forward as property tax reform and relief should not be a partisan issue, it is an everybody pays issue!”
And last month, when Bettencourt was asked if he had the votes to pass his bill in the Senate, he noted that he does in a special session — when only a simple majority of senators is needed. That means Seliger’s opposition might not be an obstruction.
“What a waste and time and money that would be,” Seliger said, noting there are several other bills that could help advance property relief in the regular session, including his bill that would cap property appraisal growth at 5 percent a year.
Sales tax swap
Property tax relief could come in other forms. The House’s school finance bill included a provision to reduce school tax rates by at least 4 cents per $100 of valuation. In Dallas, a home valued at $191,000 would see a $153 savings.
And next week Rep. Dan Huberty, R-Humble, will push a bill in committee that could increase the state sales taxes by 1 cent, making the average local and state combined rate 9.25 cents. An increase would generate about $5 billion in new sales tax revenue, Huberty said, which could push down school property tax rates by about 20 more cents per $100 valuation.
But Dick Lavine, an economist with the left-leaning Center for Public Policy Priorities, said that would disproportionately hurt poor people, who spend more of their annual income on sales taxes than wealthier people.
“Only families with an annual income of $150,000 a year would see an actual cut,” he said of the sales tax swap.
Other lawmakers have pushed for increasing homestead exemptions, which would mean a decrease in property taxes, and appraisal caps, which would limit growth.
Republican Rep. Matt Schaefer, R-Tyler, said the Legislature has to do something meaningful.
“You’ve got to have property tax relief that people can feel and that will last,” he said, noting that he supports House Bill 2, but wants school districts added back in. “We’ve got to have something that keeps downward pressure on local property taxes or they’re going to throw us all out of this building.”
Thomas Marchetti, a Rockwall homeowner, agreed. He said he owns properties in other states but will no longer invest in Texas until the state “gets its act together on reducing property taxes.”
“Republicans can expect to be thrown out of office come 2020 if they fail to do what they promised the voters,” he said. “They ran on property tax reform, and now they are fumbling the ball. The base will not accept more useless talk by the GOP. We want action.”