A bill to slash property taxes by at least $2 billion was passed unanimously by the Texas Senate Finance Committee this week on August 30, clearing the way for final approval by the Senate. This bipartisan tax relief plan, Senate Bill 91, takes aim at the state’s onerous school district Maintenance and Operations (M&O) taxes. Known as the “Robinhood Tax,” M&O property taxes are imposed by Texas municipalities and account for nearly half of the total annual property tax burden, totaling $56 billion last year.
SB 91 would allocate at least $2 billion and up to $4 billion in state dollars to pay down local M&O taxes, creating substantial tax relief for Texans. For the owner of a median $300,000 home, tax savings under the new bill will come out to about $200 next year, according to Senator Paul Bettencourt, the author and primary sponsor of the tax plan.
“Texans will see a reduction of at least 6.6 pennies on their school district tax rate in the 2022 property tax year,” said Bettencourt at Monday’s Finance Committee hearing. “Each billion available for compression will lower the M&O tax rate for all property owners in Texas.”
This new round of tax relief is contingent upon a revenue trigger being met. The total amount of tax savings under the new bill will depend on a key revenue estimate for the 2022-23 fiscal year, to be provided by the Texas Comptroller on June 1, 2022. If the Texas economy continues to grow at its current pace, school district M&O taxes could be lowered by as much as $4 billion as surplus state tax revenue subsidizes local property taxes.
Vance Ginn, chief economist at the Texas Public Policy Foundation, testified in favor of SB 91 at Monday’s hearing. Ginn points out that property taxes are inefficient, as they rely on subjective valuations by appraisal review boards, and can often force people out of their homes if not paid, meaning no one truly owns their property in Texas. Moreover, Ginn argues, property taxes tend to hurt low- and fixed-income earners the most. Booming housing markets, of which Texas has many, lead to rising home valuations and higher property taxes, regardless of the homeowner’s ability to afford the additional tax burden.
Not only is property tax relief clearly needed, Texans are demanding it. Recent polls show that 82% of Texans consider property taxes to be a “serious issue,” while more than two-thirds would be upset if no legislative action is taken to lower property taxes this year. Their concerns are valid; over the last 20 years, local property taxes have grown faster than the average taxpayer’s ability to pay for them, helping make Texas the state with the 7th worst property tax burden on homeowners.
By passing SB 91, Texas legislators can heed the advice of Americans for Tax Reform and its coalition partners to ease a crushing tax burden on Texas families. “Texans cannot afford to wait until 2023 for the Legislature to address these issues,” noted a joint statement released on Monday by the Texas Public Policy Foundation, the Texas Conservative Coalition Research Institute, and Americans for Tax Reform. “Not only is the burden too high, but the system is designed to allow insatiable local governments to keep squeezing every last dime out of taxpayers.”
SB 91 now awaits a full vote in the Texas Senate and subsequent votes in the House before it can go to Governor Greg Abbott’s desk. ATR will be following this legislation closely.