Tax Relief Ahead: Texas Homeowners and Businesses to Benefit from Voter-Approved Proposition 4

Frisco, North Texas neighborhood | mei-chun jau

The primary goal of the $18 billion property tax cut package is to reduce school district property taxes, which account for the majority of a landowner’s property tax liability in Texas.

Voters on Tuesday decisively adopted a constitutional amendment that modifies the way public schools are funded, possibly saving thousands of dollars for Texas companies and homeowners in property tax bills in the years to come.

The bill’s author, Republican Senator Paul Bettencourt from Houston, stated via email that he and Lt. Governor Dan Patrick have been working on property tax reform for over 20 years. It’s wonderful to see the people finally get the property tax cut they have long desired and earned, a testament to everyone’s hard work. Giving customers their money back from overbudget collections is a terrific idea.

In Tuesday’s constitutional amendment election, over 80% of voters passed Proposition 4, a $18 billion property tax-cut package, according to Decision Desk HQ. After 99% of anticipated ballots were counted, over 2 million votes were cast in favor of the amendment.

The proposition’s primary goal is to reduce school district property taxes, which account for the majority of a landowner’s property tax burden in Texas.

As a result of what lawmakers refer to as “compression,” school districts will receive $7.1 billion under the proposal to lower their tax rates. Specifically, this will result in a reduction of 10.7 cents for every $100 of property value in taxes that would otherwise be collected from local governments.

Additionally, the proposal more than doubles the amount of a homeowner’s worth that is free from school district taxes due to their homestead exemption. This money is used to fund public education. The exemption amount is increased from $40,000 to $100,000 by the constitutional amendment.

Together, those breaks—which will be applied to landowners’ 2023 tax bills—will result in tax savings for the average Texas homeowner of more than $2,500 over the next two years, with larger savings for seniors. These figures come from the office of Senator Bettencourt, a Republican from Houston who is leading the Senate’s tax-cutting efforts. That works up to slightly over $100 every month.

Texas landowners pay some of the highest property tax bills in the country, despite the state’s image as having cheap taxes—partially because there is no state income tax—according to the conservative Tax Foundation. For the state’s top Republicans, lowering property taxes has been a primary focus.

Republicans had the opportunity to take a major swipe at tax cuts this year, pledging to spend a sizeable portion of a record $33 billion state budget surplus—a consequence of Texas’ significant economic development and plenty of federal COVID-19 relief funds—in their budget. The $18 billion tax cut plan was delivered to Gov. Greg Abbott by GOP lawmakers after months of infighting, but voters still needed to approve it at the polls.

$5.3 billion is also included in the agreement to cover tax cuts that Congress has previously passed.

As part of Proposition 4, voters also passed additional tax reforms, including a new annual ceiling on the growth in some companies’ property values, which go into determining an owner’s tax liability.

For the next three years, the value increase of commercial, mineral, and residential properties (such as apartment complexes and rental houses) that are valued less than $5 million and do not qualify for the homestead exemption will be capped at 20% annually. Previously, companies were exempt from this ceiling, in contrast to homeowners, whose taxable house values are limited by state law to annual increases of no more than 10%.

The valuation cap on specific commercial properties will run out in 2026 unless voters and legislators decide to extend it.

Additionally, Proposition 4 increases the number of companies exempt from the state’s franchise tax. Additionally, the amendment gives voters in counties with a population of at least 75,000 the ability to choose three newly appointed members of the board of directors for their local appraisal districts.

Resounding Approval: Texas Voters Pass $18 Billion Property Tax Cut in November Election

In Tuesday’s off-year constitutional amendment election, Texas voters easily approved a massive $18 billion property tax decrease. According to the legislator who led the campaign to place the subject on the statewide ballot, homeowners should anticipate realizing their savings practically immediately.

Sen. Paul Bettencourt, a Republican from Houston, told the USA TODAY Network late on Tuesday, when it was evident the proposition would win. “The results (of Proposition 4) are already in the tax bills that are being mailed right now,” Bettencourt stated. “The average tax assessor will send out a revision to mortgage companies by January, so homeowners who pay property taxes through escrow accounts, which is roughly about half of the homes, will have an escrow reduction starting next year.”

One of the 14 proposed changes to the Texas Constitution was the property tax issue. Voters on Tuesday passed 13 of the amendments in a low-key, nonpartisan election that would have a significant impact on the financial stability and standard of living of Texans.

Proposals to create special funds for state park expansion and improvement, plan for future water requirements throughout the state, and provide broadband internet to even the most distant areas of the state were among the other initiatives that the voters passed.