Texas lawmakers want to cut property taxes again. Can they afford it?

AUSTIN – The San Antonio Express-News reports that the Texas Legislature spent the past three sessions chipping away at the soaring property taxes that have strained homeowners and businesses across the state. And this year is no different: the House and Senate have already laid out their dueling plans to bring another round of relief. But as the debate picks up again, tax experts and some lawmakers caution that leaders might already be committing to unsustainable tax cuts — threatening public school funding and other essential services. On top of the $12.7 billion in new property tax cuts lawmakers agreed to in 2023, both chambers now want to spend another $3.5 billion of the state’s surplus to cut school property taxes and reimburse school districts for lost revenue.

If the increase passes, the state would be on the hook for a whopping $51 billion to pay for past cuts and fund new ones. That includes increasing the homestead exemption, which reduces the taxable value of a primary residence, and compressing tax rates for all properties. The ongoing cost of previous tax cuts has ballooned so much that it now represents 22% of the state’s total spending, according to estimates from the Legislative Budget Board. That amount will only continue to grow, even if no further cuts are enacted. That’s because of provisions written into state law in 2019 that automatically reduce tax rates as property values grow. Property taxes in Texas are among the highest in the nation, largely because the state doesn’t have an income tax to help fund basic services. “We are mindful of how much this is costing, because you have to pay for it and continue to pay for it,” said state Sen. Paul Bettencourt, a Houston Republican who has led the chamber in property tax relief. “And that’s why you can’t overdo it.” Local property taxes fund public school districts, and lowering them means districts collect less money. To make up the difference, the state promises to reimburse districts for any lost tax revenue.