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The ongoing debate on Property Tax Relief

Since Returning to the Legislature in 2017, my goal has been to use my legislative seniority and my financial and real estate experience as a member of the Texas House Ways and Means Committee. I have promoted transparency, accountability, and taxpayer-friendly changes to the Texas Property Tax Code.

The House Ways and Means Committee is where state revenue initiatives are debated.

Texas has a constitutional provision prohibiting a state or local income tax, and the State of Texas does not receive property tax income. Local governments are funded primarily with property appraisal assessments that are taxed locally and they receive portions of the state sales tax.

My goal has been to:

  • limit the growth of homestead property values through appraisal reforms, and thereby restrict the growth of local government with revenue growth constraints;

  • provide greater exemption opportunities for those 65 and disabled;

  • reduce public schools’ property tax rates through increased state funding by a method called compression;

  • provide an equal and uniform approach to appraisal assessments.

The legislature has successfully capped the growth of local government with a 3.5% revenue cap and public school revenue cap of 2.5% (both down from previous levels). Homestead exemptions for school appraisals also have increased over the past four years. Local governments have discretion to offer exemptions but many do not offer any exemptions.

Reductions of public school tax rates at the local level were accomplished in 2019 and 2021 with the impact of compression. A similar reduction is both the legislature’s and my goal for 2023.

Appraisal reforms remain the greatest challenge due to the tax code’s complexity. The recent debate to limit appraisal increases focuses on appraisal caps for all real estate property versus appraisal caps only for homesteads.

Property tax liability is a two-part process that begins with the appraisal district’s appraised value assessment and the tax rate assessed by local government entities.

With the largest budget surplus in the state’s history and a commitment by the Governor, the Lieutenant Governor and Speaker of the House (the state’s top three leaders) stating they were going to use a majority of this biennium’s budget surplus to provide the largest property tax reduction in the state and nation’s history, Texans anxiously have been awaiting the news of the reduction.

The 88th Legislative Session that ended 29 May was a disappointment as the legislature failed to agree on a property tax reduction compromise between the House, Senate and the Governor.

As the session progressed the Texas House passed a proposal that included a 5% appraisal cap on all real estate appraisals, increased the homestead exemption to $100,000 and provided increased school tax reduction through the compression method. The estimated reduction to taxpayers for the combined initiative was over $16.5 billion. This initiative did not pass in the Senate.

The real estate appraisal cap debate has been a deeply divided issue between the House and Senate. The Senate’s initiative included an increase in the homestead exemption and compression but did not offer the 5% appraisal cap on real estate appraisals.

When the 88th Legislative Session ended without needed property tax relief, the Governor called the legislature back into session and directed us to send him legislation that only provided 100% compression of the public school tax rate. The House passed the Governor’s compromise, but the Senate has not. Gridlock prevails as a result.

Responding to the gridlock senate leadership began openly attacking the Governor and inundating Texas House members with text messages, emails and mailers implying that the House members did not support property tax reform. That is totally inaccurate and misleading and it is a detriment to reaching a compromise.

We had two competing property tax proposals at the beginning of this legislative session and both offered significant property tax relief.

The House version and the Senate version differed in the mechanics of the initiatives, but the outcome for property taxpayers was very close to the same. There is no doubt that both proposals under consideration would provide significant and lasting relief to property owners.

An appraisal cap of 5% for all real estate creates short-term gratification but long-term complications. An appraisal cap targeted only for homesteads would be a more palatable solution if appraisal caps are included.

Exemptions work. However, a fixed amount is impacted by homestead appraisal creep that property owners will continue to experience. Exemptions will need to be increased every two years as property values continue to rise. A better option would be to use an exemption tied to the average value of a homestead in each respective county and set a percentage that adjusts annually based on rising appraisals.

Compression works. The legislature has successfully increased the state’s share of public school funding the past two sessions through compression. However, taxpayers may not have seen the results because appraisals continue to rise exponentially. Although complicated to understand, it is an effective tool.

Data since 2019 reveals that, with the local government revenue growth cap of 3.5% and the school revenue growth cap of 2.5%, increased exemptions and compression have slowed or actually lowered the property tax liability for property owners.

It is my belief a solution that lowers the homestead appraisal cap of 10% to a level of 5.0%-7.5% and avoid any appraisal caps on other properties is a start to appraisal reform. Initiatives could be enacted to:

  • Increase the homestead exemption with additional exemptions for 65 and disabled,

  • Possibly freezing appraisals for the same group at some point

  • Including a mandatory exemption by local governments (Counties, Cities, Special Districts) using the average homestead values for a basis in each respective county enhances home ownership. By combining these initiatives and sustaining compression for public school tax rates (which is simply increasing the state’s contribution to the foundation school program) property owners should experience relief.

It is important to reflect on the meaningful tax reforms the Legislature has accomplished.

House Bill (HB) 490 (2019) and HB 491 (2019) that I authored were merged into House Bill 2 (No-new-revenue - rollback tax rate) which gave us the revenue caps for local governments.

HB 3 (2019) began the school tax compression initiative.

HB 492 (2019) was disaster relief legislation that offered property owners who experienced property damage or loss, an exemption for the tax period of their property appraisal up to 100% of the value in the event the Governor declared an area a disaster resulting from a Hurricane, Tornado, Flood or Fire.

HB 998 (2021) began the process of offering taxpayers relief through a grievance process at the county appraisal district.

HB 1285 (2023) expanded that grievance process with increased duties and responsibilities of the taxpayer liaison officer.

HB 4101 (2023) offers taxpayers limited binding arbitration to compel compliance with procedural requirements related to protests before appraisal review boards (ARB).

Progress is being made in Texas’ Property Tax Code. Transparency, accountability, appraisal reform, appraisal review board training, and supporting equal and uniform procedures are my legislative priorities and have become priorities among fellow legislators.

There are 150 House members, 31 Senators, the Lieutenant Governor and the Governor who participate in the process. Working together is necessary to make government function properly. Taking the “high road” and following the Golden Rule always are preferable to rhetoric and name-calling. The primary objective of tax reform must be paramount: failure to reach a reasonable solution is unacceptable.

Hugh D. Shine

State Representative

District 55 (Bell County)


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