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Dueling Property Tax Relief Bills Bring Texas Legislators No Closer In Hastily Called Special Session

The Texas Senate and House were set to pass respective property tax relief bills on the first day of a special session Tuesday, but are no closer to actually relieving taxes.

Texas Gov. Greg Abbott

Gov. Greg Abbott called the special session Monday evening after the Texas Legislature failed to reach a deal to pass property tax relief during its biennial regular session that ended earlier that day. Abbott said this session will focus on property tax cuts and border security, adding there will be more special sessions later this year, the Houston Chronicle reported.

Abbott has made property tax reform a major priority this session.

The Senate passed Houston-based Republican Sen. Paul Bettencourt’s Senate Bill 1, which would increase the homestead exemption on school district taxes from $40K to $100K, meaning homeowners would no longer have to pay school district taxes for $100K of their property value.

A fiscal analysis of the Senate bill suggests the proposal would direct $12.1B in state funds to cover the exemption increase and help school districts lower their own rates through a mechanism known as "tax rate compression."

“This is the biggest property tax relief plan in the State’s history,” Bettencourt said in a release, adding the additional $60K exemption would save homeowners about $681 a year. "That will help out to the tune of $20,442 over a 30-year mortgage!”

Meanwhile, the House planned to take up House Bill 1 later Tuesday. The bill would lower school district property tax rates across the board, according to the Texas Tribune and was advanced out of the House Ways & Means Committee Tuesday. The House version would spread out relief to all property owners, including businesses owning commercial property.

Abbott said he wants the legislature to only focus on reducing school districts' maximum compressed tax rates by buying down local property taxes with $12.3B of state funding lawmakers had set aside for property tax cuts. The House’s bill follows that strategy, the Tribune reported.

The dueling bills bring into relief disagreements between Texas’ branches of government on how property tax relief should be addressed. Unlike Abbott,  Lt. Gov. Dan Patrick, who leads the Senate, wants a combination of an increased homestead exemption and compression.

“This is not acceptable to the Senate,” Patrick said in response to Abbott’s plan, per the Chronicle. “Compression plus homestead exemption is the path for the biggest tax cut in history. All compression is not.”

House Speaker Dade Phelan had proposed tightening the annual cap on property tax appraisal increases from 10% to 5%. Tax policy experts warned that approach would have substantial negative side effects while doing little, if anything, to lower property owners’ taxes, the Texas Tribune reported. The House has since dropped its cap proposal.

On Twitter, Patrick accused Phelan of leaving a meeting with him and Abbott on Sunday in a huff, “killing the largest property tax cut in history.” Patrick also insinuated that Phelan, a real estate broker and partner at a real estate investment firm, wanted to benefit himself with the cap proposal.

“In one of those meetings, he said, ‘I own a lot of property, not that it's about me,’” Patrick said, according to the Tribune. “Now, anytime anyone says it's not about me, it's usually about them. … Now, I'm not saying he was doing that to benefit himself. But I could never figure out why he wanted to do that.”