At Governor Greg Abbott’s swearing in for his third term, the animated inauguration speech he delivered emphasized Texas’s economic prowess, promising to put our $33.7 billion budget surplus to work toward the Lone Star State’s continued growth.
Perhaps the most significant proposal in his speech was a promise to provide the largest property tax cut in state history.
In reference to the budget surplus, Abbott said, “it does not belong to the government. It belongs to the taxpayers. We will use that budget surplus to provide the largest property tax cut in Texas history.”
In today’s political climate, politicians don’t have a reputation for absolute honesty. And with a claim that could impact so many Texans, we thought it was worth consulting the experts.
How will Abbott cut property taxes?
Glenn Goodrich is the Director of Technology and Property Tax at Goodrich Realty Consulting. With over 10 years of experience in the real estate industry, Glenn is a property tax guru. To provide a professional perspective, he sat down with daltxrealestate.com to discuss the implications of Greg Abbott’s recent proposal.
“To really understand all this, it’s important to take a step back to 2020,” Goodrich said.
In 2020, Senate Bill 2 was passed. This is where it all begins, Goodrich said, calling it the most significant property tax legislation in Texas history. The bill capped budget increases from local school districts, which make up a significant portion of property taxes. SB2 prevented school districts from increasing their annual budgets by more than 2.5 percent.
“Of course, this really didn’t make headlines,” Goodrich said. “Even though it significantly impacts property taxes, many people don’t realize its effect.”
There are a few reasons for this. The first is that homeowners receive their appraisals in April.
“Home values have skyrocketed since 2020,” said Goodrich, whose site propertytax.io helps homeowners protest their property tax valuation. “Homeowners get sticker shock in April but don’t see their new property tax rate until October. Most people have their property taxes tied up in their mortgages and never see the real increase. And the increase is actually not that much now that the school budget increases have been capped at 2.5 percent.”
All this presents a problem for Greg Abbott. It doesn’t allow Senate Bill 2 to make headlines.
That’s why Abbott and Lieutenant Governor Dan Patrick used the inauguration to propose something a lot more significant. As part of his passionate speech on Tuesday, Dan Patrick proposed to increase the homestead exemption from $40,000 to $70,000, which would effectively create a massive property tax cut.
“Of course,” Goodrich said, “there will be some major points of contention here.”
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Texas has a reputation as one of the best states in the country for small businesses. In fact, the Lone Star State ranked No. 2 in Harrington Group International’s list of best states to start a business in 2023. However, we didn’t get here without a whole lot of lobbying.
“Like anything, this homestead exemption is going to be influenced by lobbyists,” Goodrich said.
Since the homestead exemption only applies to places of primary residence, small businesses or those with rental properties won’t benefit nearly so much from this historic property tax cut. This isn’t going to sit well with small business lobbies, Goodrich said.
“They’re going to fight for a piece of this tax break,” he added. “They’ll run ads against Abbott and will make it as difficult as they can for this legislation to pass.”
