Texas homeowners and businesses are poised for bigger tax breaks.
Voters are on track Tuesday night to approve a constitutional amendment to raise the state’s homestead exemption, meaning the amount of a home’s value that can’t be taxed to pay for public schools, from $100,000 to $140,000 — shaving hundreds of dollars off of the biggest chunk of the typical homeowner’s property tax bill. Homeowners above the age of 65 or living with disabilities looked primed to see even bigger cuts after voters signed off on a separate amendment.
Businesses, too, are poised to get a break on their property taxes. An amendment to exempt up to $125,000 of businesses’ inventory from being taxed by school districts, cities, counties or any other taxing entity appeared on track to pass.
“There is an absolute recognition of the need to provide property tax cuts for homeowners and business owners, but specifically that the public embraces the idea that increasing homestead exemptions is a way to keep people in their homes and to lower their property tax bills,” said state Sen. Paul Bettencourt, a Houston Republican who pushed the tax-cut measures.
Under the homestead exemption amendment, the owner of a typical Texas home — valued at $302,000 last year, according to Zillow — would have saved about $490 on their school property taxes had the higher exemption been in effect last year, a Tribune calculation shows. Older Texans and people living with disabilities who own their homes would have seen even bigger savings.
State lawmakers have spent heavily in their efforts to drive down Texans’ property taxes, among the highest in the nation. Texas will spend $51 billion over the next two years on property tax cuts, including on the higher homestead exemption — a lofty number that some state budget watchers and tax-cut skeptics warn Texas won’t be able to afford should the state’s economy experience a significant slowdown.
Because the tax breaks would be embedded in the state’s constitution, lawmakers would have to trim other parts of the state budget should coffers come up short — including other tax cuts that aren’t guaranteed by the Constitution.
Meanwhile, the state is paying for the bigger inventory tax exemption for school districts. But cities, counties and other jurisdictions that tax businesses’ inventory will either have to adopt a higher tax rate than they otherwise would have or trim their budget to make up for lost revenue.
This article first appeared on The Texas Tribune.
