AUSTIN — Proposals to cut property taxes by raising the Texas homestead exemption to $140,000 cleared a key hurdle Tuesday when a bipartisan committee voted unanimously to approve and send two bills to the full Senate.
Senate Bill 4 and Senate Joint Resolution 2, proposing an amendment to the Texas Constitution allowing the higher exemption, are priorities of Republican Lt. Gov. Dan Patrick, who leads the Senate.
Sen. Paul Bettencourt, the Houston Republican who filed the bills, told the Local Government Committee that SB 4 would build on years of effort by lawmakers to bring down taxes while the cost of living continues to climb in other areas.
“You’ve got inflation baked in everywhere,” Bettencourt, chair of the committee, said during Tuesday’s hearing in the Capitol. “The one place it’s not baked into is Texas’s ISD property tax bill. That’s a big, big advantage for homeowners.”
In 2023, voters approved raising the school-district tax exemption from $40,000 to $100,000 after a hard-fought battle by lawmakers to enact an $18 billion property tax package that included some $12.7 billion in new cuts. That was estimated to have saved Texas homeowners an average of $700 on their bills.
The new homestead exemption amount would save homeowners an additional $363 per year on average, Bettencourt said.
Nearly $3.5 billion in school district tax compression — using state funds to buy down maintenance and operations taxes — included in the Senate’s budget proposal would save residential and commercial homeowners an additional $133.13 on average on their tax bill, Bettencourt said.
Texas had the third highest property taxes in the country a few years ago but has dropped to 10th place after lawmakers have worked on the issue for several legislative sessions, Bettencourt said.
According to a state fiscal analysis attached to SB 4, raising the exemption would cost a little over $1 billion for the 2026-27 cycle. The cost of maintaining previous property tax cuts and funding proposed new ones is estimated to be $32 billion in current budget drafts.
The House has not yet filed a property tax bill and is expected to put forth its own plan in the coming weeks.
The constitutional amendment would require the support of two-thirds of the House and Senate before the cuts would be sent to voters in November.
Gov. Greg Abbott has called for $10 billion in property tax relief but did not specify how he wanted lawmakers to get there. Budget bills filed by both chambers earmarked $3.5 billion for new property tax relief by reducing school district tax rates.
SB 4 includes a provision guaranteeing school districts would not lose funding due to the higher exemption, with the state making up the difference. The state now carries about 56% of Texas homeowners’ school tax burden, Bettencourt said.
“This doesn’t take away anything from our ISDs,” said Sen. Mayes Middleton, R-Galveston, a member of the committee. “This puts the state surplus funds in place of what would have been that local school property tax share. We’re relieving that local property tax share and making sure they don’t end up with any less dollars at all at the ISD level.”
The exemptions are of particular benefit to older Texans, who are typically on fixed incomes and in homes that are increasingly expensive to maintain, surviving on groceries that are more costly, said Charles Scoma, who represents Tarrant County in the Texas Silver-haired Legislature, which advocates for seniors at the Texas Capitol.
Scoma told senators during Tuesday’s committee hearing that up to 90% of Texans over 60 could wind up paying no property taxes at all if the relief is enacted.
“These folks have contributed to our community over the years,” said Scoma, former superintendent of North Richland Hills school district. “Several, like myself, served in elected positions to provide services to the community, and we can only do that if we retain our health and if we are able to retain our homestead.”
Some supporters asked the panel to consider ways to come closer to Abbott’s request for $10 billion in relief.
Lawmakers started the session with a $24 billion surplus in available general revenue and a rainy day fund expected to pass $28 billion, making the state “well positioned to offer an even larger measure of tax relief,” said James Quintero of the Texas Public Policy Foundation, a conservative think tank.
“Those are incredible figures that speak volumes about the strength of the Texas economy and the soundness of the policy framework that undergirds it,” Quintero said. “And I hope the committee today will consider those encouraging features and return at least $10 billion back to taxpayers this session.”
Others expressed concern that homestead exemptions would shift the burden more to commercial property owners, incentivize homeowners who would pay no property taxes to support tax increases, or be wiped out if local taxing entities raise rates separately.
Abbott has asked for legislation requiring voter approval for local tax increases, and Bettencourt on Tuesday said senators would be addressing that and other issues in future legislation.
“We’ve got a lot of other work,” Bettencourt said. “There’s a lot of other bills coming. We’re going to talk about all these issues.”
Shannon Halbrook of Every Texan, a progressive think tank, told senators the homestead exemption appears to be the most equitable way to deliver property tax relief, but he said lawmakers should ask whether pouring billions more into exemptions is the most efficient way to take care of Texans — particularly because the state won’t always have a surplus.
His concern has been echoed by public education advocates who fear that if the state can no longer afford the cuts, public schools — funded largely by property taxes — will lose money.
“We think it’s time to sort of take a step back and think about, ‘OK, should we be continuing to do more tax cuts?’” Halbrook testified Tuesday. “Or should we think about some of the other priorities for the state, namely investing in our public education system, in our state workforce, in our infrastructure, and in our health care system?”
