Ever since Lt. Gov. Patrick and Senate Finance Chair Nelson (R-Glower Mound) announced SB 1 as the Senate tax cut bill we’ve been waiting for substance of the bill to be revealed. This week Patrick and Nelson, along with Sen. Schwertner (R-Georgetown) announced and filed three tax cut bills to make up the complete Senate package.
SB 1 has become the property tax reduction bill for homeowners. The bill increases the school property tax homestead exemption “to 25% of the median market value in the current tax year of all residence homesteads in the state.” The median market value is to be determined by the Legislative Budget Board annually. The Senators wanted to find a way to make any property tax reduction meaningful and permanent, not subject to disappearing with appraisal increases. This move means the homestead exemption will rise as appraisals rise; I guess that makes it permanent. As far as meaningful, according to press reports, at current values the homestead exemption could increase from $15,000 to $33,625 saving the average homeowner $233 in 2016. Is $233 meaningful? The bill does provides about $2.5 billion in reduced property tax revenue raising the question about whether or not there is any room left for business property tax relief.
The bill is accompanied by SJR 1 which proposes a constitutional amendment necessary to change the homestead exemption, give senior citizens the benefit of the homestead exemption and to prohibit the imposition or collection of a tax on the conveyance of an interest in real property.
SB 7, also by Nelson, reduces the franchise tax rates by 15% to 0.85 for most taxpayers and 0.425 for retailers and wholesalers. SB 7 has a $1.5 billion price tag. SB 8, by Schwertner, increases the franchise tax small business exemption from $1 million to $4 million. Schwertner says the bill will exempt 52% of all Texas businesses from the franchise tax. The lost revenue is $760 million.