AUSTIN — A House panel unanimously advanced a compromise tax-relief plan Tuesday after a key lawmaker from Dallas promised Texas teachers a pay raise will be taken up in a third special session this fall.
Dallas GOP Rep. Morgan Meyer also assured skeptical Democrats that renters would benefit from the tax cuts, as landlords would pay less in property tax and be able to pass along the savings to tenants.
The $18 billion tax cut package, which the state’s “Big Three” leaders hammered out over the weekend, broke a months-long deadlock over how best to pour much of a gigantic state surplus into tax relief.Related:Texas Lt. Gov. Dan Patrick, House Speaker Dade Phelan strike deal on property taxes
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Assuming lawmakers bless it, the compromise could bring the summer’s second special session to a close as early as Thursday, and Gov. Greg Abbott has signaled he’s ready to let lawmakers go home until after Labor Day.
The Senate impeachment trial of Attorney General Ken Paxton begins Sept. 5. Also, Abbott has said he plans to call a special session this fall on school choice. In the regular session, educator raises were tied to a proposed education savings accounts program, which would allow families to spend public dollars on private school tuition or other services.
On Tuesday, as his House Ways and Means panel quickly heard and voted out the tax package’s three measures on identical votes of 9-0, Meyer was asked why the final deal omits teacher salary increases.
Late last month, the Senate added temporary educator bonuses to its tax-cut bill, noted Grand Prairie Democratic Rep. Chris Turner.
Meyer said decisions on teacher pay and how to spend $5 billion of new money for public schools in the newly passed state budget, which lawmakers have yet to allocate, won’t be decided in the current special session.
“This is a tax bill,” he told Turner.
Abbott is expected to convene a special session on education, beginning in late September or October.
“The House is fully supportive of the teacher pay raises and fully funding public education, and that is something we absolutely will accomplish,” Meyer said.
Last week, Dallas Democratic Rep. John Bryant introduced a tax and school finance bill that would have provided teachers with permanent salary bumps of $4,300. Supporters of faster action on educator pay will see if they can propose changes to Meyer’s bill, Bryant said.Related:Texas renters would gain along with homeowners under Dallas Democrat’s tax relief plan
Meyer’s omnibus property tax bill and two other measures carrying out the relief deal are expected to hit the House floor Thursday.
Chiefs of the House Democratic Caucus, Mexican American Legislative Caucus and Texas Legislative Black Caucus said in a joint statement that teacher shortages have become a crisis. Leaders of the three heavily Democratic caucuses said they will see if they can “add back into the bill funding for our local schools.”
Earlier Tuesday, House members held a brief session. Some lingered afterward, offering their reactions to the tax-cut compromise announced Monday by Abbott, Lt. Gov. Dan Patrick and House Speaker Dade Phelan, R-Beaumont.
“I look forward to supporting it wholeheartedly,” said Tarrant County GOP Rep. David Cook, citing pocketbook gains for both homeowners and business.
While the House wasn’t able to persuade senators to tighten to 5% an existing appraisal limit of 10% on homesteads and apply the annual cap on taxable values to all real estate, Phelan won a “circuit breaker” experiment that should help small businesses, Cook said.
For tax years 2024, 2025 and 2026, the annual cap on growth of appraised values for “non-homesteads” — commercial property and second homes, for example — would be 20%.
“Most of our businesses in Texas are small business owners, and this will help more of our small business owners stay in business, quite frankly,” Cook said. “A lot of people who purchase property see a 50% increase [in appraised value] within a two- or three-year period.”
Cook, the former mayor of Mansfield, said he would have liked an even tighter appraisal cap.
“But all in all, I’m excited to be a part of the biggest tax break in Texas history,” he said.
Democrats and the leader of a business tax-research group were less effusive.
Turner, the Tarrant County Democrat, said the deal’s 150% increase in mandatory homestead exemptions on school taxes is attractive.
At the insistence of Patrick, the package would take the exemptions, which remove a set dollar amount of value from being taxed, to $100,000, from $40,000 now. The increase to the homestead exemption would save the average Texas homeowner nearly $700, according to the author of the identical proposal in the Senate.
“Historically, Democrats have championed homestead exemption increases,” noted Turner, in his seventh term.
“At the same time, questions remain about how, if at all, this legislation will help renters. I don’t buy that if you cut commercial property tax rates, then landlords are going to just magnanimously pass those savings on to their tenants,” he said. “They’re going to charge what the market allows.”
The absence of direct help for renters, such as the 10% annual rebates proposed in Bryant’s bill, rankled some.
“Like what planet do you live on?” said Democrat Rep. Gene Wu, who said renters comprise 85% of his Houston constituents. “You think that a landlord is going to reduce rent, right, because of a small property tax decrease?”
Meyer said he believes his bill will help renters.
“Everyone’s taxes will go down, and so those who own rental homes or others, they will see their tax rate go down and therefore they will be able to pass that on to their renters,” he said.
Landlords have seen steep increases in property tax bills and have increased rents in response, Meyer said. Decreasing their tax burden in a free market would force them to lower rents to attract tenants.
“That’s what a competitive market would absolutely demonstrate,” he said.
Republicans control the House, 85-64, with one seat vacant.
If they needed to, Phelan and his GOP rank and file could pass along party lines Meyer’s bill and a bill by Fort Worth GOP Rep. Charlie Geren that would exempt about 67,000 small businesses from having to pay franchise tax. That would leave about 100,000 of the state’s 1.7 million businesses still paying the tax.
But the GOP leaders’ tax-relief deal — with increased homestead exemptions and a change allowing election of some county appraisal district directors — will need the support of at least 15 Democrats in the House to meet the two-thirds majority threshold required for proposed amendments to the Texas Constitution.
Voters would have final say in November.
