Texas Legislature’s Path to a

Conservative Texas Budget and Real Cuts to Property Taxes

The Problem
Texans pay too much in property taxes because of excessive government spending. Current legislative
efforts to address this may not bring substantial, long-lasting property tax reductions.

The Opportunity
 The Texas Legislature has available $9 billion of taxpayer funds in the Senate’s version of HB 1. This
includes $2.7 billion to tax relief, $2.3 billion to increase the basic allotment, and $4 billion to
increase teacher and librarian pay by $5,000.
 $5 billion of these funds could instead go to real cuts to property taxes this session.
 This would provide an opportunity with the Senate’s version of HB 1 to pass the potentially third
straight Conservative Texas Budget (CTB).

The Path Forward

 Senate and House plans provide little to no tax relief without a penny increase in the sales tax rate.
 If a penny increase in the sales tax rate is to only cut property taxes and there is spending restraint to
pass a CTB, there is an opportunity for lasting property tax relief and a more efficient tax system.
 Path to a CTB is to allocate to property tax relief either the $2.3 billion in HB 3 from (1) increasing
the basic allotment with current resources or (2) raising teacher pay by no more than $2,100.
 The real cuts plan, which requires a freeze in school districts’ property taxes, would provide
immediate, long-lasting property tax reductions. Eventually eliminating those taxes in about a decade.
 Under other plans, $5 billion in tax relief will provide close to half with the 2.5 percent growth limit.
 The penny swap will only provide effective property tax relief if accompanied by the adoption of a
Conservative Texas Budget of less than $234.1 billion and strict local revenue limitations.

Proposed Scenarios
The Chart shows an Austin taxpayer’s 2020 property tax liability under scenarios compared to 2019.
 Status Quo: increase in a homeowner’s tax liability in Austin assuming a historical 6 percent increase.
 Senate’s latest proposals:
o CSHB 3: Increase the homestead exemption for school districts by $15,000 to $40,000.
o SB 2: Reduce rollback rates to 2.5 percent for school districts and to 3.5 percent for others.
o HJR 3: Cut school districts’ property taxes by 15-cents with penny increase in sales tax rate.
 House’s latest proposals:
o HB 3: Cut school districts’ property taxes by 4-cents.
o CSSB 2: Reduce rollback rates to 2 percent for school districts and 3.5 percent for others.
o HJR 3: Cut school districts’ property taxes by 15-cents with penny increase in sales tax rate.
 Real cuts plan: Use the $5 billion currently in HB 1 as outlined in the Foundation’s plan.
Estimated Tax Liability Changes from 2019 to 2020 from Policy Proposals
Senate Senate House House
Housing/ Status Real Cuts
CSHB3 CSHB3+SB2 HB3 HB3+CSSB2
Policy Changes Quo Plan
+SB2 +HJR3 +CSSB2 +HJR3
$300,000 Median Price
+$371 +$2 -$477 +$43 -$474 -$177
Property Tax Change
Homestead Exemption $25K $40K $40K $25K $25K $25K
Election Trigger 8% 3.5% 3.5% 3.5% 3.5% 2.5%
Cut M&O Rate -- -- 15-cents 4-cents 19-cents 7.4-cents
State Sales Tax Rate 6.25% 6.25% 7.25% 6.25% 7.25% 6.25%
Sales Tax Change $0 $0 +$479 $0 +$517 $0
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Net Tax Liability Change +$371 +$2 +$2 +$43 +$43 -$177