House Bill 2, by Rep. Morgan Meyer, R-Dallas, passed out of the House with a 139-5 vote April 14. Its approval sets the stage for a potential showdown with the Texas Senate, which approved a separate $16.5 billion tax relief package in March.
Property tax relief is a top priority for Texas Republicans this session, including Gov. Greg Abbott. But the leaders of each legislative chamber have stood behind their proposals and signaled that there is limited room to negotiate.
Here are six things to know about the House’s property tax relief package and how it could impact Texans.
1. It could save the average homeowner over $1,000 in the next two years.
Property value is determined annually by county appraisal districts, which review all property in a county and determine how much it is worth. Under current state law, the appraised value of residential property can increase by 10% each year.
HB 2 would prevent residential property values from increasing by more than 5% annually.
According to a tweet by House Speaker Dade Phelan, the owner of a $350,000 home would pay $542 less on their 2024 property tax bill and $733 less in 2025, resulting in $1,275 in savings. These amounts would increase year over year, Phelan said in a statement.
2. Business owners would also benefit from the tax cuts.
The current appraisal cap only applies to residential property, but HB 2 proposes expanding it to all types of property in Texas, including businesses and land.
“We want to have the caps so that there's predictability and stability for our property owners,” Meyer said as the House debated his bill April 13.
With this change, Meyer said small businesses owners will be able to estimate how much their annual property tax bills will be, allowing them to plan ahead. But the bill’s opponents argue that it would put a greater burden on homeowners and benefit residents of other states who operate businesses in Texas.
Rep. Chris Turner, D-Grand Prairie, said 24% of property in Texas is owned by people who do not live in the state. This is partially due to a corporate tax break program that allows large businesses to pay minimal school district property taxes when they relocate to Texas.
Expanding the appraisal cap would benefit “people who are not our constituents,” Turner said. He added that renters and first-time homebuyers would likely face higher tax rates as school districts, cities and counties attempt to make up for the loss in revenue.
“This is gonna cause a lot of volatility in the market and shift the burden to homeowners,” Turner said.
3. School district property taxes would drop by 28%.
The House’s proposal would cut property tax rates for school districts by 15 cents per $100 valuation, which Phelan said reduces school property taxes by 28%.
Since property tax revenue largely funds Texas public schools, the state would provide districts with $12 billion to make up for the loss.
The bill is also aimed at reducing how many school districts participate in recapture, a program which requires districts that bring in high property tax revenue to return some of it to the state. That money is then allocated to “property-poor” districts to ensure schools are funded equally.
4. The final decision on the plan would be up to Texas voters.
The House passed House Joint Resolution 1 with a 140-9 vote April 13. The resolution creates a constitutional amendment to authorize the property tax cuts.
If the bill and resolution are both approved by the Senate, the amendment would be added to all ballots during the general election in November.
However, Lt. Gov. Dan Patrick, who presides over the Senate, has stated that HB 2 is dead on arrival.
5. The House’s proposal competes with the Senate’s tax relief plan.
The Senate unanimously passed its own property tax relief plan, which includes three bills and a joint resolution, in March. The package would increase the statewide homestead exemption from $40,000 to $70,000, which lawmakers have said would save the average homeowner at least $340 annually. A homestead exemption is the portion of a home’s value that cannot be taxed.
An additional exemption for seniors and people with disabilities would increase from $10,000 to $30,000.
The Senate also proposed cutting school district property tax rates by 7 cents per $100 valuation. In turn, the state would funnel at least $5.38 billion into schools.
At an April 13 press conference, Patrick said HB 2 would not provide enough tax relief to Texans and argued that adjusting the appraisal cap is not a good solution.
Seniors own about 40% of homes in Texas, but Patrick said the new appraisal cap would not benefit them, because their property appraisals are already capped. On the other hand, he said the Senate package would save seniors thousands of dollars each year.
“We can negotiate on just about everything, but I do not negotiate on bad math,” Patrick said.
6. Both chambers have set money aside to continue paying for existing tax cuts.
The House and Senate have agreed to use $5.3 billion in state funds to cover property tax cuts that were approved during previous legislative sessions. These allocations are laid out in their respective budget bills, HB 1 and SB 1.
What’s next?
HB 2 now heads to the Senate, while SBs 3-5 were sent to the House. The Senate proposals have been referred to the House Ways & Means committee, which tackles bills related to state and local taxation. However, none of the bills have been scheduled for committee hearings.
Despite criticism from the opposite chamber, Phelan has stood his ground on HB 2. Since property tax relief is included in the state budget, lawmakers must find a middle ground or remove the tax cuts from the budget entirely. Under Texas law, a budget must be passed before the legislative session ends May 29.
