by Morgan Smith
Editor’s note: This story has been updated throughout.
Flanked by a dozen Republican senators, Lt. Gov. Dan Patrick on Tuesday announced a slate of legislation he said would provide lasting tax relief to businesses and homeowners in Texas.
“At the end of the day, the Texas economy stays strong if people have more money in their pocket, if businesses have more money to create jobs,” said Patrick, a Republican.
Patrick said three recently filed bills — Senate Bills 1, 7 and 8 — would deliver a combined $4.6 billion break from the state’s property and business taxes.
About $2.5 billion of that total would go toward increasing homestead exemptions from school property taxes. Currently set at $15,000, they would instead be 25 percent of the median home market value in the state. In 2016, when the median home market value is projected to be $134,500, that could mean as much as a $33,625 exemption.
Another $1.5 billion would stem from reducing the state’s franchise tax on businesses by 15 percent.
State Sen. Jane Nelson, the Flower Mound Republican who chairs the upper chamber’s finance committee, is carrying both of those measures, along with a resolution that would send a constitutional amendment to voters to enact the property tax break. Nelson said the resolution would also prohibit any future sales tax on real estate.
Yet another proposal, from state Sen. Charles Schwertner, R-Georgetown, would allow more small- and medium-sized businesses to qualify for exemptions from the franchise tax. It exempts businesses with a total revenue of $4 million or less from paying the tax, which Schwertner said would apply to 52 percent of the businesses in the state.
Patrick said the legislation represented an initial step toward what he said would be further tax breaks — though he declined to say whether those would come during this legislative session. He also emphasized Gov. Greg Abbott’s support of the measures.
“We are so close shoulder-to-shoulder you couldn’t put a piece of paper between us,” said Patrick.
Abbott responded to Patrick’s comments at a news conference later Tuesday morning. He said while he had yet to look at the legislation announced today, it appeared similar to what he has proposed in the past.
“The tax relief package that I announced in my State of the State was about $4.2 billion. It sounds like we are very close,” Abbott said. “It seems like what I’m hearing from both the Senate and the House is that we are going to have meaningful tax relief, especially for the job creators in the state.”
Despite support from the governor — and what Patrick said was a bipartisan group of 24 of the chamber’s 31 senators who have signed on to the tax relief package — there are signs that it may encounter opposition.
“We have got to deal with the major problems of this state before we commit to tax cuts,” state Sen. Kevin Eltife, R-Tyler, said in an interview after the announcement. “We have some big ticket items that we can actually resolve this session. I think those needs come first.”
He said wanted to see a long-range plan to fix the significant shortfalls in state-funded pensions and deferred maintenance on state facilities before passing any tax breaks.
“I think it’s the cart before the horse. We need to go through the budget process and make sure we have those needs addressed in our budget before we commit to cutting $4 billion a year in revenue out of the state budget,” he said. “It might work down the road, but I want to see a plan of action for the needs of this state before I commit to cutting taxes.”
State Sen. Kirk Watson, the Austin Democrat who leads the party’s caucus in the Senate, said in a statement that he supported increasing the homestead exemption. But he added that he “can’t get behind” cutting the franchise tax with a school finance case pending before the Texas Supreme Court.
Lawyers for the state are currently appealing a trial court ruling that found it inadequately funds public schools. More than two-thirds of the state’s school districts brought the lawsuit against the state following deep budget cuts to public education during the 2011 legislative session.
“It would be irresponsible to cut off an important stream of revenue before we know what the Legislature’s obligations will be to fulfill its constitutional responsibility to Texas schoolchildren,” he said.
Ryan McCrimmon contributed reporting to this story for the Texas Tribune.