News88th TXLege

Dismal Legislative Session for Texas Taxpayers

June 6, 2023
Jeramy Kitchen
88th Legislative Session, Corporate Welfare, Property Tax, Spending, Taxpayer-Funded Lobbying, Texas Prosperity Plan

The 88th Texas Legislative Session has come and gone. State lawmakers were faced with a historic budget surplus (over-collected taxpayer dollars) and a historic opportunity to provide Texas taxpayers with much-needed tax relief and a promise for future prosperity. Instead, 140 days passed and in the wake of all the grift, political posturing, and talking head narratives, taxpayers are not left with much to behold.

Texas Prosperity Plan

In June of 2022, Texans for Fiscal Responsibility introduced the Texas Prosperity Plan, comprised of policy options that put Texas on a path to ensure lasting prosperity for future generations. This plan included encouraging the Texas Legislature to adopt a frozen state budget, eliminate property taxes, curtail local government spending, and ban the practice of taxpayer-funded lobbying. Sadly, none of those policies made it through the entirety of the legislative process.

Instead, lawmakers saw It fit to pass the largest spending increase in Texas history, usher in billions more in new corporate welfare programs, and waste time squabbling over inferior approaches to historic property tax relief while never giving consideration to legislation that would provide maximum tax relief and put Texas on a path to eliminate the tax altogether.

Ultimately, it was a squandered opportunity.

Largest Spending Increase in Texas History

The General Appropriations Act for fiscal years 2024 through 2025 (House Bill 1) ultimately passed the Texas Legislature with a total of $321 billion in spending, representing a 21.3% ($56.5 billion) increase over appropriations made in the previous biennium.

TFR maintains that Texas does not have a revenue problem, but a spending problem. This is exhibited by the nearly $33 billion budget surplus—and even more, if you factor in revenue above last biennium’s appropriations.

State spending has steadily grown over the last 30 years, picking up its rate of growth in the last few budget cycles. For two decades, Republicans have held control of the Legislature and every statewide elected office. Their own platform says:

75. Government Spending and Taxation: We believe in the principles of constitutionally limited
government based on federalist principles. To this end, we encourage our elected officials at all levels of government to work to reverse the current trend of expanding government and the growing tax and debt burdens placed on “We the People.” Government spending is out of control at the federal, state, and local levels, and action is needed to reduce spending, and therefore taxation, at all levels.

That same platform goes on to say:

76. State Fiscal Restraint: We urge the Legislature to amend the Texas Constitution and State statute
with a stricter spending limitation based on US Census population growth plus inflation, as measured by the Consumer Price Index, and apply the new limit to Texas’s total government budget. We call on the Texas State Legislature to freeze State spending until wasteful programs have been eliminated, a sustainable size of government has been restored, and substantive property tax relief has been provided to Texas citizens. Any budget surplus shall be applied to property tax relief.

The bottom line is that government has grown, continues to grow, and now—thanks to lawmakers in the 88th Legislative Session—it has grown faster than at any other point in Texas history.

It is expected that Governor Abbott will consider the budget proposal soon.

Corporate Welfare

In spite of both major political parties in Texas having explicit opposition to corporate welfare in their platforms, Republican leadership in both legislative chambers sought fit to revitalize the biggest corporate welfare boondoggle in Texas history. Dubbed the Texas Jobs, Energy, Technology, & Innovation Act, it ultimately sought to usher in a revival of the recently ended Chapter 313 tax abatement program under the Texas Economic Development Act.

Though the new program purports to have safeguards to provide for additional transparency and accountability, it still ultimately allows the government to pick winners over losers, providing a property tax abatement to qualifying companies and merely shifting the tax burden to individual property taxpayers who are afforded no such abatements.

The Texas Republican Party platform states:

94. Property Tax Abatements: We support repealing Tax Code Chapter 312 county and municipal
property tax abatements, and we oppose reintroducing school property tax abatements, formerly known as Chapter 313.

The Texas Democrat Party platform states:

“Eliminate tax loopholes and unproductive special breaks to simplify the tax system and provide revenue for essential services.”

That same platform continues:

“Prohibit ‘corporate welfare’ incentives that pit states and communities against each other.”

It is expected that Gov. Greg Abbott will sign the bill into law soon.

To make matters even worse, lawmakers additionally passed a litany of other legislation related to corporate welfare, some of which Texas voters will see on the November 2023 ballot and will cost more than $12.1 billion in 2024 and 2025. That list includes things like House Joint Resolution 125 and House Bill 9, which create the Texas Broadband Infrastructure Fund (cost $1.5 billion); Senate Joint Resolution 74 and Senate Bill 1648, which would create the Centennial Parks Conservation Fund (cost $1 billion); and renaming the National Research University Fund to the Texas University Fund in House Joint Resolution 3 and House Bill 1595 (cost $273 million).

Voters should reject these proposals and force their lawmakers to instead appropriate the money from the state budget if they deem them priorities.

Property Tax Relief

As previously mentioned, lawmakers had a historic opportunity to provide only tangible property tax relief to Texas taxpayers and a path to the elimination of the tax altogether.

Instead, legislative leadership in each chamber prioritized differing approaches to provide tax relief and never gave consideration to legislation seeking to eliminate the tax. All the while, that same leadership resorted to social media to poke at the opposite chamber’s plan.

The Texas House prioritized legislation that sought to decrease the caps on appraisals from 10 percent as it applies to qualified homestead property to 5 percent and apply it to all property, while also providing for additional money to compress the school M&O (Maintenance and Operations) portion of the property tax (the largest portion). It passed the Texas House but was never considered by the Texas Senate.

The Senate prioritized legislation that sought to increase the homestead exemption from $40,000 to $70,000 and an additional $30,000 for elderly and disabled taxpayers (totaling $100,000). Additionally, as a part of their package of legislation related to the subject, they also passed legislation that would have increased the amount of M&O compression and provided relief to businesses. All passed the Senate unanimously. In the final days of the legislative session, the House considered Senate Bill 3 relating to an increase in the homestead exemption, improved it to include even more M&O compression, and fused their appraisal cap approach into the bill. They passed it, but neither the House or Senate could reconcile the differences in the legislation via a conference committee before the end of the legislative session.

As such, the legislative session ended without additional property tax relief above what was already included in the state budget to maintain previous property tax relief efforts.

What Is Next?

Nearly immediately after the 88th Legislative Session concluded, Gov. Abbott called for a special legislative session to address property taxes and border security, two things left virtually undone by lawmakers.

Abbott’s call for property tax was notable as it completely rejects both the House and Senate approaches to property tax relief with appraisal caps and homestead exemption increases, instead specifically requesting legislation that reduces the school district compressed rate (the M&O portion of the tax), something TFR favors as the superior approach to tax relief.

In response, the Texas Senate quickly convened and passed legislation once again focused on a homestead exemption increase. Alternatively, the Texas House quickly convened and passed legislation solely focused on compression, and then gaveled out of the session. This essentially forced Lt. Gov. Dan Patrick in the Senate to either consider the House’s legislation, something Abbott later endorsed, or risk additional special legislative session calls by Abbott himself.

Thus far, Patrick has stuck to his opposition to compression being the best approach to property tax relief. The Senate reconvenes Tuesday evening. It is unclear what their next steps are.

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