AUSTIN (KXAN) — Lt. Gov. Dan Patrick announced a $4.6 billion tax relief package during a press conference Tuesday morning — $2.5 billion of that coming from property tax relief through the Homestead Exemption.
Sen. Jane Nelson, R-Flower Mound, introduced Senate Bill 1, which centers around setting the exemption at 25 percent of the state’s home median value, as determined by the Legislative Budget Board. Nelson says this bill aims to have a homestead exemption that rises and falls as property values in the state fluctuate.
“I am so happy today,” Nelson said as she opened her portion of the press conference. “The budget meets the need of the growing state, continues policies of fiscal discipline that lead to this economic success that allows us to do this … These bills have broad, bipartisan support, and that makes me so happy that we can talk about things and come up with something that the majority – and these are joint authors. I don’t ever remember a time where we had joint authors on Senate Bill 1.”
Nelson says the last time the homestead exemption was increased happened in 1997, upped from $5,000 to $15,000. Nelson says they anticipate the 2016 homestead exemption to be $33,625 — projected to increase for 2017 at $35,979 for a median home value of $143,915. In addition, it will prohibit the establishment of any tax on the sale of real estate — intended to prevent future Texans from being priced out of homeownership. Lawmakers are hoping this will be on the ballot by September so that relief can come to Texans by 2016.
State Sen. Kirk Watson, D-Austin, supported that part of the tax cuts. In a statement, Watson said, “I take satisfaction knowing that the foundation of the Senate’s multi-billion dollar tax package is a progressive idea that will help folks who need it most.”
“It’s important to us that we all share that pain of recession,” said Nelson. “We came out of it stronger; our business is booming right now.”
Nelson added that “a strong economy is just as critical to our future” as all other budget items, saying they have also committed to funding transportation this session. Business tax relief is also a major priority, the focus of Senate Bill 8. The bill proposes $1.5 billion in franchise tax relief for businesses.
The franchise tax is similar to an income tax on just businesses. Right now many businesses pay 1% of all revenue. Nelson’s plan would cut that to .85%. Another bill, proposed by Sen. Charles Schwertner, R-Georgetown, would allow businesses that made less than $4 million a year to not pay the franchise tax. Right now that exemption is $1 million.
“Success depends on the success of our businesses, and this will make those businesses able to grow,” said Schwertner.
Watson disagreed with the franchise tax cuts, saying it takes away too much money away from the state, when the State Supreme Court will likely order lawmakers to put more money into public education.
In 2014, the franchise tax brought in about $4.7 billion. According to the Lieutenant Governor’s Office, the reforms will save Texas businesses an average of $1 billion per year.
Patrick says ultimately, the focus is on homeowners and business owners of all sizes — putting money back in their pockets.
“We are still looking at value growth, and we want to eliminate the franchise tax over time,” said Patrick, added that it addresses issues with small business that don’t make a profit but that still have to pay taxes.