On November 7, 2023, Texas voters overwhelmingly approved Proposition 4, an $18 billion property tax-cut package aimed at providing relief to homeowners and businesses. Spearheaded by Houston Republican Sen. Paul Bettencourt, the constitutional amendment is a significant step toward reforming property taxes in the state, with a focus on reducing school district property taxes, which constitute a substantial portion of Texans’ property tax bills.

Key Provisions and Objectives:

School District Tax Reduction:

Proposition 4 allocates $7.1 billion to school districts to lower their tax rates. This involves replacing local revenues with state dollars, a process referred to as “compression.” As a result, school districts will experience a reduction in tax rates by 10.7 cents for every $100 of property value.

Homestead Exemption Increase:

Homeowners will benefit from an increased homestead exemption on school district taxes. The amendment raises the exemption from $40,000 to $100,000. This means that a larger portion of a home’s value is exempt from taxation to fund public schools.

Tax Savings for Homeowners:

Combined, these measures are expected to result in significant tax savings for homeowners. The average Texas homeowner can anticipate over $2,500 in tax savings over the next two years. Seniors and other eligible groups may experience even greater savings. This reduction will be reflected in landowners’ 2023 tax bills, providing tangible relief.

Utilization of State Budget Surplus:

The tax-cut package is made possible by tapping into a substantial $33 billion state budget surplus. This surplus is a result of Texas’ robust economic growth and the influx of federal COVID-19 relief funds. Republicans, aiming for significant tax cuts, seized the opportunity to address property taxes.

Additional Tax Changes:

The $18 billion package also includes $5.3 billion to cover tax cuts previously approved by lawmakers. This demonstrates a comprehensive approach to providing relief and addressing various tax-related concerns.

The amendment introduces a cap on the annual growth of certain businesses’ property values. Commercial, mineral, and residential properties valued at less than $5 million, without a homestead exemption, will be subject to a 20% cap on value growth annually for the next three years. This brings business properties in line with the existing cap for homeowners.

The cap on certain business properties’ value growth is set to expire in 2026, unless lawmakers and voters choose to extend it. This provision introduces a time-sensitive element to the tax reforms.

Proposition 4 also expands the category of businesses exempt from the state’s franchise tax, providing additional relief to qualifying entities.

Local Appraisal Districts:

Voters in counties with at least 75,000 residents will now have the authority to elect three new members to their local appraisal districts’ board of directors. This change shifts from the previous system of appointed positions, allowing for more direct community involvement in property valuation matters.

Proposition 4 is fantastic news for Texas homeowners and businesses! It marks a big win and shows a real change in property tax policies. The green light for this $18 billion tax-cut package is a clear commitment to lightening the load on taxpayers, especially when it comes to school district property taxes. Thanks to state funds, higher homestead exemptions, and limits on some business property values, Texans can look forward to actual financial relief in the years ahead. This amendment covers a lot of ground, addressing different tax issues and making the local appraisal process more transparent. I believe it’s a fantastic move in the right direction for taxpayer’s financial well-being!

Your Partners in Commercial Real Estate Success

At Blue Collar Commercial Group, we don’t just work in the Texas Hill Country commercial market—we live here. Our deep-rooted understanding of this unique market, combined with our unmatched expertise in commercial real estate, positions us as your ideal partner for navigating the complexities of office space selection.

From identifying your perfect office space to closing the deal with confidence and ease, our team of seasoned commercial real estate professionals is dedicated to guiding you every step of the way.

Ready to make your mark in the Texas Hill Country commercial real estate landscape?

Contact Blue Collar Commercial Group today. Let us empower you with the insights, resources, and personalized support needed to turn your commercial real estate aspirations into reality.

Reach out to us now and embark on your journey toward commercial real estate excellence in Texas Hill Country.

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About the Author: Kaitie Moore Underwood

Kaitie Moore Underwood
Kaitie Moore Underwood's roots in competitive rodeo in Texas intertwined with her academic pursuits at the University of Houston, where she met her husband, Hank. Their move to the Hill Country in 2021 marked the beginning of both their family and Kaitie's successful career in real estate, assisting 18 families in her first year. With a background in the hospitality industry, recognized for her service excellence by the Starwood Hotel Sales Organization, Kaitie has honed her skills in financial analysis, strategy, and marketing. Now, as a pivotal member of the Blue Collar Commercial Group, she continues her professional ascent, consistently exceeding expectations through her dedication to relationships and solutions.

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