By Tom Wolfe, April 19, 2022
The 87th Legislature chose not to extend the Chapter 313 property tax incentive program beyond December 31, 2022, although Chapter 313 agreements in place by that date will remain in force. As highlighted in a previous blog post, a number of problems with Chapter 313 emerged since its inception in 2001. Despite its flaws, however, the problem to which Chapter 313 was a response persists: Texas’ high property tax rates relative to most states, and the broad reach of its commercial property tax, make the state less attractive to capital-intensive businesses than it would otherwise be. With the expiration of Chapter 313 and a projected budget surplus of $12 billion, a key question for policymakers is how best to provide commercial property tax relief. Fortunately, there are several excellent options for providing this relief.
Similarly, some key reforms are possible in the residential property tax context. The 86th Legislature did outstanding work in limiting the future growth of property taxes, but the current property tax burden on Texans is too high.
TCCRI has prepared testimony for the House Committee on International Relations & Economic Development and the House Committee on Ways & Means that discusses possible policy responses to the property tax burden in the state. These options include “buying down” school district maintenance and operations (M&O) tax rates with state revenue; enacting “tax swaps” in which sales tax rates are increased in exchange for lower property tax rates; limiting the ability of community college districts to increase taxes when enrollment is stagnant or even declining; increasing the value of tangible personal property exempted from commercial taxation; lowering the appraised values of tangible personal property used in a business; and exempting inventory from property tax.