Texas Lt. Gov. Dan Patrick Proposes Incremental School Property Tax Reform

Texas Lt. Governor Dan Patrick has introduced a school property tax reform plan named Operation Double Nickel, which proposes lowering the qualifying age for the senior homestead exemption and school tax freeze from 65 to 55 and increasing the general homestead exemption to $180,000. This builds on an earlier proposal by Governor Greg Abbott, which included the possibility for voters to abolish school homestead taxes. Both plans lack detailed explanations on how the state would compensate for the estimated $4 billion in lost revenue per biennium, suggesting economic growth as a revenue source without raising sales tax rates. Patrick's approach focuses on flat-dollar homestead exemptions, which are more equitable to lower-income homeowners, rather than percentage-based exemptions affected by tax compression issues. However, critics argue that lowering the senior exemption age to the mid-50s primarily benefits individuals at their peak earning years who have often already acquired home equity, rather than addressing the challenges faced by younger potential homeowners. The proposal does not offer targeted support for first-time homebuyers or renters struggling with affordability due to high home prices, mortgage rates, insurance premiums, and inflation-driven construction costs. This omission may exacerbate existing issues in the homeownership market, particularly for younger families juggling college debt and childcare expenses. Moreover, the tax freeze on long-term homeowners might discourage housing turnover, potentially leading to inefficiencies in the housing market. This could result in unequal property tax burdens among neighbors with similar housing but different ages and durations of homeownership. Sustaining public school funding remains a concern as pandemic relief funding runs out and new private school voucher programs add financial pressures to the budget. The uncertainty of economic conditions complicates the prospect of balancing tax relief with adequate school funding. Overall, Operation Double Nickel represents a marginal improvement over previous tax reform efforts but falls short of providing a comprehensive solution that balances tax relief, education funding, and support for emerging homebuyers. Policy innovation that addresses these multifaceted challenges is needed to better serve Texas residents and maintain fiscal stability for education funding.