It’s been less than a week since Texas’ top three state leaders threw their collective support behind an idea to raise the sales tax by 1 percentage point in order to lower property tax bills statewide.
But despite that powerful backing, many of the rank-and-file lawmakers who will have to bless the proposal have already indicated they’re hardly on board. Elected officials and advocacy groups on both sides of the political spectrum have criticized the idea. And their concerns will have to be assuaged if the legislation, a proposed constitutional amendment, is to muster the requisite two-thirds majority in both chambers before going to voters in November.
In an attempt to address those concerns, state Rep. Dan Huberty laid out a version in a committee meeting Wednesday that would put 80% of the $5 billion in new sales tax revenue toward property tax relief and 20% toward school funding. But it immediately became clear that many lawmakers were unsure of that split. Conservatives want all the money to be spent on buying down property taxes. Democrats are skeptical of any measure that increases the regressive sales tax — and if they stick together, they have the numbers in each chamber to block the proposal.
Meanwhile, Gov. Greg Abbott, who proposed the sales tax swap alongside Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, suggested recently that all the new money it generates should go toward property tax relief.
“We would only do [the sales tax swap] if that money was absolutely dedicated for the purpose of property tax relief,” Abbott said in a KVUE television interview Tuesday evening, the night before Huberty’s proposals, House Joint Resolution 3 and House Bill 4621, were scheduled to come before a House committee.
The governor’s stance puts Huberty, who chairs the House Public Education Committee, in a difficult spot: Keep the split at 80% toward property tax relief and he could lose Republican members who argue that every additional dollar generated must go toward property tax cuts — and the state leaders who pitched the tax swap in the first place. But inch that figure higher, toward 100%, and Huberty faces increasingly steep odds of recruiting the Democratic support he’d need to pass the proposal.
Also complicating matters is that “property tax relief” may mean different things to different lawmakers. Some conservatives want to use every dollar of the extra money to lower school tax rates, while others say that increasing the state’s share of public education funding would keep school districts from going to voters for more money.
Huberty distributed data to Ways and Means Committee members Wednesday showing how their school districts would benefit under the combined impacts of House Bill 3, a comprehensive school finance bill, and HJR 3. The 20% of additional money raised would increase the base funding schools receive per student — helping to reduce the amount wealthier districts pay to shore up poorer districts through the state’s recapture system, known as Robin Hood.
Both pieces of legislation would decrease districts’ recapture payments by about $5 billion over the next two years. Lowering recapture payments could give districts the opportunity to keep tax rates low but would not necessarily lower homeowners’ tax bills at first blush.
“You’re providing more resources to school districts so they don’t have to go do a [tax ratification election],” Huberty said.
“You could argue it’s 100% property tax relief,” state Rep. Jim Murphy, R-Houston, a member of the Ways and Means Committee, said in agreement.
If all 83 House Republicans vote for the proposal, it would still need support from 17 House Democrats; in the Senate, if all 19 GOP senators are on board, the proposal would require two Democratic votes. Given the battle lines that have emerged, the odds of putting together a two-thirds majority look steep.
Some Democrats have already said they oppose the sales tax swap — no matter where the money goes.
“I don’t personally see anyone voting for it unless something drastic changes,” said state Rep. Ramon Romero, D-Fort Worth. “The Democratic Caucus is likely to stick together. Could you have folks who peel off? Of course there’s always five or six that are going to.”
Swapping sales tax revenue in to replace property taxes isn’t a new idea in the Capitol. In the summer 2017 special session, under a mandate from Abbott to consider how to reform property taxes, lawmakers pitched pie-in-the-sky proposals to address the high cost of education to the state — including a few bills that would raise money through a higher sales tax.
But now, HJR 3 appears to be the main pitch on the table for long-term school district property tax relief and potentially public education funding.
“The only way we can do that is through a new revenue source,” Huberty said Wednesday.
Huberty pitched the resolution as a way to stop skyrocketing local property values from pushing the state’s share of public education cost lower and lower. Without any new money or legislation this session, the state is expected to pay closer to 30% of the cost in the next few years while local taxpayers will pay closer to 70%.
Huberty's argument was met with confusion and skepticism from several advocates at Wednesday's committee hearing. Some Republicans criticized putting any additional money toward public education in HJR 3.
Terry Holcomb, a member of the State Republican Executive Committee of the Republican Party of Texas, said he did not understand whether the 20% toward public education would result in tax relief.
The House Freedom Caucus, a hardline conservative group of representatives, has taken a similar stance, writing in a statement that its members would only back the tax swap proposal if all additional money generated went to property tax cuts. And state Sen. Paul Bettencourt, the Houston Republican tasked with shepherding leadership tax priorities through the upper chamber, said in an interview Tuesday that “you have to make sure it’s dollar for dollar, and that’s a tough thing to do.”
“You have to make sure that it’s actually all property tax relief,” he added.
The question for leadership, then, is whether there’s a split that can earn two-thirds support in both chambers. Some leaders have already cast doubt on the proposal’s chances. Bettencourt said he doesn’t see “a tremendous appetite” for it in the Senate.
And Patrick, in recent public statements, has made clear he supports a consumption-based tax — but also signaled he’s not married to the tax swap proposal.
"That may or may not ever come to the floor for a vote, but we look at everything,” Patrick said in a radio interview last week.