Tax fight will determine consumer savings, leaders’ future

AUSTIN — The last time lawmakers approved school property tax relief, then-Gov. Rick Perry ran ads promising a $2,000 cut for the average homeowner.

The angry calls from taxpayers who looked in vain for lower bills are still ringing in some lawmakers’ ears as they again work to reduce taxes.

“They called us liars,” said House Ways and Means Committee Chairman Dennis Bonnen, R-Angleton, who wants to avoid property tax promises and instead slash the state sales tax.

The problem for Bonnen’s approach lies across the Texas Capitol, where Lt. Gov. Dan Patrick already has led Senate passage of a greater homestead exemption from school property taxes.

Patrick, who promised property tax relief on the campaign trail to great acclaim from tea party voters, shows no sign of budging.

“Property tax relief is No. 1 for me,” he said. “Homeowners need relief.”

The battle puts legislative leaders at the intersection of policy and politics as they try to craft plans that make sense for the state, can be sold politically and carry clear implications for Republican leaders’ future.

Also at that delicate intersection is Gov. Greg Abbott, who declined last week to play traffic cop.

Abbott wouldn’t take sides, though he had said in his February State of the State speech that he’d insist on property tax relief. Back then, the sales tax proposal wasn’t on the table.

Abbott’s reticence was a blow for the tea party-backed Patrick, an ambitious officeholder considered a potential future gubernatorial candidate. It was a boon for more traditional Republican leaders in the House, headed by Speaker Joe Straus of San Antonio.

But both sides now may have time to make their case to Texans.

“We have heard a lot about property taxes in the last 18 months of public discussion, and we’ve heard almost nothing about the sales tax,” said Jim Henson, who directs the Texas Politics Project at the University of Texas at Austin. “Policymakers can lead, and they can frame the discussion.”

Half the discussion already is framed. Abbott has promised to reject any state budget that doesn’t include business tax relief. House leaders and the Senate back more than $2 billion in business tax reductions, albeit with some disagreement on how to deliver them.

The other half of the tax battle, however, will help define this legislative session, frame Abbott’s performance as governor and potentially force a special session this summer if lawmakers can’t agree.

The Senate’s $4.4 billion, two-year package includes $2.15 billion to raise the homestead exemption from school property taxes. That’s estimated to save the average homeowner more than $200 a year.

By contrast, the $4.9 billion package headed for House consideration includes $2.3 billion in a sales tax rate reduction from 6.25 percent to 5.95 percent. It’s estimated to give $172 in savings to the average family of four, plus benefit businesses.

Warriors for property tax relief point to a Texas Tribune/UT poll showing it to be the least popular levy, with 54 percent of respondents dissatisfied with it. The strongest dissatisfaction was among Republicans, Henson said, and they are more likely to own homes.

“It’s a tax break that is likely to disproportionately benefit the Republican base. And therefore I think it appeals to Republicans,” Henson said.

Republicans and Democrats who support property tax relief say they are responding to people who are under intense pressure from rising bills.

“The public has been crying out for property tax relief,” said Sen. Paul Bettencourt, R-Houston. “I have had no one cry out for sales tax relief.”

And political pressure for property tax relief is being exerted on the right.

JoAnn Fleming of Grassroots America said tea party voters — and voters in general — will be looking for alternative candidates if Abbott, Patrick and other officeholders don’t keep their promises.

“Taxes are not something that people think is a comedy routine. They don’t think it’s funny when elected officials do a flip-flop on taxes,” she said. “We want to see property tax reductions.”

But Bonnen said a sales tax break would have a greater economic effect and would go to everyone, not just homeowners.

A cut in the sales tax rate would be the state’s first, not a bad campaign talking point.

Also, it’s a state tax, putting it under the control of lawmakers. The property tax is a local levy, making it difficult for the state to wrangle into submission.

Advocates of cutting the sales tax recall the 2006 package, when rising property values quickly ate up the $7 billion a year in property tax rate reductions.

“We cut (the rates for) school property taxes by one-third. ... We got no credit,” said House Appropriations Committee Chairman John Otto, R-Dayton. “Appraisals were rising just like they are now, and everybody complained that we didn’t do anything.

“I feel like, OK, burn me once, shame on you,” Otto said. “Burn me twice, shame on me.”

The way senators propose to deliver property tax relief this time may make it more visible than it was in 2006. A bigger homestead exemption, as opposed to a rate cut, would show up as a figure that people can see on their tax bills, regardless of how much the overall tally goes up.

But Henson said he wouldn’t expect much change in polling results.

“Are people going to be more satisfied as a result of a marginal amount of reduction?” he asked. “I doubt it.”

Some senators haven’t ruled out a sales tax cut.

Sen. Kirk Watson of Austin, chairman of the Texas Senate Democratic Caucus, pushed the idea of a bigger homestead exemption early. He said the state has created an overreliance on property taxes and that people are being squeezed as a result. But he added, “I’m surprised that a sales tax cut is on the table because we’ve just never talked about it. And I’m pleased that we’re talking about it.”

Senate Finance Committee Chairwoman Jane Nelson, a Flower Mound Republican who is lead author of the Senate tax package, said she hasn’t drawn any lines in the sand.

“I believe a majority of the Senate and our leader believe that property tax relief, along with margins franchise tax relief, is preferable,” she said. “But I haven’t had a chance to sit down and talk with Bonnen. My way of dealing with things is to listen first, and then have a discussion.”

Discuss they may, but Bettencourt doesn’t see Patrick moving off of property tax relief.

“I don’t see him backing up on his pledge that he’s made everywhere from the Panhandle to the Valley for property tax relief, under any circumstances,” he said.

Nor should he, said Fleming of Grassroots America.

“Dan Patrick has every reason to believe that the people who elected him — they elected him based on what he told them he was going to do,” she said. “I do not think that Gov. Abbott has helped the situation by becoming nuanced on property tax reductions when he has been so definitive in the past.”

That means any real negotiation could be difficult. Bonnen said Patrick “seems desperate to make certain that there is not an intellectual discussion of ideas about how to cut Texans’ taxes.”

“I am desperately trying to have this be a far more respectful discussion about a policy decision based on fact,” Bonnen said, “rather than a knife fight in the back alley between here and the Bullock Museum.”