The Case for a Flat-Dollar Exemption

/, Invest in Texas, State, Texas Legislature/The Case for a Flat-Dollar Exemption
Dick Lavine

In the 2015 session, legislators considered a promising proposed constitutional amendment to give cities, counties, and other local taxing units the option of lowering property taxes through a flat-dollar homestead exemption. The measure passed the Senate and the House Ways & Means Committee with significant support, but failed to come up for a full House vote before the final bill-passage deadline.

Presently, cities, counties, community colleges, and hospital districts can offer homeowners percentage homestead exemptions, meaning a percentage of the home’s value is excluded for tax purposes. The amount of the exemption differs depending on the value of the home. For example, with a 20 percent exemption a $100,000 home would get a $20,000 exemption, and a $500,000 home would get a $100,000 exemption. By contrast, a flat-dollar exemption would give all homeowners the same reduction in tax liability.

A flat-dollar exemption spreads the benefits more evenly among homeowners of all income levels by giving every homeowner the same reduction in tax liability. In contrast, a percentage exemption gives the greatest tax break to the highest value homes. According to the Comptroller’s Tax Exemptions & Incidence study, only 38 percent of the benefit of a percentage exemption goes to middle-income households earning between $34,100 and $147,400 a year. However, that income group would see 56 percent of the benefits of a flat-dollar exemption.

The flat-dollar homestead exemption option had support during the 2015 legislative session, and deserves another chance in 2017. It benefits both homeowners and local governments, offering homeowners a reduction in their property taxes and local governments increased stability and predictability of their tax revenue.

Learn more about the flat-dollar exemption.

 

CPPP's Senior Fiscal Analyst Dick Lavine presents on the flat-dollar exemption at the Texas Public Policy Foundation's Policy Orientation.
CPPP’s Senior Fiscal Analyst Dick Lavine presents on the flat-dollar exemption at the Texas Public Policy Foundation’s Policy Orientation.

At the Center for Public Policy Priorities, we believe in a Texas that offers everyone the chance to compete and succeed in life. We envision a Texas where everyone is healthy, well-educated, and financially secure. We want the best Texas - a proud state that sets the bar nationally by expanding opportunity for all. CPPP is an independent public policy organization that uses data and analysis to advocate for solutions that enable Texans of all backgrounds to reach their full potential. We dare Texas to be the best state for hard-working people and their families.

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