Amending Texas’ Constitution, understanding the 2023 ballot PROPOSITIONS 3 AND 4

Early voting begins Oct. 23 and the Navasota Examiner will publish the 14 proposed Constitutional amendments over the next seven weeks. The Condensed Analyses of Proposed Constitutional Amendments, 88th Legislative Session for the Nov. 7, 2023, Election is published by the Texas Legislative Council and available at: https:// www.tlc.texas.gov/docs/amendments/ analyses23_condensed. pdf.

A detailed analysis is available at: https://tlc.texas.gov/docs/ amendments/analyses23.pdf

Summary of Comments

The following comments supporting or opposing the proposed constitutional amendment reflect positions that were presented in committee proceedings, during house or senate floor debate, or in the analysis of the resolution prepared by the House Research Organization (HRO) when the resolution was considered by the House of Representatives.

Proposition 3 (H.J.R. 132)

The constitutional amendment prohibiting the imposition of an individual wealth or net worth tax, including a tax on the difference between the assets and liabilities of an individual or family.

SummaryAnalysis

H.J.R. 132 would amend the Texas Constitution to prohibit the legislature from imposing a tax on the wealth or net worth of individuals or families. The prohibition would specifically cover a tax on the amount equal to the difference between the assets and liabilities of an individual or family.

Comments by Supporters

• Enshrining a ban on a wealth tax in the Texas Constitution now will ensure that a future legislature cannot impose such a tax without the consent of voters.

• Prohibiting the imposition of a wealth tax will help ensure that Texans know they will not be penalized for working to create wealth.

• Wealth taxes discourage economic innovation and investment and can lead to stagnation. Many European countries that previously imposed a wealth tax have since repealed the tax due to negative economic consequences.

Comments by Opponents

• The current legislature cannot anticipate how the needs of the state will change over time, so it would be better to let future legislatures decide how to address future needs. A constitutional ban means that even if a majority of people support a wealth tax in the future, a minority of legislators in either chamber could block it.

• This measure is unnecessary because a wealth tax has not been proposed in Texas.

Proposition 4 (H.J.R. 2)

The constitutional amendment to authorize the legislature to establish a temporary limit on the maximum appraised value of real property other than a residence homestead for ad valorem tax purposes; to increase the amount of the exemption from ad valorem taxation by a school district applicable to residence homesteads from $40,000 to $100,000; to adjust the amount of the limitation on school district ad valorem taxes imposed on the residence homesteads of the elderly or disabled to reflect increases in certain exemption amounts; to except certain appropriations to pay for ad valorem tax relief from the constitutional limitation on the rate of growth of appropriations; and to authorize the legislature to provide for a four-year term of office for a member of the board of directors of certain appraisal districts.

SummaryAnalysis

H.J.R. 2, 88th Legislature, 2nd Called Session, 2023, proposes several amendments to the Texas Constitution relating to ad valorem taxes and the administration of the ad valorem tax system. S.B. 2, 88th Legislature, 2nd Called Session, 2023, the Property Tax Relief Act, is the enabling legislation for the proposed amendments.

The proposed constitutional amendment authorizes the legislature to establish a temporary limit on the maximum appraised value of real property other than a residence homestead in a tax year of the lesser of the market value of the property or 120 percent, or a greater percentage, of the appraised value of the property for the preceding tax year. If the proposed amendment is approved by the voters, S.B. 2 implements this appraisal limit so that the appraised value of real property does not increase by more than 20 percent a year for the next three years.

The proposed amendment increases the portion of the market value of a residence homestead that is exempt from ad valorem taxation for public school purposes from $40,000 to $100,000.

The proposed amendment provides for a reduction of the limitation, or “tax freeze,” on the total amount of ad valorem taxes that may be imposed for public school purposes on the homestead of an elderly or disabled person to reflect increases in the amount of school district residence homestead exemptions, including the increase to $100,000 described above and any future increases.

The proposed amendment excepts appropriations of state tax revenue for purposes of paying for ad valorem tax relief from the constitutional limit on the rate of growth of appropriations. This change has the effect of exempting state payments to reduce school district taxes from the general state spending cap on appropriations and applies to the amounts appropriated by the 88th Legislature to decrease school tax rates as directed by S.B. 2.

Finally, the proposed amendment authorizes the legislature to provide for four-year terms for members of the governing body of an appraisal district established for a county with a population of 75,000 or more. S.B. 2, which provides for a combination of elected and appointed appraisal district board members in counties with a population of 75,000 or more if this amendment is approved, increases the terms of board members in those populous counties to four years

Comments by Supporters

• Since Texas taxpayers are responsible for the state’s historic budget surplus, the state should ensure that some of the surplus funds are returned to taxpayers. The proposed amendment will do so by helping to deliver the largest tax cut in state history.

• At a time in which many Texans are struggling to stay in their homes due to rapidly increasing property tax burdens, it is appropriate for the state to step in and dedicate money to help alleviate this burden.

• Increasing the residence homestead exemption to $100,000 will be especially beneficial to the owners of moderately priced homes—the type of homeowner in the greatest need of property tax relief.

• While renters do not receive direct relief from the proposed amendment, they will still benefit substantially because residential and commercial landlords are going to see their tax burden reduced and those savings will enable landlords to avoid rent increases and even reduce rents.

• By providing tax relief for commercial property owners, the proposed resolution could help stabilize businesses struggling under the weight of rising property taxes and help them to further grow and aid in the state’s overall economic expansion.

• The limit on the increase in the appraised value of non-homestead real property provided for in the proposed amendment will help small business owners stay in business and provide greater predictability to Texans who are helping to drive the state’s economy.

• By making some positions on an appraisal district’s board of directors elected positions in certain counties, appraisal districts in those counties will be more directly accountable to local taxpayers.

Comments by Opponents

• Increasing the residence homestead exemption by such a large amount could result in a shift of the tax burden from homeowners to business owners, which could result in higher prices for consumers.

• The proposed amendment does not go far enough since it does not put the state on a path toward eliminating property taxes entirely.

• Because the tax rate compression may be only temporary if state funding at the increased levels is not maintained, not much actual relief is being provided. Any property tax relief needs to be permanent.

• By reducing property taxes, public education funding is placed in jeopardy as other revenues made available for public schools, such as sales tax revenues, are more volatile and less predictable than property taxes.

• Nearly four million Texans are renters, and the proposed amendment does nothing to provide them any direct financial relief.

• The proposed tax relief is not targeted enough to those who are struggling the most. The state’s historic budget surplus should not be funneled directly to businesses and the wealthy.

• Individuals running for the elected seats on an appraisal district’s board of directors may not be focused enough on the overall business of the board and instead focus too heavily on reducing property values.