A Tax Exemption is not just a Tax Discount

Representative Rogers: “Mr. Chairman, I request that the dialogue between myself and Representative Smith be placed in the Journal to be used for legislative intent.”
The Chair: “Any objection. Hearing none so ordered.”

This type of exchange is frequently heard on the floors of the House and Senate during bill debates today. Perhaps this thinking could help with the property tax debate.

The Senate has proposed a legislative package that includes roughly doubling of the “Homestead Exemption”, and importantly, tying the Exemption in the future to the cost of a median priced home in Texas.

So what are the origins of the Texas Homestead Exemption and what were the legislators trying to accomplish? It is not complicated. HOMESTEAD was in the vernacular and text of the Texas 1876 Constitution, the home and up to 200 acres of land and the family business, or in a city the house and lot it was on, not to exceed $5000.i EXEMPTION was just that, an exemption. It was not a mere discount on taxes.

From THE Noah Webster dictionary of 1828, exemption was defined as:

Freedom from any service, charge, burden, tax, evil or requisition, to which others are subject; immunity; privilege. Many cities of Europe purchased or obtained exemptions from feudal servitude. No man can claim an exemption from pain, sorrow or death.

So, a Homestead Exemption was to exempt ones’ homestead from taxes and other encumbrances such as collection of debts. (Interestingly, a reading of the journal and debates of the 1875 Constitution delegate deliberations shows that the exemption was in part to also ensure that a wife’s home was not squandered away by a night of drunken gambling by her husband. It was not just to give her a discount on taxes, it was to protect her and her children’s very home.)

It was not a coupon for 10% off of your tax bill—it was “freedom from” your tax bill. It effectively eliminated property tax on the typical homestead of the day.

A simple inflation to present 2015 dollars would bring this homestead exemption to $107,972ii. In 2000, the median Texas home was $82,500.

But as they say on TV, there’s more. Real estate prices in Texas have escalated much faster than general inflation. Sparse data is available from the 1800’s forward to the 1950’s, and much data is available from about the 1950s to present. Real estate in Texas rose by a MULTIPLICATION FACTOR of about 7.14 from 1876 to 1960, and another 7.81 TIMES from 1960 to present. Hence real estate has increased at a combined multiplier of 55.76 TIMES since 1876. If the $5000 original homestead exemption had kept pace with real estate prices in Texas, it would now be worth a whopping $278,928.

These “real” values of the 1876 Constitution exemption of $5000, coupled with the legislative intent, clearly means that if the homestead exemption had kept pace with even median home prices, homeowners today would truly still have a homestead exemption, not a discount. An exemption.

Please encourage both the House and the Senate to keep whatever property tax reduction amount they agree on indexed to property inflation! Anything less is more taxes “for your children”.

iUnder the Constitution of 1876 the homestead was defined as the family home on up to 200 acres of rural land or urban land worth up to $5,000 (at the time of homestead designation) with its improvements and used as a family home or place of business. - From the Texas State Historical Society https://tshaonline.org/handbook/online/articles/mlh02 (Article of course has more details.)


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