After months of negotiations and disagreements, Republican lawmakers in Texas have finally reached a deal on property tax reduction. The compromise, valued at $18 billion, includes over $5 billion in relief approved for 2021. It aims to provide increased tax relief for the state’s 5.7 million homeowners, introduce a tax-credit pilot program for non-homesteaded properties, lower taxes for small businesses, and allocate billions of dollars to school districts to enable across-the-board tax rate cuts.

The proposed legislation must now pass through both chambers before reaching the desk of Governor Greg Abbott. Texas House Speaker Dade Phelan expressed his satisfaction with the agreement, stating that it would ensure economic growth and prosperity for all Texans. Lt. Gov. Dan Patrick also praised the deal, highlighting the positive outcome for property owners and businesses.

According to details released by Phelan’s office, the legislation, expected to be passed this week, will allocate more than $12 billion to reduce the school property tax rate for homeowners and business properties. It will also increase the homestead exemption from $40,000 to $100,000 and provide franchise tax relief for small businesses. Additionally, it includes a three-year pilot program called the “circuit breaker,” which will offer tax relief for residential and commercial properties valued at $5 million and below.

Phelan’s office confirmed that the new property tax relief bill, franchise tax relief bill, and constitutional amendment required for implementing the cuts would be filed later today.

Governor Abbott’s office did not immediately respond to requests for comment.

The agreement marks the end of a lengthy deadlock among the state’s top Republicans that lasted for nearly seven months. They faced challenges in determining how to allocate $12.3 billion in tax breaks, which were budgeted earlier this year. With a surplus of approximately $33 billion, Republicans aimed to provide tax relief to Texas property owners, who face some of the highest property taxes in the country. However, disagreements arose between House Speaker Phelan and Lt. Gov. Patrick regarding whether homeowners or business owners should receive the larger tax breaks.

Phelan and House lawmakers initially proposed channeling the entire $12.3 billion to school districts for lowering tax rates, leading to across-the-board cuts for all property owners, with the greatest benefit for business owners.

Governor Abbott and tax-cut proponents viewed this proposal as a means to gradually eliminate the school maintenance and operations tax, which forms the bulk of the school property tax, covering expenses like teacher salaries. As weeks passed, Abbott’s support for a compression-only tax-cut proposal seemed to diminish, and he encouraged House and Senate leaders to reach a compromise and present a bill for his approval.

Patrick and Senate tax-cut writers agreed with the House on allocating $12.3 billion for property tax cuts but aimed to use only 70% of the amount for tax rate compression. They intended to utilize the remaining funds to enhance the state’s school district homestead exemption, which exempts a portion of a home’s value from taxation for public schools. Patrick and State Sen. Paul Bettencourt, a Houston Republican, advocated raising the exemption from $40,000 to $100,000.