The Dallas Federal Reserve recently released a report, expecting a "soft landing" in 2023, as the 88th State Legislature discusses how to manage a record-breaking $33 billion budget surplus with a nationwide recession looming.
Gov. Greg Abbott has called for the largest property tax cut in state history, while others say the surplus funds should be used to fund infrastructure, the Texas Standard reported, citing an interview with Emily Kerr, a senior business economist in the Research Department at the Federal Reserve Bank. Kerr said the Texas economy wasn't showing any red flags economically, and opportunities are abundant in the state. Kerr also said she was "hopeful" Texas would be able to outperform the U.S. economy over the next year.
Kerr co-authored research with Ana Pranger which predicted Texas will have a “soft landing” in 2023, adding that price and wage inflation "are expected to slow this year but remain above historical averages… [and] employment growth is expected to slow across the state in 2023, although Texas will likely avoid going into recession this year.”
Abbott tweeted in August of 2022 that half of the budget surplus should go toward property tax relief, giving Texans “the largest property cut ever in the history of Texas.”
According to the Texas Tribune, Lt. Gov. Dan Patrick said he wants the surplus to increase homestead exemptions for homeowners, but was unsure whether half of the surplus could be used, contrary to Abbott's view on offering property-tax relief.
Crestline Solutions reported that House Speaker Dade Phelan made a suggestion last year that surplus funds be used to invest in infrastructure, and he strongly cautioned against taking a significant portion of the surplus to alleviate property taxes during uncertain financial times.
Previously, the largest property tax cut in Texas history was $14.2 billion in 2009, James Quintero of the Texas Public Policy Foundation said.
To make good on Abbott’s promise, the Legislature would have to deliver a property tax cut of approximately $20 billion, adjusted for inflation from 2009, according the Labor Department's Bureau of Labor Statistics.
According to Tax-Rates.org, Texas has the third highest median property tax rates in the nation, approximately double that of Florida and 2.5 times that of California.