SB 1821

84(R) - 2015
Senate Finance
Senate Finance

Vote Recommendation

Vote No; Amend
  • Negative
  • Neutral
  • Neutral
  • Negative
  • Neutral


Donna Campbell

Bill Caption

Relating to a local option exemption from ad valorem taxation of a portion of the appraised value of real property of a business that employs honorably discharged veterans.

Fiscal Notes

The fiscal note dated April 10, 2015 for the enabling resolution, Senate Joint Resolution 60, indicates that to the extent that local taxing units adopt the proposed optional exemption for property used by businesses that hire veterans, the resolution would create a cost to local taxing units. The future actions of local taxing units in adopting the proposed new exemption cannot be predicted; consequently the cost cannot be estimated.

The fiscal note nevertheless give the example of the estimated cost to local taxing units if 10 percent of Texas business real property parcels were to be granted the proposed exemption at $15,000:

Fiscal Year Gain/(Loss) to Special Districts Gain/(Loss) to Cities Gain/(Loss) to Counties Gain/(Loss) to School Districts
2016 $0 $0 $0 $0
2017 (2,125,000) (3,016,000) (3,056,000)  (10,052,000)
2018 (2,163,000) (3,068,000)  (3,115,000) (10,220,000)
2019 (2,202,000)  (3,120,000) (3,174,000)  (10,390,000)
2020 (2,242,000) (3,173,000)  (3,235,000)  (10,563,000)

Bill Analysis

Senate Bill 1821 would give governing bodies of local taxing units the option to adopt an additional exemption from ad valorem taxation of real property.

Any business located in the state of Texas on or after January 1, 2016 that hires at least one veteran and provides full-time employment to that veteran for at least 12 consecutive months would be eligible to receive an exemption from taxation of a portion, expressed as a dollar amount and not to exceed $15,000 for each veteran employed, of the appraised value of real property that is reasonably necessary and used for the operation of the business.

The governing body of the taxing unit would be able to repeal the exemption in the manner already provided by law.

Senate Bill 1821 would take effect on January 1, 2016, and only if Senate Joint Resolution 60 is passed and approved by voters.

Senate Bill 1821 is the enabling legislation for SJR 60.

Vote Recommendation Notes

Senate Bill 1821 would try and encourage the hiring of veterans by allowing for local taxing units to decrease the property tax burden of businesses that hire veterans.

We understand that it can be particularly difficult for a veteran to find a job and that this bill tries to remedy the problem. Even while this exemption is optional, it has the potential of resulting in unintended consequences when created, especially since the exemption appears to apply on each veteran a qualified business would hire.

Businesses located where this exemption would be adopted would be encouraged to hire as many veterans as possible mostly with the objective of decreasing their property tax burden. This would create distortions on the job market, favoring one category of workers above others.

A good, existing example of unintended consequences of such special exemptions lies in Senate Bill 1368 which recently passed the Senate. SB 1368 tries to remedy the revenue losses caused by tax exemptions to cities and counties located near or around major military installations. SB 1368 would provide that some of these cities and counties receive state aid to compensate revenue losses due to these exemptions. Under the provisions of SB 1368, taxpayers from across Texas who already pay their own property taxes will also have to pay for the lost tax revenue created by the special veterans tax breaks addressed by the bill. 

Low taxes applied broadly and more equitably enable businesses and individuals to keep more of the wealth they create or the money they earn. They can then invest this money that can be used to create more jobs, increasing the number of opportunities for everyone, including veterans.

We do not support increasing the opacity of the tax code by adding additional exemptions for special groups of people or businesses. The taxpayers of this state should not be on the hook for subsidizing the hiring of any particular group of people, no matter how highly we all hold them in regard. This essentially creates a new socialized entitlement program for a preferred class of people which everyone else will inevitably have to pay for. 

For these reasons we oppose this legislation on the grounds that it abridges our free markets and limited government principles.

The only redeeming provision of this legislation is that it would be optional for local governments to participate in. We suggest legislators adopt an amendment to stipulate that the Texas Legislature may not appropriate revenues to local governments for the purpose of making up for ad valorum tax revenue that was lost due to their having implemented the tax breaks authorized by this legislation.

By amending the bill this way, any revenue losses incurred by a political subdivision that offers the subsidy would have to be made up by the tax base of the political subdivision that offered the subsidy in the first place; making it an entirely local issue.