Texas' Property Tax Problem

January 29, 2019

Texas has a problem. A big one.


As a new homeowner in the state of Texas, I’ve been shocked by just how high property taxes are in our supposedly conservative state – and how much those taxes can increase from one year to the next.


And I’m not alone:


“Texas taxpayers have been facing property tax bills that are increasing 2.5 to 3 times faster than median household income” –– State Senator Paul Bettencourt, chairman of the Senate Select Committee on Property Tax Reform and Relief.[1]


“Texas justifiably has a reputation as a low tax state ... [but] too much of the tax burden, however, has been shifted to homeowners. Texas' property tax burden is now the fourth highest in the country when measured as a percentage of median home value, according to the Tax Foundation. That puts Texas in the company of states like New Jersey, Illinois, if you can believe it. The state's newspapers are suddenly reporting on fears that homeowners have of being unable to hang onto their homes in retirement thanks to high property taxes.” –– Manhattan Institute Senior Fellow Steven Malanga[2]


Currently, Texans are saddled with over 4,100 local taxing jurisdictions - each imposing their own tax rate. These taxing jurisdictions include school districts, cities, counties, and various other “special districts.” The result of this patchwork layering of taxing jurisdictions is that Texas’ property tax rates are some of the highest in the nation[3] - higher even than Democratic strongholds like California, Hawaii, New York, and the District of Columbia.


Despite numerous attempts by the legislature to slow down skyrocketing property taxes, there has been no real respite for homeowners. In 1998, local governments in Texas levied approximately $19 Billion in property taxes. By 2017 that number burgeoned to a staggering $59 Billion,[4] an average of over $2,000 for every man, woman, and child in the state.[5]



There are a number of significant factors contributing to the rise of property taxes in Texas: from rising appraisal costs, the increase of public sector employees, increasing tax rates, and out-of-control local debt.



Rising Appraisal Costs

Due to an amendment to the state constitution that was passed in 1997, appraised values for residential property cannot increase by more than ten percent year-over-year. Unfortunately this measure that was intended to slow the growing property tax burden has had minimal effect, as it does nothing to cap the revenue that can be collected by local taxing jurisdictions.


Increase of Public Sector Employees

As pointed out in the property tax reform proposal released by Governor Abbott, local government employment in the state of Texas totals 1.4 million, which translates to slightly more than ten percent of all employed people in the labor force. This number has grown by a whopping 10 percent in the last 5 years.


Coupled with that, the Texas public school system employs approx. 688,000 people - more than four out of the five largest private employers in the country. Sadly only half of those employees are teachers, with the rest being administrative and professional support staff who are paid much higher than the teachers.[6]


With these two sectors ever expanding their operating and payroll budgets, the demand for property tax revenue to increase grows with them.


Increasing Tax Rates

Currently state law allows local taxing jurisdictions (such as cities, counties, and special purpose districts, with the exception of school districts) to increase their tax rates as much as they want in a given year. If the revenue they collect increases 8 percent or more than the previous year then voters can petition to hold a rollback election to reduce the tax rate.


This backwards system puts the impetus on the voters to collect sufficient petitions to hold an election and then to vote to rollback the tax rate, rather than on the local governments to make their case for why taxes should be increased.


Out-Of-Control Local Debt

According to the Texas Bond Review Board (BRB)[7], local governments in Texas have $218.46 billion in outstanding bond debt. This translates to a per capita debt burden of $8,350 - a higher per capita local debt burden than even that of notoriously fiscally insolvent states like California and Illinois!


These high debt levels further drive the demand for growing property tax revenue in order to service the debts.





Governor Abbott has proposed a property tax reform plan that would slow future property tax increases, but sadly the plan does nothing to address the already too-high taxes.


Under Governor Abbott’s proposal, future property tax revenue growth would be capped at 2.5% per year - meaning that the amount that a taxing entity can collect in revenue from property taxes cannot increase by more than 2.5% year-over-year. Any increases over the 2.5% level would require a ⅔ supermajority vote of the people and the elected officials of that district.


In addition, the Governor’s proposal would require a ⅔ supermajority vote of the people to approve the issuance of any new local debt. 


What the Governor’s proposal doesn’t address, however, is how to reduce the existing property tax burden.


One way to do this would be to eliminate the so-called “Robin Hood” property tax, as proposed by the Texas Public Policy Foundation.[8] If enacted, the plan would eventually reduce property taxes by 40% by restraining state spending growth and using the surplus state revenue this produces to ratchet down local property tax rates.



Governor Abbott and the legislature must make implementing real property tax reforms a priority in this legislative session. And not just slowing the growth of property taxes - but reducing the already too-high and unsustainable burden on Texans.

By Nate James

[2] Malanga, S., “Will Texas Squander Its Prosperity?” Real Clear Markets, September 26, 2012.

[7] Texas Bond Review Board, Annual Report (2016)

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