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Texas Legislature Grapples with Property Taxes

2 min readBy: Alicia Hansen

Texas is one of many states to recently consider increasing sales taxes in order to decrease property taxes. Texans, like many other taxpayers around the country, aren’t happy about their propriety taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. burden, which is high comported to other states. (See our dataset on Property Taxes on Owner Occupied Housing by State.) In fact, in 2006, Texas’s property taxes were the highest in the nation when calculated as a percentage of home value.

Texas has already made changes in its property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. system to comply with a state Supreme Court ruling directing the state government to increase its education spending. See the Tax Foundation Background Paper Appropriation by Litigation: Estimating the Cost of Judicial Mandates for State and Local Education Spending for more on how this court mandate has affected Texas and other states.

At the end of January, Lt. Gov. David Dewhurst asked the Senate to consider new property tax limits, and legislators are currently pondering the issue. From Tax Analysts (subscription required):

Texas lawmakers are searching for a property tax reform plan that would provide relief for what they see as excessive taxes on homeowners, but critics believe that the debate has been too one-sided and that many of the proposals would harm local governments.

Officials on both sides of the issue concede that Texas property taxes are relatively high compared with other states, but Rep. Fred Hill (R), who chairs the House Local Government Ways and Means CommitteeThe Committee on Ways and Means, more commonly referred to as the House Ways and Means Committee, is one of 29 U.S. House of Representative committees and is the chief tax-writing committee in the U.S. The House Ways and Means Committee has jurisdiction over all bills relating to taxes and other revenue generation, as well as spending programs like Social Security, Medicare, and unemployment insurance, among others. , said that the state does not levy income taxes and that the state’s overall tax burden is relatively low.

“Texas is really a bargain,” Hill told Tax Analysts. “I don’t know anyone that likes property taxes. It affects life choices, the size of the home you buy . . . but I also don’t know of a system that Texas could use to replace it.”

Texas’s overall tax burden may compare well with other states, but Michael Quinn Sullivan, president and CEO of Texans for Fiscal Responsibility, said taxes—including property taxes —need to be low enough to compete in a global economy.

As the debate over appropriate local spending levels continues, a recent proposal by Rep. Phil King (R) calls for a constitutional amendment that would replace most school property taxes with sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. revenue.

For more on Texas property taxes, see the website of the Texas Comptroller of Public Accounts. For more property tax data and studies, see out property tax page.