The big picture
The state of Texas does not charge property taxes, meaning homeowners are taxed by local entities such as school districts, cities, counties, hospital districts and municipal utility districts.
However, lawmakers can place limits on how much local governments can increase taxes each year and require tax exemptions for certain groups. When the state creates or expands tax exemptions, it is often constitutionally required to send money to school districts to ensure they do not lose revenue as a result of the lower taxes.
Texas is spending $51 billion on property tax relief in fiscal years 2026 and 2027 alone, previous Community Impact reporting shows. Unless the legislature rolls back existing tax exemptions, the state will be required to spend that much or more on tax relief every biennium, lawmakers said.
“We're kind of maxed out at what we can do for property tax reform, from a budget perspective,” said Sen. Charles Perry, a Lubbock Republican and member of the Texas Senate Finance Committee, during a Nov. 20 event hosted by the Texas Taxpayers and Research Association.
In June, Gov. Greg Abbott told reporters he believed Texas could afford to spend $51 billion on tax relief because of the state’s “robust economy,” citing the nearly $24 billion budget surplus that was available this year. Rep. Donna Howard, D-Austin, said Nov. 20 that Texas has seen high surpluses in the past two legislative sessions due to federal funding from the COVID-19 pandemic and high sales tax revenues, adding that “the money is not still coming in.”
“I do have a lot of concerns, as the senator does, about how in the heck are we going to pay for this going forward?” Howard, a House Appropriations Committee member, said. “$51 billion ongoing, it's a huge amount to continue to support. And to think about doing anything more seems very fiscally irresponsible to me.”
Zooming in
During this year’s legislative session, some lawmakers said that while they supported state-mandated property tax relief, they were concerned that some local governments would raise property tax rates after the state expanded tax exemptions, essentially making the changes “a wash.”
Rep. Terry Canales, D-Edinburg, said in May that lawmakers need to “rein in the tax rates.”
“I think this is just a Band-Aid, and I'll take a Band-Aid when we're bleeding,” he said on the House floor. “But the reality is, if we really want to help people, we've got to work on the rate at which people are getting taxed.”
Lawmakers considered tightening limits on local property tax growth during special legislative sessions this summer, but that proposal did not become law.
Several other solutions have been proposed ahead of the 2026 elections and 2027 legislative session. Abbott on Nov. 9 announced a six-part plan that he said would “drive a stake through the heart of local property tax hikes” by limiting annual local government spending, increasing the threshold for tax hikes to pass in an election and asking voters to eliminate school property taxes.
Rep. Ellen Troxclair, a Lakeway Republican on the tax-writing House Ways and Means Committee, said she has supported ending school property taxes, which make up the majority of an average homeowner’s property tax bill, “since the beginning.”
“I think it's a reasonable solution to say that we're going to shift that to the state [and] fund it from our biggest sources of revenue—sales taxes, oil and gas [taxes], business taxes—that maybe are a little bit more stable and able to weather the ups and downs,” Troxclair said Nov. 20.
In order for the state to continue expanding tax exemptions or eliminate some property taxes altogether, lawmakers need to consider cuts elsewhere, Perry said.
“Texas runs a pretty lean budget. We’ve spent money, I can agree, that we shouldn't have on different things, but generally speaking, our budget is tied up in roads, schools and Medicaid,” he said Nov. 20. “That's it. So tell me which one of those you want to do less of.”
More details
Abbott’s tax relief plan includes tying annual spending by cities, counties and other taxing entities to inflation and population growth and implementing limits on debt, similar to existing state-level spending limits.
Troxclair said limiting local spending would be critical to keeping Texas affordable.
“We have to find a way to allow people to stay in their homes,” she said. “I think it's totally reasonable for our local taxing entities to do exactly what the state of Texas is already doing: staying within reasonable limits.”
Rep. Trey Martinez Fischer, a San Antonio Democrat and vice chair of the Ways and Means Committee, said he was concerned about limiting local spending. He noted that while the state follows certain spending limits, “there is not a state police department that will come to somebody's house in the middle of the night.”
“Sometimes I think that the result of this tax policy actually hurts people,” Martinez Fischer said. “In the instance of San Antonio, we [would] have the potential to actually lose jobs and major economic development should our tax spending policy change at the local level, even though the voters a couple of weeks ago said, ‘Go spend a billion dollars to come up with the next big idea.’”
During the Nov. 4 election, voters in Community Impact’s coverage areas approved just over half of the local bond propositions and tax rate elections on the ballot, according to previous Community Impact reporting.
Texas lawmakers are not expected to formally consider additional legislation on property tax relief or other policies until the next state legislative session in 2027.
