Is It Possible to Get Rid of Property Taxes in Texas?
Some lawmakers in Texas are exploring the idea of eliminating property taxes in the state. However, experts warn that such a move would require significant adjustments to other taxes.
During a recent meeting at the state Capitol, the Texas Senate Finance Committee discussed the possibility of completely removing property taxes. According to state officials, if property taxes were to be eliminated, Texas would need to increase the sales tax rate from 6.25% to 22% to make up for the lost revenue.
Senator Charles Perry (R-Lubbock) expressed his concerns about such a high sales tax rate, questioning if any other state in the country had a 22% sales tax. Brad Reynolds, chief revenue estimator with the Texas Comptroller’s Office, confirmed that no other state had a sales tax rate that high, with the highest rate being around 10.25% at the state and local levels.
Reynolds explained that the 22% figure also took into account the possibility of people spending less due to higher taxes. He noted that purchases could be driven out of the state, especially in areas near the border, resulting in reduced tax revenue.
Furthermore, Reynolds stated that some Texans might opt to purchase items that are not subject to sales tax, such as ready-to-microwave meals from grocery stores.
While some lawmakers are enthusiastic about the idea of eliminating property taxes, others are more cautious. Senator Chuy Hinojosa (D-McAllen) pointed out that assuming a strong economy with surplus funds is risky, as history has shown economic fluctuations.
This discussion comes after the approval of an $18 billion tax cut plan in the previous legislative session, which voters supported in November 2023. Concerns were also raised about the impact of eliminating property taxes on Texas schools.
Mike Morath, commissioner of the Texas Education Agency, highlighted that recent tax reforms have resulted in decreased funding from property-wealthy school districts like Austin ISD. This has implications for the state’s school finance system and could lead to significant changes in funding for districts.
As Texas prepares for the next legislative session in January, the debate over property taxes and their impact on the state’s economy and education system continues.