AUSTIN, Texas — Can Texas eliminate property taxes? While there’s been big talk of it in recent years, it’s likely not realistic. At least not without sacrificing vital state services. 

What You Need To Know

  • Lawmakers want to see how much relief on property taxes they can give Texans during the 2025 legislative session

  • Lt. Gov. Dan Patrick charged senators to study the impact of eliminating property taxes. An elimination would cost the state $81 billion per year

  • Experts say an elimination of property taxes would create a burden on local municipalities to figure out how to fund certain necessities

  • If property taxes are eliminated without a substantial financial replacement, local municipalities would need to turn to the state for more assistance

Lawmakers want to see how much relief on property taxes they can give Texans during the 2025 legislative session, but they may not do so even as property taxes continue to outpace personal income growth. 

“We have to strike that balance,” said state Sen. Charles Perry, R-Lubbock. 

After two special legislative sessions, lawmakers and voters approved an $18 billion property tax cut. Of that, $12.7 billion was sent to school districts to subsidize the decrease in property taxes coming from homeowners, and of that $5.6 billion was used to increase the homestead tax exemption from $40,000 to $100,000, which is the amount of a home’s value that cannot be taxed.   

This tax cut was possible due to a record state budget surplus. 

“To me, it seems that we have an assumption that our economy will always be strong and we’ll have a surplus,” said state Sen. Juan Hinojosa, D-McAllen. 

Lt. Gov. Dan Patrick charged senators to study the impact of eliminating property taxes. An elimination would cost the state $81 billion per year. Texas currently raises half of that in sales tax, which the comptroller’s office lists as one source to replace lost revenue from a property tax elimination. But it would be hard as consumer spending and economic growth is slowing following a surplus in spending coming out of the pandemic. 

“Until that extra savings got spent down, we still had pretty rapid growth in sales tax, but that appears to be over now,” said Brad Reynolds with the comptroller’s office. 

Experts add that an elimination of property taxes would create a burden on local municipalities to figure out how to fund certain necessities. 

“When they’re providing these services, they’re having a hard time collecting those money’s back,” said Teresa Chandler, the acting city manager of Nolanville. 

Chandler told senators that since the most recent tax cut, they’ve lost over $11 million in tax revenue in 2024 and costs of services such as ambulances have skyrocketed. 

“For an ambulance service in our community to service the citizens, today we pay over $30,000 a month,” said Chandler. 

If property taxes are eliminated without a substantial financial replacement, local municipalities would need to turn to the state for more assistance. 

“Everything that local government does now to take care of their local people we would strip them of that and it would have to be replaced or I suppose not replaced,” said Houston-area state Sen. Joan Huffman. 

If Texas replaces property taxes with an increased sales tax, members of the comptroller’s office say sales tax would need to increase from a little over 6 cents to 22 cents, which would give Texas the largest sales tax rate in the country.