Texas’ Property Tax Mess

Why are property taxes in Texas so high? Four main reasons:

One: The state froze the motor fuel tax at 20 cents per gallon in 1991. Inflation and fuel mileage have contributed to a shortfall estimated at $4 billion per year just to maintain our highways.

Two: In 1997, the state botched the property tax law, allowing the owners of large, commercial and industrial properties to cheat the system by $4 billion per year.

Three: When the business margin tax was designed and implemented in 2006, it created a $5 billion per year structural deficit. Tax cuts since then have widened this deficit to $6.5 billion.

Four: Because we froze the motor fuel tax in 1991, botched property taxes in 1997, and screwed up the margin tax in 2006, we’ve used massive debt to make ends meet. Per the 2017 Comprehensive Annual Financial Report (“CAFR”), Texas owes more than $100 billion in bonds payable and unfunded retirement obligations.. School districts owe more than $118 billion in bonds payable. Counties and cities owe billions more.

As a result of all this borrowing, interest and debt service charges are killing us. Interest at the state level is running at $2 billion per year (Note 6, 2017 CAFR). Debt service at the school district level is running at $6.4 billion per year (2018-2019 Statewide Summary of Finances) .

By blowing holes in our revenue systems, and then borrowing billions and driving debt service costs up, the state has made a complete hash of our finances. We simply don’t have enough money to make ends meet.

And the one place lawmakers always turn for more money is local property taxes. The state accomplishes this by allowing property values (and property taxes) to soar, and that allows the state to cut support for everything from schools to mental health services to roads and bridges.

And the state has been unbelievably aggressive in driving property taxes up. The state budget, for which Lt Governor Dan Patrick is responsible, states that school property taxes “shall be increased” by 26.9 percent (compounded) over his four-year term (Article III page 5 note 3). Also, The State Comptroller’s Office is meeting with appraisal districts to ensure appraisals are up (according to whistle-blowers who have called me). And The Texas Education Agency recently sent a letter to school districts reminding them that they could lose state funding if they lower tax rates, even though property values are soaring.


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