Texas Governor Abbott vows to eliminate school property taxes, but how?
Texas Gov. Greg Abbott proposes eliminating school district property taxes for homeowners, but how would that work in practice?
Abbott — during a Thursday campaign stop in Fort Worth and other trips around the state — has outlined a five-point plan to reign in property taxes and local government spending. Among the action items, Abbott wants voters to decide on doing away with school property taxes through a constitutional amendment election.
Property taxes are a primary funding source for Texas public schools, but they also make up a sizable portion of most homeowners’ property tax bills.
Texas doesn’t have a statewide property tax, which means when it comes to driving down property tax bills, lawmakers have to get a bit creative.
In recent years, they’ve relied on increasing homestead exemptions, which lowers the home value off which school property taxes are calculated. Voters in November overwhelmingly approved increasing the homestead exemption on school property taxes from $100,000 to $140,000, with the state supplementing the lost funds with its budget.
And while lawmakers in have whittled down on the expense, the governor says more must be done.
Economic experts note that revenue lost from eliminating school property taxes must be supplemented somehow.
“The feasibility depends on what’s going to take the place of property taxes,” said Sriram Villupuram, an associate professor in UT Arlington’s department of Finance and Real Estate.
How could Texas eliminate property taxes?
Eliminating school district property taxes would have cost Texas $39.5 billion in the 2023 tax year, according to The Texas Tribune, citing figures that the Legislative Budget Board that presented during a Senate committee hearing.
There’s a wide variation between districts in terms of how much they rely on property taxes, said Rachel White, an associate professor of educational leadership and policy at UT Austin’s College of Education.
“On the average, about half Texas’ school funding comes from local school property taxes,” White said.
The move away from school property taxes is doable, White said. She and other experts interviewed by the Star-Telegram pointed to sale taxes and income taxes as the primary ways Texas could opt fill in the gap of no school property taxes.
Texas passed a 2019 constitutional amendment banning a personal income tax, so that route is unlikely.
“I guess we have legislated ourselves out of that,” Villupuram said.
James Quintero, policy director at conservative think tank Texas Public Policy Foundation was resolute: “Texas will never have an income tax.”
And sales tax can be volatile, Villupuram said.
“If sales tax are higher, that means that people might decide to consume less,” he said. “The essentials are going to be consumed — the eggs, milk, bread and all that — but some other things, such as electronic goods, televisions, things that I want but don’t need, those are going to go down.”
Quintero also noted that surplus dollars could be used to buy down districts’ property tax rate.
“This option has already been put into effect for the last several sessions, and so it’s very easy to see the Legislature moving forward with some additional compression in the future,” he said.
It’s the state Legislature that would likely flesh out the specifics of how property taxes are eliminated and revenue replacements.
But Abbott seems to be eyeing more homestead exemption increases, with the state covering lost revenue using surplus dollars from the Texas budget to offset the loss of revenue districts would see without property taxes paid by homeowners in their communities.
Gov. Abbott’s plan to eliminate property taxes
During the Fort Worth event, Abbott suggested the tax relief could be achieved by increasing the state’s homestead exemption, like what’s been done in recent years.
“Our budget surplus is so large, we could use it and it alone to pay off the cost of your homestead exemption elimination so that you’re paying $0 for your school district property tax, and still have more money left over in our budget surplus,” Abbott said. “So we can do this without raising any more of your taxes. It’s time to finally cut your taxes and put an end to it.”
Texas has seen historic surpluses in recent sessions, including a $24 billion surplus during the most recent legislative session.
A 2026-2027 revenue estimate from the Texas Comptroller’s office shows the state Legislature with roughly $4.7 billion left in its coffers after the legislative session, not including the Rainy Day Fund — a pot of savings to help Texas in times of economic uncertainty. The Rainy Day Fund, more formally called the Economic Stabilization Fund, is projected to have $28.5 billion by the end of fiscal 2027.
State revenue increased by 1.7% between the 2024-2025 biennium and the 2026-2027 biennium, according to the office.
Relying on a surplus to fund schools introduces a lot of instability, White said.
“We have a surplus right now, but we know in economic downturns, it’s not always clear how that surplus is going to be impacted,” she said. “Things like natural disasters can also really eat into a state surplus, and so I think it’s really dangerous to have it be relying on that, when you could be in a situation where you’re pitting, like, supporting a local community that has experienced a significant disaster, against like the education budget.”
Abbott said his five-point plan will promote affordability, which will lead to more people moving to Texas.
“That in turn will lead to revenue that will help us make sure we’re able to keep those property taxes low for generations to come,” he said.
Abbott was confident in Texas’ political future, when asked about the possibility of future budget surpluses not meeting the levels seen in recent years at the Fort Worth event.
He stressed that his plan does not apply to all property, which reduces the amount of revenue the state must come up with. Abbott doted on Texas’ diversified economy — highlighting sectors like oil and gas, construction, artificial intelligence and semiconductor manufacturing.
“We know that we’re going to have plenty of money for a long time,” Abbott said.
Pressed on how Texas could generate revenue in difficult economic times, without sales taxes — which Abbott said there’s “no reason to raise” — he pointed to increased sales tax revenue due population growth.
“All that said, Texas is more prepared than any other government in the United States to deal with an economic shortfall,” Abbott said, referring to the Rainy Day Fund.
Whatever ultimately happens, going forward with the cuts is easier that reversing course down the line, Villupuram said
“Taking away taxes is pretty easy,” Villupuram said. “If in the future we want to reintroduce them, which will increase property taxes dramatically, it’s going to be pretty hard.”
