Sick of Paying Property Taxes? Here's how Texas can just eliminate them.

Originally published at the Houston Chronicle. 

Friday is the last day for Texans to appeal their property taxes, and there’s no doubt that plenty of Texans are rightly frustrated that their bills keep rising even after years of proclaimed “relief.” Local property tax collections are now about $90 billion per year, even as state lawmakers cite “an overwhelming $51 billion in relief.”

The problem is not that Texas lacks the tax revenue to cover state needs or the policy tools to address the problem. It is that the state has tried to lower property tax bills without fixing the structure that causes property taxes to grow year after year.

The ongoing debate between Gov. Greg Abbott and Lt. Gov. Dan Patrick reflects this tension. Abbott has spoken openly about eliminating school district maintenance and operations property taxes for homeowners, while Patrick has emphasized expanding homestead exemptions on those property taxes. 

Both approaches appeal to voters. But exemptions, limitations on tax revenue growth and other partial fixes do not reduce the size or scope of government. They redistribute who pays for it while allowing spending to continue. Nothing is free, including government spending.

At its core, this debate is not just about taxes. It is about the proper role of government. Government exists to preserve liberty, protect property rights, enforce contracts and provide limited public services. It is not meant to permanently claim a share of what people own or to grow faster than the average taxpayer’s ability to sustain it. When the government exceeds those limits, taxes rise regardless of how they are labeled.

As a native Texan and an economist who has spent more than a decade studying state and local public finance, including detailed work on property tax elimination, I have reached a consistent conclusion. Eliminating property taxes is morally the correct thing to do and can be done either quickly or gradually. What matters is whether lawmakers commit to spending discipline and permanent tax rate reduction rather than temporary relief.

The most logical place to start is school district maintenance and operations property taxes, which make up the largest share of the property tax burden. Public education is already governed by state funding formulas, mandates and recapture rules. If the state largely controls the system, it should fund it directly rather than forcing homeowners to pay a perpetual tax on homeownership.

The lieutenant governor has claimed that eliminating school property taxes would require a massive sales tax increase. That’s not true. According to my calculations, by spending less and broadening the sales tax base — in ways such as by taxing services and currently exempt items — Texas could replace school district M&O property taxes with a sales tax rate no higher than 9 percent, compared with today’s 8.25 percent combined state and local rate. 

The key variable that is too often overlooked is not the tax base or the tax rate — it is excessive government spending. When spending is limited, base broadening can support necessary revenue without punishing taxpayers. That restraint requires a binding limit on state and local spending growth tied to population growth plus inflation, a principle central to sustainable budgeting. 

When the government grows more slowly than the average taxpayer’s ability to pay, excess taxpayer money collected — known as surpluses — emerges. Over the last two budget cycles, Texas has had more than $50 billion in state budget surpluses because of a fast-growing economy. Applied consistently through a surplus buydown with tax revenue collected above population growth plus inflation, those funds could have dramatically lowered school property tax rates without raising taxes.

Local control would remain intact. School boards would still operate schools. Voters would still approve bond elections for facilities and repay that debt locally until it matures. What changes is the funding of day-to-day operations, not who governs.

Cities, counties and special districts should eliminate their property taxes through the same surplus buydown principle applied locally. Local governments should be allowed to rely more on sales tax revenue — but only if that revenue is dedicated to reducing property tax rates rather than expanding spending. Unlike property taxes, sales taxes follow economic activity more closely, naturally capping spending and generating surpluses during expansions while not overly burdening taxpayers during recessions.

Debt should be treated differently. Voter-approved debt should remain local and be paid by the voters who approved it until it matures. The state should not redistribute or socialize local debt across taxpayers who never consented to it.

Texas once led the nation by pairing low taxes with disciplined spending. In recent years, that leadership has slipped as spending has grown faster and relief has increasingly relied on homestead exemptions rather than structural reform. Other states are moving faster on tax modernization and fiscal restraint. Texas risks falling behind if it continues to avoid hard choices.

The time to lead is now. With clear limits on government growth, zero-growth levy rules without voter supermajority approval, surplus buydowns, a modern tax base focused on final consumption rather than property ownership, and political courage, Texas can restore conservative principles to fiscal policy and once again set the standard for economic freedom.