AUSTIN, Texas — State lawmakers are looking for ways to continue cutting property taxes when the Texas Legislature reconvenes in 2025.
On Wednesday at the State Capitol, the Texas Senate Finance Committee even crunched the numbers on getting rid of them altogether. State officials said to make up the deficit from eliminating property tax entirely, Texas would have to more than triple its sales tax rate from 6.25% to 22%.
“There’s not another state in the union that has a 22-cent sales tax?” State Sen. Charles Perry (R-Lubbock) asked.
“Not remotely,” responded Brad Reynolds, chief revenue estimator with the Texas Comptroller’s Office, who noted that the highest rate was around 10.25% state and local.
Reynolds said the 22% figure factors in people spending less.
“That’s because purchases are going to get chased out of state in all the parts of our state that are anywhere near a border,” Reynolds said.
Additionally, he said some Texans would switch to buying items not subject to sales tax.
“For example: ready-to-microwave prepared meals that you buy at the grocery stores,” Reynolds said.
Some lawmakers urged caution.
“To me, it seems that we have an assumption that our economy will always be strong and have a surplus, but that’s not really the case when we look at past history,” State Sen. Chuy Hinojosa (D-McAllen) said.
Wednesday’s discussion follows an $18 billion tax cut plan passed during the previous legislative session that voters approved in November 2023.
Another concern raised during the interim hearing was the impact on Texas schools.
“What happens if you eliminate property taxes as a source of funding in public education?” asked Mike Morath, commissioner of the Texas Education Agency.
Morath said recent tax reforms have meant massive drops in how much money property-wealthy school districts like Austin ISD send to the state.
“In the most recent school year, recapture would have been $10 billion in the school finance system,” Morath said. “Instead, with those three acts of sort of tax policy, recapture was $2.7 billion.”
Morath told lawmakers average daily attendance in Texas public schools is down 1% since the COVID-19 pandemic, but enrollment is flat due to demographic changes. Based on the state’s school funding formula, that means less money for districts.
The Texas Legislature reconvenes in January.