Estimated Time to Read: 8 minutes
Property tax relief was a marquee issue for the 89th Texas Legislature, as lawmakers grappled with how best to provide meaningful, long-term reductions to the state’s notoriously high local tax burdens. The result was a patchwork of policy wins and disappointments, including several bills that offered targeted exemptions or increased transparency, as well as a slate of ambitious reform efforts that ultimately failed to cross the finish line.
In Part 6 of our 8-part series, we explore what passed, what didn’t, and what Texans can expect next when it comes to property tax policy.
Bills That Made It
Despite political tensions between the House and Senate over the best strategy to deliver tax relief, particularly around rate compression versus expanded exemptions, lawmakers managed to pass a handful of property tax-related bills. These included exemption increases for homeowners, elderly and disabled Texans, business property owners, and disaster-affected communities. Some bills promoted transparency in school finance, while others aimed to refine tax rate mechanics or remove administrative barriers. However, many of these reforms provide targeted rather than structural relief, and in some cases, increase the state’s financial obligations to offset local tax base reductions.
Homestead Exemption Increase – Senate Bill 4
Senate Bill 4 (SB 4), authored by State Sen. Paul Bettencourt (R-Houston), increases the homestead exemption for school district property taxes from $100,000 to $140,000, contingent on the approval of a constitutional amendment. The bill also ensures that school districts receive additional state aid to offset revenue losses caused by the exemption increase. It modifies multiple sections of the Tax Code and Education Code to adjust school finance formulas, recapture payments, and state funding mechanisms. SB 4 also provides transitional provisions to prevent financial disruptions for school districts and taxpayers.
Exemption Increase for Elderly and Disabled Texans – Senate Bill 23
Senate Bill 23 (SB 23), also authored by Bettencourt, increases the school district property tax exemption for elderly and disabled Texans from $10,000 to $60,000, contingent upon voter approval. The bill includes retroactive and forward-looking provisions that commit the state to covering any lost revenue to school districts via new aid formulas, particularly for debt service and operational costs.
Tangible Personal Property Tax Exemption Increase – House Bill 9
House Bill 9 (HB 9), authored by State Rep. Morgan Meyer (R-Dallas), raises the exemption for income-producing tangible personal property from $2,500 to $250,000, contingent on constitutional amendment approval. This measure aims to relieve small businesses from inventory and equipment taxes and is expected to result in a biennial revenue loss of more than $566 million, primarily affecting school finance and local revenue.
Addressing Disaster Loophole – House Bill 30
House Bill 30 (HB 30), authored by State Rep. Ellen Troxclair (R-Lakeway), allows local taxing units to adjust their voter-approval tax rates following federally declared disasters to fund debris removal, replacing a broader “disaster loophole” with a narrowly defined “disaster debris rate.” It includes limitations such as tying the rate to federal cost estimates and sunsetting the adjustment after three years or upon full property value recovery.
School Bond and Tax Transparency Database – Senate Bill 843
Senate Bill 843 (SB 843), authored by State Sen. Lois Kolkhorst (R-Brenham), requires the Texas Education Agency to create a centralized, publicly accessible database tracking school district bond elections, maintenance tax rates, and capital project expenditures. The database must include bond language, election outcomes, tax rate impacts, and how funds are spent, offering a new level of transparency in local school finance decisions.
Teacher Eligibility for Appraisal Review Boards (Vetoed) – Senate Bill 974
Senate Bill 974 (SB 974), authored by State Sen. Sarah Eckhardt (D-Austin), would have allowed public school teachers to serve on appraisal review boards (ARBs), currently off-limits to taxing unit employees due to conflict-of-interest concerns. Though the bill passed the Legislature, Governor Abbott vetoed it, stating it undermined the integrity of the tax protest process.
Bills That Did Not Make It
At the same time, many of the boldest property tax proposals, ranging from full elimination of school M&O taxes to shifting the state to a consumption-based model, did not survive the session. These bills generally sought to use budget surpluses or systemic tax shifts to replace local revenue, cap local spending, or impose higher voter thresholds for tax increases. Their failure reflects the political and logistical difficulty of enacting large-scale tax reform in a state with decentralized fiscal systems and conflicting priorities across chambers.
Compression-Based Property Tax Elimination Proposals
These bills sought to redirect general revenue surpluses into a Property Tax Relief Fund to reduce or eliminate school district M&O taxes. House Bill 275 (HB 275) and House Bill 1553 (HB 1553) envisioned full compression to zero, replacing local tax collections with state aid. Neither bill was granted a hearing in the House Appropriations Committee. House Bill 2743 (HB 2743) would have dedicated a fixed percentage of surplus revenue to fund ongoing tax rate reductions. HB 2743 was also never granted a hearing in the House Appropriations Committee. Each offered a path toward systemic M&O tax phase-out while preserving local enrichment options. Their failure leaves the M&O tax structure largely unchanged.
Value-Added Tax (VAT) Replacement Framework
House Bills 960, 1485, 2194, and 2220 proposed eliminating school district M&O property taxes by January 1, 2030, and replacing them with a 6.72% state-administered Value-Added Tax (VAT), with limited local and enrichment VATs allowed. The measures also would have repealed all local sales and use taxes and restructured school funding under a consumption-based tax model. Despite their sweeping ambition, none advanced beyond the House Ways and Means Committee.
Abolish Property Taxes by 2031 and Study Transition
House Joint Resolution 64 (HJR 64), authored by State Rep. Brian Harrison (R-Midlothian), proposed a constitutional amendment to eliminate all property taxes by January 1, 2031, while House Bill 698 (HB 698), its enabling legislation, would have created an interim committee to study implementation. The pair failed to move beyond the House Ways and Means Committee.
Local Spending Limits – House Bill 325
House Bill 325 (HB 325), authored by State Rep. Briscoe Cain (R-Deer Park), would have capped annual municipal and county spending increases to the prior year’s level plus inflation and population growth, unless overridden by voters. Though popular among fiscal conservatives, it did not progress beyond the House Intergovernmental Affairs Committee.
Higher Voter Threshold for Tax Rate Increases – House Bill 217
House Bill 217 (HB 217), authored by State Rep. Brian Harrison (R-Midlothian), would have increased the voter threshold to 60% for approving local tax rates exceeding the voter-approval limit. The bill sought to improve fiscal discipline and voter protections but failed to advance beyond the House Ways and Means Committee.
Political Takeaways/Trends
The 89th Legislature’s handling of property tax policy underscores the sharp divide between symbolic relief and structural reform. Lawmakers delivered popular but narrow relief in the form of homestead exemption increases and business inventory exemptions, while failing to advance more transformative efforts, such as M&O tax elimination, VAT replacement frameworks, or tighter local spending limits.
Though many Republican lawmakers campaigned on eliminating property taxes, the session revealed an unwillingness to fully reconfigure Texas’s school finance model or impose fiscal discipline on local governments. Despite historic surpluses, the Legislature stopped short of structural changes that would reduce long-term taxpayer exposure.
Meanwhile, bipartisan support for transparency efforts like SB 843 shows some consensus around improving fiscal visibility. However, the veto of SB 974, despite legislative passage, reaffirmed the importance of maintaining trust in taxpayer oversight mechanisms.
Governor Greg Abbott named property tax relief an emergency legislative priority during his State of the State address. He called for at least $10 billion in new property tax relief from the budget surplus and emphasized tax rate compression as his preferred mechanism. Abbott also sought to close loopholes that allow local tax increases without voter consent and pushed for two-thirds voter approval thresholds for any local rate hikes. However, tensions between the House and Senate over the best path forward, compression versus exemptions, once again led to compromises that fell short of structural reform.
Conclusion
While lawmakers can claim incremental progress on property tax relief, the 89th Legislative Session largely missed the opportunity to enact lasting reform. Homeowners may see short-term benefits from increased exemptions, but the underlying pressures, rising appraisals, local spending growth, and a convoluted school finance system, remain unresolved.
Texans concerned about property tax burdens should prepare for the next round of battles, especially as voter-approved constitutional amendments and future surplus allocations come into play. Until legislators commit to comprehensive, equitable, and taxpayer-first reform, property tax relief in Texas will remain more cosmetic than structural.
Other Policy Briefs in the Series
Texas Policy Research relies on the support of generous donors across Texas.
If you found this information helpful, please consider supporting our efforts! Thank you!
