Property tax revenue in Texas has surged by 181% over the past two decades, far outpacing combined population growth and inflation of roughly 100%, according to a commentary published by the Reason Foundation. The analysis warns that recent state efforts to reduce homeowner tax bills won't deliver lasting relief unless local governments curtail spending growth. Despite multiple rounds of exemptions and cuts, the overall tax burden continues climbing because the state simply compensates local districts for lost revenue rather than shrinking government costs.
The report breaks down Texas's property tax landscape with granular detail. Property taxes make up about 40% of local government revenue in Texas, compared to roughly 30% nationwide. Single-family homes represent 48% of the state's taxable value, and when multifamily properties are included, residential property accounts for 56% of the total tax base. School districts collected 48.5% of all local property taxes in 2023, totaling approximately $39.5 billion, though their share has dropped from 60% in 1998. The Texas Comptroller's Office estimates median home prices climbed about 40% between 2019 and 2023, driving tax bills higher on paper gains that homeowners can't readily access. Texas ranks 38th nationally in property tax competitiveness, with levies equal to about 1.4% of owner-occupied housing value. Total property tax collections increased by roughly $3 billion, or 3%, from fiscal year 2024 to 2025, even after significant homestead exemption increases took effect.
Voters approved a boost in the school district homestead exemption from $40,000 to $100,000 in November 2023, retroactively applied to that tax year. In 2025, they approved another increase to $140,000. But the report notes that "a property tax cut does not actually shrink the cost of government; it merely adds pressure to reduce." School district levies stayed essentially flat after the exemption increases, but cities, counties, and special-purpose districts continued raising their levies because the homestead relief applied only to school taxes. The analysis also highlights Texas school districts' debt burden, with about $27,500 in bonded debt per student—more than double the national average of $12,300.
The report explains that under both recent exemption increases, the state compensated school districts for lost local tax revenue, meaning costs weren't actually reduced but merely shifted to the state budget. These expenses will resurface as higher state taxes, increased debt, or depleted reserves. The 1983 Texas Permanent School Fund Bond Guarantee Program uses the state's public education endowment to back school district bonds, giving them AAA credit ratings that lower borrowing costs by an estimated $400 million annually. But this arrangement has weakened market discipline and made it easier for districts to accumulate debt. Texas's long-term obligations are disproportionately bonds—62% compared to 40% nationally—and school district debt is the primary driver. Governor Greg Abbott's newer property tax proposal calls for local spending limits tied to population growth plus inflation or 3.5%, whichever is lower, along with two-thirds voter approval for tax increases and a constitutional amendment allowing voters to eliminate school district property taxes on homeowners entirely.
The report's bottom line is stark: property tax relief can't endure without spending and debt controls on local governments. Texas must require municipalities, counties, and school districts to cut spending, limit tax hikes, and restrict new debt issuance, or the burden will simply migrate from local property tax bills to state coffers and future obligations. Many homeowners face taxes on gains they didn't seek and may never realize unless they sell, making the political pressure for relief intense. But exemptions alone won't solve the problem if local spending continues its upward trajectory unchecked.