Creating Economic Prosperity

Securing the American Dream

About

While many Americans know that Texas is a low-tax state overall, many of them may not realize that its property taxes—which are imposed by local governments rather than by the state—are among the highest in the nation. Over the years, the Legislature has made efforts to control the property tax burden the state’s residents face through measures such as a 10 percent appraisal cap for primary residences and a 2.5 percent property tax revenue cap that empowers local voters to strongly limit the growth of property taxes in the future. However, their benefits are largely prospective; they offer Texans the ability to limit the growth rate in property taxes but offer only modest relief from the current property tax burden.

Unlike homeowners, businesses do not benefit from the 10 percent appraisal cap, and they also must pay taxes on tangible property used in their operations. One 2021 report found that Texas tied for the seventh-highest commercial property tax burden in the country, which has a particularly acute impact on capital-intensive industries.

About

With the Texas Legislature declining to extend the controversial Texas Economic Development Act (known as the "Chapter 313 Program") in the 87th Legislative Session, the property tax burden borne by capital-intensive industries will come into sharp focus in the near future. Chapter 313 provided property tax incentives to businesses that relocated tangible property-heavy operations to Texas. Chapter 313 was problematic for a number of reasons, including questions about whether it actually fulfilled its initial supporters’ promise of generating numerous, high-paying jobs. Nevertheless, the key legislative finding underpinning Chapter 313 remains accurate today: Texas’ relatively high property tax rates place the state at a disadvantage when it comes to attracting capital—intensive businesses.

To sustain its position as the best state in the nation to live, work, and raise a family, Texas' property taxes cannot be allowed to make home ownership unaffordable, and they cannot be allowed to further negatively impact the state's business climate.

The Property Tax Project will focus on reducing school district property taxes and rates with the ultimate goal of eliminating school district property taxation and fully funding public schools with a more sustainable source of revenue. The Property Tax Project will also consider whether programs such as Chapter 313 should be replaced with a broader approach tax relief, aimed at easing the burden on businesses of all kinds. It will also look at other ways to lower business property taxes, including through the Business Personal Property Tax.