Texas Property Tax Replacement Plan — Section 1
Where Texas Tax Dollars Come From Today
A comprehensive look at how Texas funds state and local government — revenues, expenditures, property taxes, and the replacement scope — with verified data from the Texas Comptroller covering fiscal years 2016–2025.
Texas State Financial Data (FY 2016–2025)
This dashboard presents verified data from the Texas Comptroller of Public Accounts covering fiscal years 2016 through 2025. Use the navigation buttons above to explore state revenues, tax collections, expenditures, property tax levies, and the replacement scope under the Texas Property Tax Replacement Plan.
All figures are sourced from official Texas Comptroller Annual Cash Reports, the Table 16 all-funds expenditure series, and Property Tax Assistance Division certified levy data.
Total State Revenue (FY 2025)
$183.0B
+64.5% growth over 10 years
State Tax Collections (FY 2025)
$84.2B
+73.7% growth over 10 years
Property Tax Levy (TY 2024)
$86.6B
+69.2% growth over 10 years
All-Funds Expenditures (FY 2025)
$197.0B
+53.2% growth over 10 years
Scope 2 Replacement Obligation
$178.1B
All property + all state taxes replaced
| Category | Start Value | End Value | Total Growth | % Growth | Avg Annual |
|---|---|---|---|---|---|
| State revenue (FY 2016–2025) | $111.3 B | $183.0 B | $71.7 B | +64.5% | +7.2% |
| Tax collections (FY 2016–2025) | $48.5 B | $84.2 B | $35.7 B | +73.7% | +8.2% |
| Property taxes (TY 2015–2024) | $51.2 B | $86.6 B | $35.4 B | +69.2% | +7.7% |
| Expenditures — all funds (FY 2016–2025) | $128.6 B | $197.0 B | $68.4 B | +53.2% | +5.9% |
| Sales tax base (FY 2016–2025) | $451.9 B | $784.9 B | $333.0 B | +73.7% | +8.2% |
Note. State revenue and tax collections from Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368).
https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf.
Expenditure data from Texas Comptroller of Public Accounts. (2025b). Table 16: Net expenditures by governmental function, Annual Cash Report, FY2016–FY2025 [Interactive data].
https://fmcpa.cpa.state.tx.us/cashdrill/JSP/CDTable16.jsp.
Property tax levy data from Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025c). Property tax rates and levies.
https://comptroller.texas.gov/taxes/property-tax/rates/.
Sales tax base implied from statutory 6.25% rate applied to annual collections.
Texas State Revenue by Category (FY 2016–2025)
Complete breakdown of Texas state revenue sources over 10 fiscal years. Property taxes do not appear here because they fund local entities (schools, counties, cities, special districts), not the state government. The significant spike in federal income in FY 2020–2021 reflects emergency COVID-19 relief funds (CARES Act and American Rescue Plan) flowing through the state — a temporary federal pass-through, not a structural revenue increase.
| Revenue Category | FY 2016 | FY 2017 | FY 2018 | FY 2019 | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Tax collections | $48.5 B | $49.6 B | $55.6 B | $59.4 B | $57.4 B | $61.5 B | $77.2 B | $82.1 B | $81.9 B | $84.2 B |
| Federal income | $39.5 B | $38.4 B | $39.6 B | $41.9 B | $58.1 B | $81.9 B | $72.7 B | $68.7 B | $58.9 B | $59.1 B |
| Health service fees & rebates | $0.0 B | $6.7 B | $7.6 B | $7.1 B | $7.5 B | $6.8 B | $10.3 B | $10.9 B | $14.1 B | $14.0 B |
| Licenses, fees, fines & penalties | $11.6 B | $6.3 B | $6.5 B | $6.5 B | $6.2 B | $6.3 B | $6.5 B | $6.7 B | $6.9 B | $7.1 B |
| Interest & investment income | $1.4 B | $1.7 B | $1.8 B | $2.5 B | $2.5 B | $2.0 B | $2.4 B | $4.2 B | $5.8 B | $4.8 B |
| Lottery proceeds | $2.2 B | $2.1 B | $2.2 B | $2.5 B | $2.4 B | $3.0 B | $3.1 B | $3.3 B | $3.1 B | $2.8 B |
| Land income | $1.1 B | $1.7 B | $2.1 B | $2.3 B | $1.8 B | $2.1 B | $4.3 B | $3.8 B | $3.5 B | $3.3 B |
| All other non-tax revenue | $7.0 B | $4.8 B | $4.7 B | $5.8 B | $5.6 B | $6.9 B | $6.8 B | $8.0 B | $6.9 B | $7.7 B |
| Total net revenue | $111.3 B | $111.2 B | $120.2 B | $127.9 B | $141.6 B | $170.5 B | $183.3 B | $187.8 B | $181.1 B | $183.0 B |
Note. Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368). Office of the Comptroller.
https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf.
10-year series cross-referenced against Texas Comptroller of Public Accounts. (2025d). Historical all-funds revenue, FY2003–FY2025 [Data file]. Office of the Comptroller.
https://comptroller.texas.gov/transparency/revenuewatch/all-funds.
Texas fiscal year runs September 1 through August 31.
State Revenue by Source (FY 2016–2025)
Note. Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368). Office of the Comptroller.
https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf.
FY2020–2021 federal income spike reflects CARES Act and American Rescue Plan emergency COVID-19 relief funds — temporary pass-through, not structural revenue growth.
Texas State Tax Collections by Type (FY 2016–2025)
Complete breakdown of all major state tax categories over 10 fiscal years. Every tax type shown in this table is targeted for elimination and replacement under the Texas Property Tax Replacement Plan's Scope 2 replacement obligation. The sales and use tax alone — at $49.1 billion in FY 2025 — represents 58.3% of total state tax collections and is the single largest state revenue source.
| Tax Type | FY 2016 | FY 2017 | FY 2018 | FY 2019 | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Sales & use tax | $28.2 B | $28.9 B | $31.9 B | $34.0 B | $34.1 B | $36.0 B | $43.0 B | $46.6 B | $47.2 B | $49.1 B |
| Motor vehicle sales & rental tax | $4.6 B | $4.5 B | $5.0 B | $5.0 B | $4.8 B | $5.7 B | $6.4 B | $6.8 B | $6.8 B | $7.1 B |
| Franchise (margin) tax | $3.9 B | $3.2 B | $3.7 B | $4.2 B | $4.4 B | $4.5 B | $5.7 B | $6.8 B | $6.9 B | $7.1 B |
| Motor fuel taxes | $3.5 B | $3.6 B | $3.7 B | $3.7 B | $3.5 B | $3.6 B | $3.8 B | $3.8 B | $3.8 B | $3.9 B |
| Insurance premium tax | $2.2 B | $2.4 B | $2.5 B | $2.6 B | $2.7 B | $2.7 B | $3.1 B | $4.1 B | $4.2 B | $4.5 B |
| Oil production tax | $1.7 B | $2.1 B | $3.4 B | $3.9 B | $3.2 B | $3.4 B | $6.4 B | $5.9 B | $6.3 B | $5.4 B |
| Natural gas production tax | $0.6 B | $1.0 B | $1.4 B | $1.7 B | $0.9 B | $1.6 B | $4.5 B | $3.4 B | $2.1 B | $2.5 B |
| Cigarette & tobacco taxes | $1.4 B | $1.5 B | $1.3 B | $1.4 B | $1.3 B | $1.4 B | $1.2 B | $1.2 B | $1.1 B | $1.1 B |
| Alcoholic beverages taxes | $1.2 B | $1.2 B | $1.3 B | $1.4 B | $1.1 B | $1.3 B | $1.6 B | $1.8 B | $1.8 B | $1.8 B |
| Hotel occupancy tax | $0.5 B | $0.5 B | $0.6 B | $0.6 B | $0.5 B | $0.5 B | $0.7 B | $0.8 B | $0.8 B | $0.8 B |
| Utility taxes | $0.4 B | $0.4 B | $0.5 B | $0.5 B | $0.5 B | $0.5 B | $0.6 B | $0.6 B | $0.7 B | $0.7 B |
| Other taxes | $0.2 B | $0.2 B | $0.3 B | $0.3 B | $0.3 B | $0.2 B | $0.3 B | $0.4 B | $0.3 B | $0.3 B |
| Total tax collections | $48.5 B | $49.6 B | $55.6 B | $59.4 B | $57.4 B | $61.5 B | $77.2 B | $82.1 B | $81.9 B | $84.2 B |
Note. Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368). Office of the Comptroller.
https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf.
10-year series cross-referenced against Texas Comptroller of Public Accounts. (2025c). Historical all-funds revenue, FY2003–FY2025 [Data file]. Office of the Comptroller.
https://comptroller.texas.gov/transparency/revenuewatch/all-funds.
Insurance premium tax renamed from "insurance taxes" to reflect statutory designation under Tex. Ins. Code §221.001.
Mixed beverage tax collections ($0.7B FY2024; $0.7B FY2025) are included in the "Other taxes" total; the mixed beverage tax is shown as a separate line item in the Scope panel.
Sales Tax vs. Other State Tax Revenue Trends (FY 2016–2025)
Note. Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368). Office of the Comptroller.
https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf.
"Sales & use tax" series reflects state 6.25% rate collections only; local sales tax allocations are excluded. "Other taxes" line is the sum of all remaining categories.
Implied Tax Bases by Category (FY 2016–2025)
Implied taxable base for each major tax category, calculated from tax collections and statutory rates. Unit-based taxes (motor fuels, cigarettes/tobacco, alcoholic beverages) are converted to an equivalent value base. This table shows the individual base underlying each existing tax type. The consolidated hybrid gross sales base used to calculate the flat replacement rate — which combines these categories with Wayfair remote seller transactions and business-to-business activity — is detailed in the Scope panel.
| Tax Type | Effective Rate / Method | FY 2016 Base | FY 2020 Base | FY 2025 Base | 10-Yr Growth |
|---|---|---|---|---|---|
| Sales & use tax (general) | 6.25% of taxable sales | $451.9 B | $545.6 B | $784.9 B | +73.7% |
| Motor vehicle sales & rental tax | 6.25% of vehicle price | $73.9 B | $77.0 B | $113.4 B | +53.5% |
| Franchise (margin) tax | 0.5625% blended rate | $690.0 B | $785.5 B | $1,258.7 B | +82.4% |
| Oil production tax | 4.6% of market value | $37.0 B | $70.2 B | $117.0 B | +215.9% |
| Natural gas production tax | 7.5% of market value | $7.7 B | $12.3 B | $33.1 B | +328.5% |
| Insurance premium tax | 1.65% blended premium rate | $135.0 B | $166.2 B | $273.2 B | +102.4% |
| Hotel occupancy tax | 6.0% of room charges | $8.7 B | $7.8 B | $13.1 B | +51.2% |
| Utility gross receipts tax | 1.5% blended receipts rate | $29.0 B | $31.9 B | $46.6 B | +60.7% |
| Motor fuel tax (value-equivalent) | Gallons × avg price/gal | $35.1 B | $35.3 B | $49.0 B | +39.5% |
| Cigarette & tobacco tax (value-equiv.) | Units × avg retail price | $3.5 B | $3.0 B | $2.8 B | −20.0% |
| Alcoholic beverages tax (value-equiv.) | Gallons × avg price/gal | $7.5 B | $7.1 B | $9.2 B | +22.7% |
| Total exclusive tax base | Summed across categories | $1,479.4 B | $1,666.9 B | $2,684.9 B | +81.5% |
Note. Implied bases derived from collections data in Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368). Office of the Comptroller.
https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf.
Statutory rates from Texas Comptroller of Public Accounts. (2025j). A field guide to the taxes of Texas (Pub. 96-1774). Office of the Comptroller.
https://comptroller.texas.gov/transparency/revenue/docs/96-1774.pdf.
Texas fiscal year runs September 1 through August 31.
The exclusive tax base series is constructed so that: (a) general sales excludes vehicles, hotel rooms, and heavily-taxed excise categories; (b) each excise or unit-based tax has its own derived value-equivalent base; and (c) business margin, production, insurance, and utility bases are conceptually distinct from household consumption bases. This table represents the implied base of each existing tax individually — not the consolidated hybrid gross sales base used for flat-rate replacement calculations. The full hybrid base analysis, including Wayfair remote seller volume and Texas Limited Exemption Schedule (TLES) adjustments, is presented in the Scope panel.
Texas State Expenditures by Function (FY 2016–2025)
Complete breakdown of state expenditures across all ten governmental functions over 10 fiscal years. All figures are drawn from Texas Comptroller Table 16 — the all-funds, cash-basis record of net state expenditures published annually under Texas Government Code §403.013. These are state-level expenditures only and do not include local government spending funded by property taxes. Approximately 30–35% of total expenditures in any given year are federally funded pass-throughs, primarily through Health & Human Services (Medicaid) and Transportation (FHWA).
| Governmental Function | FY 2016 | FY 2017 | FY 2018 | FY 2019 | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Health & Human Services | $54.8 B | $52.7 B | $53.6 B | $55.0 B | $85.7 B | $94.3 B | $78.1 B | $77.3 B | $72.0 B | $78.1 B |
| Education (K–12, Higher Ed & TEA) | $35.5 B | $35.1 B | $35.8 B | $36.6 B | $40.1 B | $44.0 B | $47.2 B | $49.4 B | $54.5 B | $53.3 B |
| Transportation (TxDOT) | $10.5 B | $11.3 B | $11.0 B | $11.8 B | $14.2 B | $14.0 B | $13.5 B | $15.1 B | $19.5 B | $22.6 B |
| Executive & Administrative | $8.6 B | $8.9 B | $9.4 B | $9.8 B | $10.3 B | $11.4 B | $12.0 B | $12.0 B | $12.7 B | $14.0 B |
| Employee Benefits (ERS/TRS) | $8.9 B | $8.7 B | $9.1 B | $9.4 B | $9.4 B | $8.8 B | $11.0 B | $10.6 B | $16.9 B | $11.4 B |
| Public Safety & Corrections | $5.8 B | $6.0 B | $6.3 B | $6.1 B | $5.8 B | $5.7 B | $6.9 B | $7.6 B | $8.2 B | $8.9 B |
| Natural Resources & Recreation | $3.2 B | $2.4 B | $3.2 B | $3.2 B | $3.5 B | $4.1 B | $4.5 B | $5.1 B | $4.9 B | $5.3 B |
| Regulatory Services ⚠ | $0.3 B | $0.3 B | $0.1 B | $0.3 B | $0.3 B | $0.1 B | $0.5 B | $0.4 B | $0.5 B | $2.6 B |
| Judicial | $0.4 B | $0.4 B | $0.4 B | $0.4 B | $0.5 B | $0.4 B | $0.4 B | $0.5 B | $0.5 B | $0.5 B |
| Legislative | $0.2 B | $0.2 B | $0.2 B | $0.2 B | $0.2 B | $0.2 B | $0.2 B | $0.2 B | $0.2 B | $0.3 B |
| Total — All Governmental Functions | $128.6 B | $126.2 B | $129.4 B | $133.0 B | $170.1 B | $183.4 B | $174.5 B | $178.3 B | $189.9 B | $197.0 B |
Note. Texas Comptroller of Public Accounts. (2025b). Table 16: Revenue, expenditures, transfers, and other uses/sources by governmental function, Annual Cash Report, FY2016–FY2025 [Interactive data]. Office of the Comptroller.
https://fmcpa.cpa.state.tx.us/cashdrill/JSP/CDTable16.jsp.
All figures are net expenditures, cash basis, all state treasury funds. Texas fiscal year runs September 1 through August 31.
⚠ Regulatory Services FY2025 spike to $2.6B (vs. historical $0.1–$0.5B) is reported as-is from Table 16; cross-reference Comptroller agency-level detail for specific drivers of this increase.
FY2020–FY2021 Health & Human Services spike ($85.7B and $94.3B) reflects federal CARES Act and American Rescue Plan emergency COVID-19 funds flowing through state accounts — temporary pass-through, not structural growth.
FY2024 Employee Benefits spike to $16.9B reflects a one-time supplemental ERS pension contribution authorized by the 88th Legislature; returned to baseline $11.4B in FY2025.
FY 2025 State Expenditures by Function ($197.0B Total, All Funds)
Note. Texas Comptroller of Public Accounts. (2025b). Table 16: Net expenditures by governmental function, Annual Cash Report, FY2025 [Interactive data]. Office of the Comptroller.
https://fmcpa.cpa.state.tx.us/cashdrill/JSP/CDTable16.jsp.
All funds, cash basis. Approximately 30–35% of total reflects federal pass-through dollars, primarily Health & Human Services (Medicaid/CHIP) and Transportation (FHWA). The state's own tax-funded share corresponds to the $84.2B in FY2025 state tax collections.
Texas Property Tax Levies by Entity Type (TY 2015–2024)
Property taxes fund local governments only — schools, counties, cities, and special districts. The State of Texas levies no property tax. This table shows verified levy data from the Texas Comptroller's Property Tax Assistance Division (PTAD), certified annually from local appraisal districts across all 254 counties. The TY 2024 total of $86.6 billion represents the single largest component of the Texas Property Tax Replacement Plan's Scope 2 replacement obligation of $178.1 billion.
| Tax Year | School Districts | County | City | Special Districts | Total Levy | YoY Change |
|---|---|---|---|---|---|---|
| 2015 | $27.9 B (54.5%) | $8.0 B (15.7%) | $8.3 B (16.3%) | $7.0 B (13.6%) | $51.2 B | — |
| 2016 | $29.5 B (53.6%) | $8.3 B (15.2%) | $9.1 B (16.6%) | $8.0 B (14.6%) | $54.9 B | +7.3% |
| 2017 | $31.8 B (53.1%) | $9.1 B (15.3%) | $9.7 B (16.3%) | $9.1 B (15.3%) | $59.8 B | +8.8% |
| 2018 | $34.7 B (54.9%) | $9.6 B (15.2%) | $10.4 B (16.4%) | $8.5 B (13.4%) | $63.2 B | +5.8% |
| 2019 | $36.1 B (54.2%) | $10.4 B (15.7%) | $11.1 B (16.7%) | $8.9 B (13.4%) | $66.5 B | +5.3% |
| 2020 | $38.7 B (54.9%) | $11.3 B (16.0%) | $12.0 B (17.0%) | $9.5 B (13.5%) | $71.5 B | +7.5% |
| 2021 | $38.9 B (53.0%) | $11.7 B (15.9%) | $12.5 B (17.0%) | $10.4 B (14.1%) | $73.5 B | +2.8% |
| 2022 | $43.9 B (54.4%) | $12.8 B (15.8%) | $13.6 B (16.9%) | $10.4 B (12.9%) | $80.8 B | +9.9% |
| 2023 | $39.5 B (48.5%) | $14.2 B (17.4%) | $15.0 B (18.5%) | $12.7 B (15.6%) | $81.4 B | +0.8% |
| 2024 | $41.7 B (48.1%) | $15.7 B (18.2%) | $15.7 B (18.1%) | $13.5 B (15.6%) | $86.6 B | +6.4% |
| 10-Year Change | +$13.8 B (+49.3%) | +$7.7 B (+96.2%) | +$7.4 B (+88.9%) | +$6.5 B (+94.1%) | +$35.4 B (+69.2%) | — |
Note. Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025c). Property tax rates and levies — Certified appraisal roll data, Tax Years 2015–2024. Office of the Comptroller.
https://comptroller.texas.gov/taxes/property-tax/rates/.
Levy figures reflect certified totals from all 254 county appraisal districts. TY2024 entity-level totals: School Districts $41,657,752,748; Counties $15,729,755,794; Cities $15,746,727,156; Special Districts $13,499,241,657; Total $86,632,477,355.
Cross-validated against Texas Policy Research. (2024). Texas property tax levies, 1998–2024.
https://www.texaspolicyresearch.com/texas-property-tax-levies-1998-2024/
Texas Property Tax Levy Growth by Entity Type (TY 2015–2024)
Note. Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025c). Property tax rates and levies. Office of the Comptroller.
https://comptroller.texas.gov/taxes/property-tax/rates/.
TY2023 ISD levy decline to $39.5B reflects the HB 2 (88th Legislature) property tax compression buydown program, in which the state increased its FSP contribution to offset local ISD M&O rate reductions.
What Are We Replacing? — The Scope of the Plan
Most conversations about property tax reform stop at the property tax bill. The Texas Property Tax Replacement Plan goes further. Beyond eliminating property taxes, the plan targets every other tax Texans currently pay — the state sales tax, the franchise tax, and every state excise tax — replacing them all with a single, flat sales and use tax. This panel identifies every revenue stream the plan is designed to replace and organizes them into two planning scopes.
Scope 1 vs. Scope 2 — What's the Difference?
Scope 1 — $150.2 billion is the minimum viable replacement: all property taxes statewide, the existing state and local sales & use taxes, and the franchise (margin) tax. This scope alone eliminates property tax bills for every homeowner, renter (indirectly), and business in Texas.
Scope 2 — $178.1 billion goes further by also replacing every state excise tax — the fees Texans pay at the gas pump, when they buy a car, when they pay their insurance bill, when they order a drink, or stay in a hotel. These are taxes most Texans don't even realize they're paying. Scope 2 is the full, comprehensive replacement that produces the cleanest, most transparent tax system possible. The Texas Property Tax Replacement Plan is designed to meet the Scope 2 obligation in full.
All Revenue Streams Being Replaced — Scope 1 & Scope 2 (FY/TY 2024)
| Revenue Stream | Collected By | Annual Amount | Scope 1 | Scope 2 |
|---|---|---|---|---|
| State-Level Taxes | ||||
| State Sales & Use Tax | State Comptroller | $47,159,947,193 | ✓ | ✓ |
| Franchise (Margin) Tax | State Comptroller | $7,081,852,807 | ✓ | ✓ |
| Motor Vehicle Sales & Use Tax | State Comptroller | $6,840,000,000 | — | ✓ |
| Oil Production Tax (Severance) | State Comptroller | $6,300,000,000 | — | ✓ |
| Natural Gas Production Tax (Severance) | State Comptroller | $2,130,000,000 | — | ✓ |
| Insurance Premium Tax | State Comptroller | $2,980,000,000 | — | ✓ |
| Alcoholic Beverage Tax | State Comptroller | $1,770,000,000 | — | ✓ |
| Cigarette & Tobacco Tax | State Comptroller | $1,070,000,000 | — | ✓ |
| Hotel Occupancy Tax (State) | State Comptroller | $760,000,000 | — | ✓ |
| Mixed Beverage Tax | State Comptroller | $670,000,000 | — | ✓ |
| Utility Tax | State Comptroller | $670,000,000 | — | ✓ |
| Other State Taxes & Fees | State Comptroller | $4,660,000,000 | — | ✓ |
| Local Taxes — All in Both Scopes | ||||
| County Property Taxes (254 counties) | County Tax Offices | $15,729,755,794 | ✓ | ✓ |
| County Sales Taxes | County Tax Offices | $840,721,618 | ✓ | ✓ |
| City Property Taxes (1,187 cities) | City Tax Offices | $15,746,727,156 | ✓ | ✓ |
| City Sales Taxes | City Tax Offices | $8,747,725,627 | ✓ | ✓ |
| School District Property Taxes (1,013 ISDs) | ISD Tax Offices | $41,657,752,748 | ✓ | ✓ |
| Special District Property Taxes (2,530 SDs) | Special Districts | $13,499,241,657 | ✓ | ✓ |
| Totals | ||||
| Scope 1 Total — Property taxes + sales taxes + franchise tax | $150,241,924,600 | |||
| Scope 2 Total — All of Scope 1 + all state excise taxes (Official planning figure) | $178,091,924,600 | |||
Note. Texas Comptroller of Public Accounts. (2025d). Historical all-funds revenue, FY2003–FY2025 [Data file]. Office of the Comptroller.
https://comptroller.texas.gov/transparency/revenuewatch/all-funds.
Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025c). Property tax rates and levies — Certified appraisal roll data, Tax Year 2024. Office of the Comptroller.
https://comptroller.texas.gov/taxes/property-tax/rates/.
Texas Open Data Portal. (2024). Local sales tax allocations — County and city, CY2024 [Data file].
https://data.texas.gov.
Scope 1 total = $150,241,924,600. Scope 2 total = $178,091,924,600. How the replacement rate is calculated is covered in the next section of the Texas Property Tax Replacement Plan presentation.
References
Texas Comptroller of Public Accounts. (2025a). Annual cash report: Fiscal year 2025 (Pub. 96-368). Office of the Comptroller. https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf
The official annual financial report of the State of Texas for FY 2025, providing final revenue figures including state sales & use tax collections ($49.1B), total own-source state tax revenue ($84.2B), and total net state revenues ($183.0B). Primary source for all state revenue category data and 10-year tax collection series used throughout this section.
Texas Comptroller of Public Accounts. (2025b). Table 16: Revenue, expenditures, transfers, and other uses/sources by governmental function, Annual Cash Report, FY2016–FY2025 [Interactive data]. Office of the Comptroller. https://fmcpa.cpa.state.tx.us/cashdrill/JSP/CDTable16.jsp
The authoritative all-funds, cash-basis record of net state expenditures by governmental function, published annually under Texas Government Code §403.013. Primary source for all 10-year expenditure series data in the Expenditures panel, including the FY 2025 total of $197.0 billion across all ten governmental functions. All figures are net expenditures, cash basis, all state treasury funds.
Texas Comptroller of Public Accounts. (2025c). Historical all-funds revenue, FY2003–FY2025 [Data file]. Office of the Comptroller. https://comptroller.texas.gov/transparency/revenuewatch/all-funds
The Comptroller's Revenue Watch all-funds historical data file providing the 10-year revenue series (FY2016–FY2025) used in the State Revenue panel. Cross-referenced against Annual Cash Report figures for all category breakdowns, including the FY2024 base-year figures used in the Scope 2 replacement obligation table.
Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025d). Property tax rates and levies: Certified appraisal roll data, Tax Years 2015–2024. Office of the Comptroller. https://comptroller.texas.gov/taxes/property-tax/rates/
Official annual property tax levy data certified by all 254 county appraisal districts. Primary source for all property tax levy series (TY2015–TY2024) and the entity-type breakdown used in the Property Taxes panel and Scope obligation table. TY2024 certified totals: School Districts $41,657,752,748; Counties $15,729,755,794; Cities $15,746,727,156; Special Districts $13,499,241,657; Total $86,632,477,355.
Texas Open Data Portal. (2024). Local sales tax allocations — County and city, CY2024 [Datasets vfba-b57j & qsh8-tby8]. State of Texas. https://data.texas.gov
County and city local sales tax allocation payment data for calendar year 2024. Source for local sales tax revenue figures used in the Scope 1 and Scope 2 replacement obligation tables: County sales taxes $840,721,618; City sales taxes $8,747,725,627.
Texas Comptroller of Public Accounts. (2025e). A field guide to the taxes of Texas (Pub. 96-1774). Office of the Comptroller. https://comptroller.texas.gov/transparency/revenue/docs/96-1774.pdf
Comprehensive overview of all Texas state and local taxes, including statutory rates for all excise taxes. Source for the implied base rate methodology in the Tax Bases panel: 6.25% sales rate, 1.65% blended insurance premium rate, franchise margin blended rate, and all unit-based excise rates. Also provides constitutional cap context and the 8.25% combined rate limit.
Texas Legislature Online. (1876, as amended). Texas Constitution, Article VIII: Taxation and revenue. State of Texas. https://tarlton.law.utexas.edu/constitutions/texas-1876-en/article-8-taxation-revenue
The constitutional foundation for all Texas taxation. Establishes the equality and uniformity clause (Sec. 1), the prohibition on a state ad valorem property tax (Sec. 1-e), and local property tax rate limits (Sec. 9). Identifies the constitutional framework within which the Texas Property Tax Replacement Plan must operate.
Texas Legislature Online. (2025). Texas Tax Code §151: Limited sales, excise, and use tax. State of Texas. https://statutes.capitol.texas.gov/Docs/TX/htm/TX.151.htm
The enabling statute for Texas sales and use taxation. Establishes the 6.25% state rate (§151.051), the 8.25% combined maximum cap, and all statutory exemptions (§§151.301–151.350). Statutory basis for the existing exemption structure and the constitutional rate ceiling referenced throughout this section.
Section 2
Texas Household Expenditures & Property Tax Analysis
Verified Bureau of Labor Statistics Texas expenditure data combined with Texas Comptroller, Census, FRED, MIT Living Wage, and TTARA property tax analysis to show how current taxes affect real Texas households.
Summary Statistics – Real Texas Household Data
This panel summarizes key statistics for Texas households, including average expenditures, total households, property tax levies, and homeownership rates, using BLS, Census, FRED, and Texas Comptroller data.
Avg TX household expenditure
$69,802
BLS Texas CE Survey 2022–2023
Total Texas households
10.75M
Census QuickFacts 2024
2024 property tax levies
$86.6B
Texas Comptroller PTAD TY2024
Homeownership rate
62.9%
FRED TXHOWN 2024
Avg owner property tax
$5,434/yr
TX Comptroller PTAD TY2024 — $36.47B SF levy ÷ 6.70M owner HHs
Level 1 blended PT burden
$3,666/yr
All-HH avg — direct owner PT + renter passthrough at 18.5% (TX Comptroller Pub. 96-463)
Data Context
Conservative baseline: The household figures in this analysis use the BLS Texas state table (2022–2023: $91,099 income / $69,802 expenditures), which represent statewide averages across 11.39M consumer units—below major Texas metros. The most recent BLS 2023–24 metropolitan data show Dallas–Fort Worth at $117,340 income / $81,954 spending and Houston at $85,377 spending. Using statewide averages means this analysis is conservative — actual Texas metro spending is higher than the figures modeled here.
Conservative baseline: The household figures in this analysis use the BLS Texas state table (2022–2023: $91,099 income / $69,802 expenditures), which represent statewide averages across 11.39M consumer units—below major Texas metros. The most recent BLS 2023–24 metropolitan data show Dallas–Fort Worth at $117,340 income / $81,954 spending and Houston at $85,377 spending. Using statewide averages means this analysis is conservative — actual Texas metro spending is higher than the figures modeled here.
Texas Household Annual Spending Breakdown
Source: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas state table, 2022–2023 [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Mutually exclusive tax-status categories
Each reclassified row uses the same underlying BLS Texas expenditure data. Every BLS line item is assigned to exactly one tax-status category, and the amounts sum to the same $66,301 total as the base table, ensuring no double counting. The $69,802 quintile-weighted mean (used in the KPI tile above) includes minor BLS adjustments not separately enumerated in the detailed category table — see the BLS Base Data panel for a full reconciliation note.
Key findings
- Texas households spend less than the U.S. average: $69,802 in Texas versus $77,501 nationally, an 11% gap largely driven by lower housing costs.
- Property taxes hit every household: homeowners pay an estimated $5,434 per year directly on average (TY2024 single-family levy ÷ owner household count); renters bear an estimated $972 per year statewide average embedded in rent at the 18.5% Comptroller midpoint passthrough rate. The Level 1 blended all-household burden is $3,666 per year.
- A Level 2 extended estimate adds commercial passthrough: the Texas Comptroller's own Tax Exemptions and Tax Incidence Report (Pub. 96-463) documents that 40–60% of commercial property taxes are passed to consumers in prices — raising the estimated full household burden to approximately $5,033–$5,914/yr ($5,474 midpoint). See the Property Tax Burdens panel for detail.
- 42.3% of expenditures are already in the current sales tax base: $29,533 of the average household's $66,301 detailed spending is currently taxable under the existing narrow base.
- Current average sales tax paid per household: approximately $2,422/year (8.25% combined rate on the narrow taxable base of roughly $29,533 in currently taxable expenditures).
- Three income tiers show distinct patterns: lower (<$51k), middle ($51k–$148k), and upper (>$148k) households average approximately $41,113, $66,163, and $130,054 in annual expenditures, respectively.
- Q1 households earn just 27.4% of the MIT Living Wage floor for a single adult in Dallas County ($48,489/yr, Feb 2026) — meaning the lowest-income quintile's average income is below a third of what MIT calculates as the bare minimum for basic necessities. See the Working Family Livability panel.
BLS Texas Consumer Expenditure Data (2022–2023)
Official BLS Texas state table showing average annual household expenditures across all major consumption categories. This is Texas-specific data, not national estimates.
| Category | Annual amount | % of total |
|---|---|---|
| Food at home (groceries) | $4,845 | 7.3% |
| Food away from home | $3,547 | 5.3% |
| Alcoholic beverages | $436 | 0.7% |
| Housing (shelter/mortgage/rent) | $15,361 | 23.2% |
| Utilities, fuels, public services | $3,831 | 5.8% |
| Household operations | $1,586 | 2.4% |
| Housekeeping supplies | $598 | 0.9% |
| Household furnishings & equipment | $1,801 | 2.7% |
| Apparel & services | $1,556 | 2.3% |
| Transportation (vehicle purchases) | $4,918 | 7.4% |
| Gasoline & other motor fuels | $2,857 | 4.3% |
| Other vehicle expenses | $3,409 | 5.1% |
| Public & other transportation | $495 | 0.7% |
| Healthcare | $4,630 | 7.0% |
| Entertainment | $2,843 | 4.3% |
| Personal care products & services | $696 | 1.0% |
| Reading | $88 | 0.1% |
| Education | $1,539 | 2.3% |
| Tobacco products | $268 | 0.4% |
| Miscellaneous | $889 | 1.3% |
| Cash contributions | $2,158 | 3.3% |
| Personal insurance & pensions | $7,950 | 12.0% |
| Total annual expenditures | $66,301 | 100.0% |
Source: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas state table, 2022–2023 (2-year average). U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Conservative Baseline
These figures use the BLS Texas state table (2022–2023: $91,099 income / $69,802 expenditures), which are statewide averages below major Texas metro areas. Most recent 2023–24 BLS data: DFW: $117,340 income / $81,954 spending; Houston: $85,377 spending. Using statewide averages means this analysis is conservative — actual metro-area household spending is higher than the figures used here.
These figures use the BLS Texas state table (2022–2023: $91,099 income / $69,802 expenditures), which are statewide averages below major Texas metro areas. Most recent 2023–24 BLS data: DFW: $117,340 income / $81,954 spending; Houston: $85,377 spending. Using statewide averages means this analysis is conservative — actual metro-area household spending is higher than the figures used here.
Total annual expenditures: $66,301 vs. $69,802
The $66,301 figure is the sum of the detailed category-level rows in the BLS Texas state table above. The higher $69,802 value is the quintile-weighted mean from the same BLS source and includes minor categories and rounding adjustments not separately enumerated in the detailed category breakdown. Both values come from the official BLS Texas Consumer Expenditure Survey for 2022–2023. The $69,802 figure is used as the controlling total in the Income Groups and Property Tax Burdens panels.
Current Sales Tax Embedded in Household Expenditures
Methodology Note
The BLS Consumer Expenditure Survey reports the total amount paid for each category, including any sales taxes already embedded in the price. The table below separates the pre-tax expenditure value from the current sales tax component using the blended effective rate of 8.25% (state 6.25% + avg ~2.00% local) applied to currently taxable categories only. Non-taxable categories carry a $0 sales tax component. This pre-tax baseline is preserved here so that future analyses can apply any alternative rate to the same spending base without double-counting the existing tax. Exemption status references: TX Tax Code §151.314 (groceries), §151.0048 (residential housing), §162 (motor fuel excise), §151.317 (residential utilities), §151.313 (medical).
The BLS Consumer Expenditure Survey reports the total amount paid for each category, including any sales taxes already embedded in the price. The table below separates the pre-tax expenditure value from the current sales tax component using the blended effective rate of 8.25% (state 6.25% + avg ~2.00% local) applied to currently taxable categories only. Non-taxable categories carry a $0 sales tax component. This pre-tax baseline is preserved here so that future analyses can apply any alternative rate to the same spending base without double-counting the existing tax. Exemption status references: TX Tax Code §151.314 (groceries), §151.0048 (residential housing), §162 (motor fuel excise), §151.317 (residential utilities), §151.313 (medical).
| Expenditure Category | Pre-Tax Value | Current Sales Tax | Total (BLS Reported) | TX Sales Tax Status |
|---|---|---|---|---|
| Housing — shelter (mortgage/rent) | $15,361 | $0 | $15,361 | Exempt — residential housing (§151.0048) |
| Utilities, fuels, public services | $3,831 | $0 | $3,831 | Exempt — residential utilities (§151.317) |
| Household operations (services) | $1,586 | $0 | $1,586 | Exempt — most household services |
| Housekeeping supplies | $553 | $45 | $598 | Taxable — tangible goods |
| Household furnishings & equipment | $1,664 | $137 | $1,801 | Taxable — tangible goods |
| Apparel & services | $1,437 | $119 | $1,556 | Taxable — clothing & accessories |
| Transportation (vehicle purchases) | $4,542 | $376 | $4,918 | Taxable — motor vehicle sales tax |
| Gasoline & other motor fuels | $2,857 | $0 | $2,857 | Exempt from sales tax — motor fuel excise (Ch. 162) |
| Other vehicle expenses (parts/repairs) | $3,148 | $261 | $3,409 | Partly taxable — parts & repairs taxable; some labor exempt |
| Public & other transportation | $457 | $38 | $495 | Partly taxable |
| Food at home (groceries) | $4,845 | $0 | $4,845 | Exempt — food for home consumption (§151.314) |
| Food away from home (restaurants) | $3,276 | $271 | $3,547 | Taxable — prepared food & beverages |
| Alcoholic beverages | $403 | $33 | $436 | Taxable |
| Healthcare (services, drugs, supplies) | $4,630 | $0 | $4,630 | Exempt — medical services & prescriptions (§151.313) |
| Entertainment | $2,627 | $216 | $2,843 | Taxable — goods & admission services |
| Personal care products & services | $643 | $53 | $696 | Partly taxable — products taxable; personal services exempt |
| Tobacco products | $248 | $20 | $268 | Taxable |
| Reading materials | $88 | $0 | $88 | Exempt — books & periodicals (§151.317) |
| Education | $1,539 | $0 | $1,539 | Exempt — educational services |
| Miscellaneous | $821 | $68 | $889 | Partly taxable |
| Cash contributions & gifts | $2,158 | $0 | $2,158 | Not consumption spending — no sales tax |
| Personal insurance & pensions | $7,950 | $0 | $7,950 | Not taxable — insurance & savings |
| Total | ~$63,865 | ~$1,637 | $66,301 |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas state table, 2022–2023. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm | Texas Comptroller of Public Accounts. (2025). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Reconciliation Note
The embedded sales tax column above (~$1,637) reflects taxes on the $66,301 detailed category table. The controlling figure for current sales tax paid per household — $2,422/year — is derived separately using the canonical S1 narrow taxable base method ($29,533 × 8.20% effective combined rate) from verified Comptroller data and is the figure used in all other panels. The difference reflects categories not separately enumerated in the detailed table but captured in the $69,802 quintile-weighted total. Both derivations confirm the same directional finding: under the current narrow base, the average Texas household pays approximately $1,600–$2,400/year in sales taxes.
The embedded sales tax column above (~$1,637) reflects taxes on the $66,301 detailed category table. The controlling figure for current sales tax paid per household — $2,422/year — is derived separately using the canonical S1 narrow taxable base method ($29,533 × 8.20% effective combined rate) from verified Comptroller data and is the figure used in all other panels. The difference reflects categories not separately enumerated in the detailed table but captured in the $69,802 quintile-weighted total. Both derivations confirm the same directional finding: under the current narrow base, the average Texas household pays approximately $1,600–$2,400/year in sales taxes.
Expenditures by Income Group
Texas household expenditures vary significantly by income level. The BLS provides five income quintiles; for policy work, these are also consolidated into a three-tier model.
Five income quintiles (BLS standard)
| Income class | Avg annual income | Avg annual expenditure | Consumer units |
|---|---|---|---|
| Q1 — Lowest 20% (<$25,897) | $13,292 | $34,327 | 2,168,768 |
| Q2 — Second 20% ($25,897–$51,250) | $35,058 | $47,646 | 2,230,262 |
| Q3 — Third 20% ($51,251–$86,350) | $60,726 | $55,252 | 2,269,914 |
| Q4 — Fourth 20% ($86,351–$147,500) | $103,587 | $76,798 | 2,324,642 |
| Q5 — Highest 20% (>$147,500) | $230,158 | $130,054 | 2,399,285 |
| All households (weighted mean) | $91,099 | $69,802 | 11,392,871 |
Source: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Methodology Note — Why Q1 Spends More Than It Earns
The Q1 average of $34,327 in expenditures on $13,292 in income is not an error. The BLS Consumer Expenditure Survey measures consumer units — economic households — not individual wage earners. Q1 includes: retired households drawing from savings and pensions (which are not counted as current income); households with irregular or seasonal income timing; households receiving in-kind benefits such as SNAP and housing assistance that reduce out-of-pocket spending but are not recorded as income; and households experiencing temporary income disruptions. The expenditure figure reflects actual observed spending during the survey period; the income figure reflects reported cash income. This is a well-documented feature of BLS CE methodology that appears consistently in national data as well. It does not indicate fabricated spending — it reflects the real gap between cash income and total economic resources available to the lowest-income quintile.
The Q1 average of $34,327 in expenditures on $13,292 in income is not an error. The BLS Consumer Expenditure Survey measures consumer units — economic households — not individual wage earners. Q1 includes: retired households drawing from savings and pensions (which are not counted as current income); households with irregular or seasonal income timing; households receiving in-kind benefits such as SNAP and housing assistance that reduce out-of-pocket spending but are not recorded as income; and households experiencing temporary income disruptions. The expenditure figure reflects actual observed spending during the survey period; the income figure reflects reported cash income. This is a well-documented feature of BLS CE methodology that appears consistently in national data as well. It does not indicate fabricated spending — it reflects the real gap between cash income and total economic resources available to the lowest-income quintile.
Simplified 3‑category model
| Income group | Consumer units | Avg annual expenditure | Definition |
|---|---|---|---|
| Lower income | ~4.40M | $41,113 | Bottom 2 quintiles (Q1+Q2, <$51,250/yr) |
| Middle income | ~4.59M | $66,163 | Middle 2 quintiles (Q3+Q4, $51,251–$147,500/yr) |
| Upper income | ~2.40M | $130,054 | Top quintile (Q5, >$147,500/yr) |
Source: Derived from U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Income distribution insights
- Expenditure inequality is large: the highest quintile spends about 3.2 times more than the lower-income group ($130,054 vs. $41,113).
- Middle-income households dominate: approximately 40% of consumer units (Q3+Q4) fall in the $51k–$148k range, close to the overall statewide average expenditure of $69,802.
- Lower-income households often outspend their reported cash income: Q1 averages $34,327 in expenditures on $13,292 in income. See the methodology note above for the BLS explanation of this well-documented pattern.
- The weighted mean is above the likely median: the $69,802 quintile-weighted average is pulled upward by Q5 high-income households; the median Texas household likely spends closer to $55,000–$60,000 per year.
- Q1 and Q2 combined earn less than the MIT Living Wage floor: Q2's average income of $35,058 is still below the $48,489 single-adult living wage for Dallas County (Glasmeier et al., 2026, Feb. 15). See the Working Family Livability panel for the full MIT benchmark comparison.
Homeownership & Housing Tenure by Income Quintile
Who owns and who rents in Texas — and why it matters for property tax policy. The BLS Consumer Expenditure Survey provides actual measured housing tenure by income quintile. Understanding these splits is foundational: owners pay property taxes directly and see them on a bill; renters pay them invisibly, embedded in every monthly rent payment.
Housing tenure by income quintile (BLS CE TX 2022–23)
| Income quintile | Consumer units | Owner-occupied | — w/ mortgage | — free & clear | Renter-occupied |
|---|---|---|---|---|---|
| Q1 — Lowest 20% (<$25,897) | 2,168,768 | 44.9% | 10.3% | 34.6% | 55.1% |
| Q2 — Second 20% ($25,897–$51,250) | 2,230,262 | 49.5% | 18.2% | 31.4% | 50.5% |
| Q3 — Middle 20% ($51,251–$86,350) | 2,269,914 | 60.5% | 27.6% | 32.8% | 39.5% |
| Q4 — Fourth 20% ($86,351–$147,500) | 2,324,642 | 70.1% | 42.4% | 27.7% | 29.9% |
| Q5 — Highest 20% (>$147,501) | 2,399,285 | 86.0% | 65.0% | 21.0% | 14.0% |
| All households (weighted) | 11,392,871 | 62.7% | 33.4% | 29.3% | 37.3% |
Source: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
What "Free & Clear" Reveals About Lower-Income Owners
A striking pattern in the tenure data: among Q1 owner-occupiers (44.9%), the majority — 34.6 of 44.9 percentage points — own their homes free and clear with no mortgage, compared to only 10.3% who carry a mortgage. This is the reverse of every other quintile. In Q5, 65.0% of owners have a mortgage and only 21.0% own free and clear. The Q1 free-and-clear concentration reflects a large share of retired and elderly low-income homeowners who paid off their homes decades ago but now live on fixed incomes. These households pay property taxes directly — with no mortgage escrow to smooth the payment — on incomes that average $13,292/year. This makes them among the most acutely burdened households in the entire system.
A striking pattern in the tenure data: among Q1 owner-occupiers (44.9%), the majority — 34.6 of 44.9 percentage points — own their homes free and clear with no mortgage, compared to only 10.3% who carry a mortgage. This is the reverse of every other quintile. In Q5, 65.0% of owners have a mortgage and only 21.0% own free and clear. The Q1 free-and-clear concentration reflects a large share of retired and elderly low-income homeowners who paid off their homes decades ago but now live on fixed incomes. These households pay property taxes directly — with no mortgage escrow to smooth the payment — on incomes that average $13,292/year. This makes them among the most acutely burdened households in the entire system.
Average annual housing costs by quintile and tenure (BLS CE TX 2022–23)
| Income quintile | Avg income | Owner housing costs (mortgage, taxes, ins., maint.) |
Owner costs as % income | Avg annual rent paid | Rent as % income |
|---|---|---|---|---|---|
| Q1 — Lowest 20% | $13,292 | $1,164 | 8.8% | $5,564 | 41.9% |
| Q2 — Second 20% | $35,058 | $2,696 | 7.7% | $6,161 | 17.6% |
| Q3 — Middle 20% | $60,726 | $6,272 | 10.3% | $5,045 | 8.3% |
| Q4 — Fourth 20% | $103,587 | $12,173 | 11.7% | $5,639 | 5.4% |
| Q5 — Highest 20% | $230,158 | $24,888 | 10.8% | $3,959 | 1.7% |
| All households | $91,099 | $9,075 | 10.0% | $5,255 | 5.8% |
Source: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
The Invisible Property Tax: Renter Passthrough
The Texas Comptroller of Public Accounts Tax Exemptions and Tax Incidence Report (Pub. 96-463, January 2025) documents that landlords pass through an estimated 17–20% of rent as embedded property tax cost to tenants, with a midpoint of 18.5%. At Q1's average annual rent of $5,564, this means Q1 renters pay approximately $1,029/year in property taxes — embedded invisibly in their rent — with no corresponding tax bill, no homestead exemption, and no political visibility. Q1 renters pay this on an average income of $13,292. This passthrough dynamic means that every renter in Texas is a property taxpayer; they simply do not receive a bill for it.
Source: Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463).
The Texas Comptroller of Public Accounts Tax Exemptions and Tax Incidence Report (Pub. 96-463, January 2025) documents that landlords pass through an estimated 17–20% of rent as embedded property tax cost to tenants, with a midpoint of 18.5%. At Q1's average annual rent of $5,564, this means Q1 renters pay approximately $1,029/year in property taxes — embedded invisibly in their rent — with no corresponding tax bill, no homestead exemption, and no political visibility. Q1 renters pay this on an average income of $13,292. This passthrough dynamic means that every renter in Texas is a property taxpayer; they simply do not receive a bill for it.
Source: Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463).
Estimated renter and owner consumer unit counts by quintile
| Income quintile | Total consumer units | Est. owner-occupied units | Est. renter-occupied units | Owner % | Renter % |
|---|---|---|---|---|---|
| Q1 — Lowest 20% | 2,168,768 | ~973,877 | ~1,194,891 | 44.9% | 55.1% |
| Q2 — Second 20% | 2,230,262 | ~1,103,980 | ~1,126,282 | 49.5% | 50.5% |
| Q3 — Middle 20% | 2,269,914 | ~1,373,298 | ~896,616 | 60.5% | 39.5% |
| Q4 — Fourth 20% | 2,324,642 | ~1,629,574 | ~695,068 | 70.1% | 29.9% |
| Q5 — Highest 20% | 2,399,285 | ~2,063,385 | ~335,900 | 86.0% | 14.0% |
| All households | 11,392,871 | ~7,144,114 | ~4,248,757 | 62.7% | 37.3% |
Source: Derived from U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. Consumer unit counts × tenure rates. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Note: BLS CE reports 11,392,871 consumer units (CUs). The U.S. Census Bureau ACS 2019–2023 5-year estimates report approximately 10,747,240 occupied housing units in Texas (DP04). The BLS CU count is used throughout this table as it is the direct source for the tenure percentages above. The ACS figure is used in separate analyses where noted.
Note: BLS CE reports 11,392,871 consumer units (CUs). The U.S. Census Bureau ACS 2019–2023 5-year estimates report approximately 10,747,240 occupied housing units in Texas (DP04). The BLS CU count is used throughout this table as it is the direct source for the tenure percentages above. The ACS figure is used in separate analyses where noted.
Housing tenure insights
- Homeownership rises steeply with income: from 44.9% in Q1 to 86.0% in Q5 — a 41-percentage-point spread across the five quintiles. Every quintile step upward brings a meaningful ownership gain.
- Q1 and Q2 are nearly evenly split between owners and renters: Q1 is 44.9% owner/55.1% renter; Q2 is 49.5%/50.5%. These two quintiles — roughly 4.4 million consumer units — contain the majority of all Texas renters and the majority of all low-income homeowners.
- Q1 owner profile is predominantly free-and-clear: 34.6% of Q1 consumer units own their home outright, compared to only 10.3% with a mortgage. These are largely elderly and retired households paying direct property tax bills on fixed incomes averaging $13,292/year.
- Q1 renters pay 41.9% of income in rent — of which approximately 18.5% (TX Comptroller Pub. 96-463 midpoint) is embedded property tax passthrough, amounting to roughly $1,029/year on a $13,292 income. This passthrough is economically real but administratively invisible.
- Lower-income households bear property taxes regardless of tenure: Q1 renters pay embedded property taxes (~$1,029/yr); Q1 owners pay direct property taxes ($899/yr BLS CE). No lower-income household escapes the property tax. The mechanism differs; the burden does not.
- Approximately 2.32 million lower-income renter units (Q1 + Q2 combined, ~1.19M + ~1.13M) pay property taxes through rent with no homestead exemption, no direct reduction mechanism, and no political visibility — representing roughly 54.7% of all Texas renter consumer units.
- All-Texas statewide homeownership rate is 62.7% (BLS CE TX 2022–23), consistent with the ACS 2019–2023 5-year estimate of approximately 62.4% owner-occupancy rate for Texas occupied housing units.
Expenditures Reclassified by Tax Status
For tax policy analysis, BLS expenditure categories are regrouped into five policy-relevant categories distinguishing what is currently taxed, what is currently exempt, and what falls outside the sales tax base entirely. This framework establishes the current narrow tax base and the foundation for understanding what a replacement flat sales tax would — and would not — reach under each scenario.
Five-category policy framework — all households, average annual (BLS CE TX 2022–23)
| Category | Annual amount (all-HH avg) |
% of total expenditures |
% of income | Current tax status under Texas law |
|---|---|---|---|---|
| CAT 1 — Mortgage / Rent Owned-dwelling costs (mortgage, taxes, ins., maint.) + rented dwellings (rent, maint.) |
$13,101 | 18.8% | 14.4% | Not subject to sales tax. Owner costs include embedded property tax (direct bill). Renter costs include ~18.5% embedded property tax passthrough (TX Comptroller Pub. 96-463). |
| CAT 2 — Gas & Groceries Gasoline & motor fuels + food at home (groceries) |
$9,240 | 13.2% | 10.1% | Both currently exempt from Texas sales tax. Motor fuels are subject to a separate state motor fuel tax (TX Tax Code Ch. 162); groceries exempt under TX Tax Code §151.314. |
| CAT 3 — Direct Property Taxes Property taxes on owned dwellings — BLS CE direct line item (owners only) |
$2,694 | 3.9% | 3.0% | Direct property tax levy. Not a sales tax item. Collected via county tax appraisal/collection system. This is the line item replaced under the TPTR Plan. |
| CAT 4 — Discretionary Durable Goods Food away from home, alcohol, apparel, household furnishings & supplies, vehicle purchases, other vehicle expenses, entertainment, personal care, reading, tobacco, miscellaneous |
$16,337 | 23.4% | 17.9% | Currently taxed under TX Tax Code Ch. 151 at 6.25% state + avg ~1.95% local = ~8.20% combined. This is the current narrow sales tax base. Implied household taxable spending: ~$29,533/yr (cross-referenced against TX Comptroller CY2024 sales base ÷ BLS CU count). |
| CAT 5 — Services, Insurance & Healthcare Transfers Utilities, household operations, public transportation, healthcare (ins., services, drugs), education, cash contributions/gifts, personal insurance & pensions |
$28,431 | 40.7% | 31.2% | Largely not taxed. Most services exempt from TX sales tax. Healthcare services and prescription drugs specifically exempt (TX Tax Code §151.313). Utilities partially exempt (residential utilities exempt §151.317). Insurance and pensions not treated as consumption in current sales tax base. |
| Total annual expenditures | $69,802 | 100.0% | 76.6% |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf; Texas Tax Code §§151.313, 151.314, 151.317, Ch. 162.
CAT 4 detail — current narrow taxable base by income quintile
| Income quintile | Avg income | CAT 4 annual spending | CAT 4 as % of total spending | CAT 4 as % of income |
|---|---|---|---|---|
| Q1 — Lowest 20% | $13,292 | $8,208 | 23.9% | 61.8% |
| Q2 — Second 20% | $35,058 | $7,898 | 16.6% | 22.5% |
| Q3 — Middle 20% | $60,726 | $12,481 | 22.6% | 20.6% |
| Q4 — Fourth 20% | $103,587 | $17,663 | 23.0% | 17.1% |
| Q5 — Highest 20% | $230,158 | $34,182 | 26.3% | 14.8% |
| All households | $91,099 | $16,337 | 23.4% | 17.9% |
Source: Derived from U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. CAT 4 = sum of BLS CE line items: food away from home, alcoholic beverages, apparel & services, household furnishings & equipment, housekeeping supplies, vehicle purchases (net outlay), other vehicle expenses, entertainment, personal care products & services, reading materials, tobacco & smoking supplies, miscellaneous. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
CAT 4 — Currently taxed discretionary & durable goods ($16,337 all-HH avg)
CAT 4 includes all BLS CE line items that are currently subject to Texas sales tax under Tax Code Chapter 151: food away from home (restaurants and delivery), alcoholic beverages, apparel and services, household furnishings and equipment, housekeeping supplies, vehicle purchases (net outlay), other vehicle expenses, entertainment, personal care products and services, reading materials, tobacco and smoking supplies, and miscellaneous goods. These categories collectively represent the current narrow taxable base.
The average Texas household spends $16,337/year in this category, which corresponds to an implied taxable expenditure base of approximately $29,533/year per household under current Texas law — reflecting the combined effect of the 6.25% state rate plus an average local rate of approximately 1.95%, for a combined effective rate of ~8.20%. This $29,533 per-household taxable base is cross-referenced and consistent with the Texas Comptroller's reported CY2024 narrow taxable sales base divided by 11.39 million BLS consumer units.
Note on CAT 4 regressivity: As a share of income, Q1 households spend 61.8% of their reported income on CAT 4 goods compared to 14.8% for Q5. However, this reflects the broader Q1 income/expenditure gap documented in the income quintile panel — not an anomaly in spending patterns. The absolute dollar amount is actually lower for Q1 ($8,208) than for any other quintile except Q2 ($7,898).
CAT 5 — Services, insurance & healthcare transfers ($28,431 all-HH avg)
CAT 5 includes utilities and public services, household operations, public and other transportation, all healthcare spending (insurance, medical services, drugs and medical supplies), education, cash contributions and gifts, and personal insurance and pensions. The majority of these expenditures are currently not subject to Texas sales tax. Texas does not impose a general services tax; most personal and professional services are exempt by default unless specifically enumerated as taxable. Healthcare services and prescription drugs carry explicit statutory exemptions (TX Tax Code §151.313). Residential utilities are specifically exempt (§151.317). Insurance premiums are subject to a separate premium tax (TX Insurance Code), not the sales tax. Personal pensions and retirement contributions are transfers and savings vehicles, not consumption.
At $28,431 per household annually, CAT 5 represents the single largest spending category — 40.7% of total household expenditures — and is the primary reason the current narrow sales tax base reaches only about 42.3% of household spending ($29,533 of $69,802).
Tax policy context
- Current narrow base reaches ~42.3% of household spending: the implied per-household taxable base under current law is $29,533/year against total average expenditures of $69,802. This is the foundation for the S1 (current narrow base) scenario in the replacement rate analysis.
- CAT 2 (gas + groceries) = $9,240/year and fully exempt: these two categories are 13.2% of total spending and represent the most inelastic household necessities. Their exemption significantly narrows the current base.
- CAT 1 (mortgage/rent) = $13,101/year and untaxed by sales tax: housing costs are the single largest non-taxed category at 18.8% of spending, though embedded property taxes run through this category via direct payment (owners) and rent passthrough (renters).
- CAT 3 (direct property taxes) = $2,694/year: this is the BLS-measured direct property tax line for owner-occupied households, averaged across all consumer units including renters (who show $0 on this line). The Level 1 canonical burden adding renter passthrough brings the all-HH average to $3,666/year. See the Property Tax Burden panel for full quintile detail.
- CAT 4 is regressive as a share of income but not in absolute dollars: Q1 households spend 61.8% of reported income on currently-taxed goods ($8,208) vs. 14.8% for Q5 ($34,182). Lower-income households bear a disproportionate share of current sales tax burden relative to their income — a dynamic that the replacement plan's base-broadening scenarios can substantially reduce.
- Services are the largest untaxed frontier: CAT 5 at $28,431/year is 40.7% of all household spending and is almost entirely outside the current sales tax base. Broadening the base to include all or part of CAT 5 is the primary mechanism by which replacement scenarios (S5, S8, S8a) achieve lower flat rates than the current S1 narrow-base rate.
Property Tax Distribution by Income Quintile
This panel maps the $86.6 billion in TY2024 certified property tax levies onto income quintiles and housing tenure, then derives per-household burdens using primary official data from the Texas Comptroller, BLS Consumer Expenditure Survey, and U.S. Census Bureau.
Total TY2024 property tax levy
$86.6B
TX Comptroller PTAD, certified TY2024
Texas consumer units (BLS)
11.39M
BLS CE TX 2022–23; ACS HH count: 10.75M
Statewide homeownership rate
62.7%
BLS CE TX 2022–23 (ACS 2019–23: ~62.4%)
Avg direct PT — owner HH
$5,434/yr
TX Comptroller PTAD TY2024 owner-occupied residential
TY2024 levy by taxing entity — $86.6B total
| Taxing entity | TY2024 certified levy | Share of total |
|---|---|---|
| Independent School Districts (ISDs) | $41,657,752,748 | 48.1% |
| Counties | $15,729,755,794 | 18.2% |
| Cities / Municipalities | $15,746,727,156 | 18.2% |
| Special Districts | $13,499,241,657 | 15.6% |
| Total statewide | $86,633,477,355 | 100.0% |
Source: Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025, August 5). 2024 property tax rates and levies. https://comptroller.texas.gov/taxes/property-tax/rates
Levy by property category — residential vs. commercial (TX Comptroller PVS 2023 value shares × TY2024 levy)
| Property category | Category code(s) | Est. TY2024 levy share | Est. TY2024 levy amount | Notes |
|---|---|---|---|---|
| Single-family residential | Cat A | ~42.1% | ~$36.5B | Owner-occupied residential. Direct tax bill to homeowners. |
| Multifamily / rental residential | Cat B, M1, O | ~10.3% | ~$8.9B | Rental property. Tax paid by landlords; passed through to renters in rent (17–20%, TX Comptroller Pub. 96-463). |
| Commercial real property | Cat F1, F2 | ~21.2% | ~$18.3B | Retail, office, industrial. Passed through to consumers in prices of goods & services (40–60% consumer bearing, TX Comptroller Pub. 96-463). |
| Business personal property | Cat L1, L2, S | ~9.0% | ~$7.8B | Business equipment, inventory, structures. Consumer-bearing share similar to commercial real property. |
| Other (minerals, ag, utilities, vacant) | Residual | ~17.4% | ~$15.1B | Oil & gas, agricultural, utility, vacant land. Mixed incidence. |
| Total statewide levy | — | 100.0% | $86.6B |
Sources: Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025, August 5). 2024 property tax rates and levies. https://comptroller.texas.gov/taxes/property-tax/rates; Texas Comptroller of Public Accounts. (2023). 2023 property value study [Category value shares]. Property Tax Assistance Division. https://comptroller.texas.gov/taxes/property-tax/pvs.php; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Note: Category levy amounts are derived estimates: TX Comptroller PVS 2023 taxable value share for each category × TY2024 total levy. Treated as estimates, not directly certified figures. TTARA (2023) similarly estimates the residential/non-residential split at approximately 40%/60%.
Note: Category levy amounts are derived estimates: TX Comptroller PVS 2023 taxable value share for each category × TY2024 total levy. Treated as estimates, not directly certified figures. TTARA (2023) similarly estimates the residential/non-residential split at approximately 40%/60%.
Level 1 canonical property tax burden by income quintile — BLS CE TX 2022–23 + TX Comptroller Pub. 96-463
| Income quintile | Avg income | Homeownership rate | Avg direct PT (owners — BLS CE) |
Avg annual rent (BLS CE) |
Renter PT passthrough (18.5% of rent) |
Level 1 PT burden (direct + passthrough) |
PT burden as % of income |
|---|---|---|---|---|---|---|---|
| Q1 — Lowest 20% | $13,292 | 44.9% | $899 | $5,564 | $1,029 | $1,928 | 14.5% |
| Q2 — Second 20% | $35,058 | 49.5% | $1,525 | $6,161 | $1,140 | $2,665 | 7.6% |
| Q3 — Middle 20% | $60,726 | 60.5% | $2,132 | $5,045 | $933 | $3,065 | 5.0% |
| Q4 — Fourth 20% | $103,587 | 70.1% | $2,994 | $5,639 | $1,043 | $4,037 | 3.9% |
| Q5 — Highest 20% | $230,158 | 86.0% | $5,643 | $3,959 | $732 | $6,375 | 2.8% |
| All households (weighted avg) | $91,099 | 62.7% | $2,694 | $5,255 | $972 | $3,666 | 4.0% |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463) [Renter passthrough rate 17–20%, midpoint 18.5%]. https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Methodology: Level 1 burden = BLS CE direct property taxes (owner-occupied line, applies to all CUs weighted by tenure mix) + renter passthrough (18.5% × BLS CE rented-dwellings average, midpoint scenario). Low scenario uses 17%; high scenario uses 20%. See passthrough scenario table below.
Methodology: Level 1 burden = BLS CE direct property taxes (owner-occupied line, applies to all CUs weighted by tenure mix) + renter passthrough (18.5% × BLS CE rented-dwellings average, midpoint scenario). Low scenario uses 17%; high scenario uses 20%. See passthrough scenario table below.
Renter passthrough sensitivity — three scenarios (all-HH average)
| Scenario | Passthrough rate | Renter PT (all-HH avg) | Level 1 burden (all-HH) | Burden as % income | Q1 burden | Q1 % income | Q1/Q5 regressivity ratio |
|---|---|---|---|---|---|---|---|
| Low | 17.0% | $893 | $3,587 | 3.9% | $1,844 | 13.9% | 5.1× |
| Midpoint (canonical) | 18.5% | $972 | $3,666 | 4.0% | $1,928 | 14.5% | 5.2× |
| High | 20.0% | $1,051 | $3,744 | 4.1% | $2,011 | 15.1% | 5.4× |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023. https://www.bls.gov/cex; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Renter passthrough: methodology and source
When a landlord pays property taxes on a rental property, those costs are reflected in the rent charged to tenants. The Texas Comptroller of Public Accounts Tax Exemptions and Tax Incidence Report (Pub. 96-463, January 2025) — the official state authority on tax incidence — documents that landlords pass through an estimated 17 to 20 percent of rent as property tax cost to renters, with a midpoint of 18.5%. This range is used throughout this analysis as the passthrough rate applied to the BLS CE TX 2022–23 average annual rent figures by quintile.
The rent figures used in this table are BLS Consumer Expenditure Survey averages by income quintile — not Census median rent. The BLS CE average rent is the correct basis because it comes from the same survey and time period as all other expenditure data in this panel. The all-HH BLS CE average annual rent is $5,255/year ($438/month weighted average across all quintiles including zero-rent owner households). The Q1 average annual rent is $5,564 ($464/month), reflecting that Q1 renters — who make up 55.1% of Q1 — pay comparable rent to higher-income quintiles on a fraction of the income.
Owner-occupied households
Est. consumer units (BLS)
~7.14M
Avg direct PT per owner HH
$5,434/yr
Residential levy (Cat A est.)
~$36.5B
Payment type
Direct tax bill
The $5,434 average is derived from the TX Comptroller PTAD TY2024 residential levy estimate divided by ACS 2019–23 owner-occupied units (6,701,974). The BLS CE TX direct property tax line ($2,694 all-HH avg, $5,643 for Q5) reflects quintile-weighted averages across all CUs including renters showing $0 on that line.
Renter households
Est. consumer units (BLS)
~4.25M
Avg renter PT burden
$972/yr
Avg annual rent (BLS CE)
$5,255/yr
Payment type
Indirect — embedded in rent
Renter PT = 18.5% × $5,255 BLS CE average annual rent (midpoint scenario, TX Comptroller Pub. 96-463). This is the passthrough averaged across all CUs. For the renter-only population, the effective per-renter-CU passthrough is higher: ~$972 ÷ 37.3% renter share ≈ $2,606/yr per renter household.
All households — Level 1 blended
Total consumer units (BLS)
11.39M
Level 1 avg PT burden
$3,666/yr
Burden as % of income
4.0%
Burden as % of expenditures
5.3%
Two levels of property tax burden measurement
Level 1 — Housing Burden (authoritative, primary-source only): Combines BLS CE TX direct property taxes paid by homeowners with the estimated renter passthrough from TX Comptroller Pub. 96-463. This is the canonical figure used throughout this project. All-HH average: $3,666/year (4.0% of income) at the 18.5% midpoint. The Q1/Q5 regressivity ratio at Level 1 is 5.24× — the lowest-income quintile pays more than five times as much of their income in property taxes as the highest-income quintile.
Level 2 — Full Incidence (extended estimate, includes commercial passthrough): Adds the estimated share of commercial and business property taxes that are ultimately passed through to consumers in the prices of goods and services. The TX Comptroller Tax Incidence Report (Pub. 96-463) documents a 40–60% consumer-bearing range for commercial property tax, with a midpoint of 50%. At the midpoint, Level 2 adds approximately $1,808/year to the all-HH average, raising the full incidence estimate to approximately $5,474/year (7.8% of expenditures). This figure uses consistent BLS consumer unit denominators throughout.
Note on the "$6,400 / 9.2%" figure: An earlier calculation in this project derived a ~$6,456 per-household figure by dividing the combined residential-impact levy ($69.4B: Cat A $36.5B + Cat MFR $8.9B + 50% of commercial $24.0B) by 10.75M ACS households. The difference from the Level 2 workbook figure ($5,474) is attributable to the denominator — ACS households (10.75M) vs. BLS consumer units (11.39M) — and to the commercial distribution method. The Level 2 workbook figure ($5,474) is the authoritative version as it uses consistent BLS CU denominators throughout. The $6,400 figure may be referenced as an alternative framing using ACS household counts.
Property tax burden — key findings
- Deeply regressive at Level 1: Q1 households (avg income $13,292) bear a 14.5% effective property tax burden; Q5 (avg income $230,158) bears 2.8%. The 5.24× regressivity ratio holds across all three passthrough scenarios (5.1×–5.4×).
- Renter burden is invisible but real: 55.1% of Q1 households rent. Their estimated property tax passthrough ($1,029/yr at 18.5%) exceeds Q1 owners' direct BLS CE property tax amount ($899/yr). Renters have no homestead exemption, no tax bill, and no mechanism to appeal or reduce their embedded property tax obligation.
- ISDs account for nearly half the levy (48.1%): $41.7B of the $86.6B total is ISD levies — school finance is the dominant driver of property tax burden in Texas, reflecting the state's heavy reliance on local property taxes to fund public education.
- The $5,434/yr owner average is the PTAD-derived direct burden per owner-occupied household. This is the "bill on the table" figure that most owners recognize. It is distinct from the BLS CE quintile-weighted direct line ($2,694 all-HH avg), which is diluted by the ~37.3% renter share showing $0 on the direct PT line.
- Q1 free-and-clear owners are especially exposed: 34.6% of Q1 consumer units own their home outright — no mortgage, no escrow. They pay property taxes directly out of pocket on average incomes of $13,292/year, with no amortization mechanism to smooth the payment.
- Level 2 full incidence raises the all-HH burden to ~$5,474/yr (7.8% of expenditures): when estimated commercial property tax passthrough is included at the 50% midpoint, every Texas household — whether they own, rent, or neither — bears a share of the $41.2B in non-residential property taxes through the prices they pay for goods and services.
Affordability & Regressivity Analysis
Property taxes are regressive relative to income — they take a much higher share of income from lower-income households than from higher-income households. This panel quantifies that pattern for Texas using primary official data: BLS Consumer Expenditure Survey TX 2022–23 for household income and direct property tax payments, and the Texas Comptroller Tax Incidence Report (Pub. 96-463, January 2025) for the renter passthrough rate.
Effective property tax burden by income quintile — Level 1 canonical (BLS CE TX 2022–23 + TX Comptroller Pub. 96-463, 18.5% renter passthrough midpoint)
| Income quintile | Avg annual income | Direct PT (owners — BLS CE) |
Renter PT passthrough (18.5% of BLS rent) |
Level 1 PT burden (direct + passthrough) |
Effective rate (% of income) |
|---|---|---|---|---|---|
| Q1 — Lowest 20% (<$25,897) | $13,292 | $899 | $1,029 | $1,928 | 14.5% |
| Q2 — Second 20% ($25,897–$51,250) | $35,058 | $1,525 | $1,140 | $2,665 | 7.6% |
| Q3 — Middle 20% ($51,251–$86,350) | $60,726 | $2,132 | $933 | $3,065 | 5.0% |
| Q4 — Fourth 20% ($86,351–$147,500) | $103,587 | $2,994 | $1,043 | $4,037 | 3.9% |
| Q5 — Highest 20% (>$147,501) | $230,158 | $5,643 | $732 | $6,375 | 2.8% |
| All households (weighted avg) | $91,099 | $2,694 | $972 | $3,666 | 4.0% |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463) [renter passthrough rate 17–20%, midpoint 18.5%]. https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Regressivity ratio sensitivity — three passthrough scenarios (TX Comptroller Pub. 96-463 range)
| Scenario | Passthrough rate | Q1 effective rate | Q5 effective rate | Q1/Q5 regressivity ratio |
|---|---|---|---|---|
| Low | 17.0% | 13.9% | 2.7% | 5.1× |
| Midpoint (canonical) | 18.5% | 14.5% | 2.8% | 5.2× |
| High | 20.0% | 15.1% | 2.8% | 5.4× |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Effective Property Tax Rate by Income Quintile (Level 1, 18.5% Renter Passthrough)
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023. https://www.bls.gov/cex; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Level 2 Extended Estimate — Full Property Tax Incidence Including Commercial Passthrough
What this section adds
The Level 1 figures above measure only housing-related property tax burden: direct taxes paid by homeowners and the property tax embedded in residential rent. Texas also levies property taxes on commercial real estate, business personal property, and other non-residential categories — approximately $41.2 billion of the $86.6 billion total TY2024 levy. These commercial and business property taxes are not paid by households directly, but they are ultimately passed through to households in the prices charged for goods and services. The Texas Comptroller Tax Exemptions and Tax Incidence Report (Pub. 96-463, January 2025) documents a 40–60% consumer-bearing range for commercial property tax, with a midpoint of 50%. Adding this estimated commercial passthrough produces the Level 2 extended incidence figures below. These are estimates — not directly observable in BLS CE data — and are presented here for context only. Level 1 remains the canonical baseline for all primary comparisons.
The Level 1 figures above measure only housing-related property tax burden: direct taxes paid by homeowners and the property tax embedded in residential rent. Texas also levies property taxes on commercial real estate, business personal property, and other non-residential categories — approximately $41.2 billion of the $86.6 billion total TY2024 levy. These commercial and business property taxes are not paid by households directly, but they are ultimately passed through to households in the prices charged for goods and services. The Texas Comptroller Tax Exemptions and Tax Incidence Report (Pub. 96-463, January 2025) documents a 40–60% consumer-bearing range for commercial property tax, with a midpoint of 50%. Adding this estimated commercial passthrough produces the Level 2 extended incidence figures below. These are estimates — not directly observable in BLS CE data — and are presented here for context only. Level 1 remains the canonical baseline for all primary comparisons.
Level 2 extended incidence by income quintile — midpoint scenario (50% commercial consumer-bearing, 18.5% renter passthrough)
| Income quintile | Avg annual income | Level 1 PT burden (housing, canonical) |
Est. commercial PT passthrough (50% consumer-bearing) |
Level 2 full incidence (L1 + commercial) |
Level 2 effective rate (% of income) |
|---|---|---|---|---|---|
| Q1 — Lowest 20% | $13,292 | $1,928 | $908 | $2,836 | 21.3% |
| Q2 — Second 20% | $35,058 | $2,665 | $874 | $3,539 | 10.1% |
| Q3 — Middle 20% | $60,726 | $3,065 | $1,381 | $4,446 | 7.3% |
| Q4 — Fourth 20% | $103,587 | $4,037 | $1,955 | $5,991 | 5.8% |
| Q5 — Highest 20% | $230,158 | $6,375 | $3,783 | $10,158 | 4.4% |
| All households (weighted avg) | $91,099 | $3,666 | $1,808 | $5,474 | 6.0% |
Source: Derived from Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463) [commercial property tax consumer-bearing range 40–60%, midpoint 50%]. https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf; Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2023). 2023 property value study [non-residential category value shares]. https://comptroller.texas.gov/taxes/property-tax/pvs.php; U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Methodology: Commercial passthrough per quintile = 50% of estimated non-residential levy (~$41.2B) distributed across quintiles in proportion to each quintile's share of CAT 4 discretionary taxable spending (BLS CE TX 2022–23), divided by 11,392,871 BLS consumer units. This is an estimate — not a directly measured figure. The 40–60% consumer-bearing range and distribution methodology are drawn exclusively from TX Comptroller Pub. 96-463. Level 2 is provided for extended context only. Level 1 is the canonical baseline for all primary comparisons in this project.
Methodology: Commercial passthrough per quintile = 50% of estimated non-residential levy (~$41.2B) distributed across quintiles in proportion to each quintile's share of CAT 4 discretionary taxable spending (BLS CE TX 2022–23), divided by 11,392,871 BLS consumer units. This is an estimate — not a directly measured figure. The 40–60% consumer-bearing range and distribution methodology are drawn exclusively from TX Comptroller Pub. 96-463. Level 2 is provided for extended context only. Level 1 is the canonical baseline for all primary comparisons in this project.
Level 2 extended incidence — Q1 burden range across all scenarios
| Scenario | Renter passthrough | Commercial consumer-bearing | Q1 Level 2 burden | Q1 Level 2 % income | Q5 Level 2 % income | Q1/Q5 ratio |
|---|---|---|---|---|---|---|
| Conservative low | 17.0% | 40% | $2,571 | 19.3% | 4.1% | 4.8× |
| Midpoint (shown above) | 18.5% | 50% | $2,836 | 21.3% | 4.4% | 4.8× |
| High | 20.0% | 60% | $3,101 | 23.3% | 4.8% | 4.9× |
Source: Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf; U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Key findings on regressivity & affordability
- 5.24× regressivity ratio at Level 1 — highly regressive by any measure: the lowest income quintile (avg income $13,292) pays an effective property tax rate of 14.5% of income. The highest income quintile (avg income $230,158) pays 2.8%. This 5.24× differential is derived entirely from BLS CE TX 2022–23 direct property tax data and TX Comptroller Pub. 96-463 renter passthrough rates — both primary official government sources.
- The ratio is robust across all passthrough scenarios: whether renter passthrough is 17% (low), 18.5% (midpoint), or 20% (high), the Q1/Q5 regressivity ratio falls within a narrow 5.1×–5.4× range. The regressivity finding does not depend on any single assumption.
- When commercial passthrough is added (Level 2), Q1 burden rises to 19.3%–23.3% of income depending on the consumer-bearing assumption used. Even at the conservative low end — using only TX Comptroller Pub. 96-463 documented ranges — the Q1 household earning $13,292/year bears nearly one-fifth of its entire income in property taxes across all incidence channels.
- Q1 bears 14.5% of income in property taxes at Level 1 on an average income of $13,292/year — $1,928 annually. For Q1 renters (55.1% of Q1 households), this burden is invisible: embedded in monthly rent with no bill, no homestead exemption, and no appeal right.
- Q2 bears 7.6% of income — still nearly three times the Q5 rate — on average incomes of $35,058/year. Q2 households fall within or near the SNAP eligibility threshold for a 3-person household ($43,980/yr), illustrating the compounding fiscal pressure on near-poverty working families.
- The burden falls as income rises, but the absolute dollar amount rises: Q5 pays $6,375/year in Level 1 property taxes — more than three times Q1's $1,928. Regressivity is about the share of income consumed — the correct measure of household fiscal burden — not the absolute dollar amount.
- No household escapes the property tax regardless of tenure: owners receive a bill; renters pay the same tax invisibly through rent. The regressivity pattern holds for both groups. Q1 renter passthrough ($1,029/yr) exceeds Q1 owner direct property taxes ($899/yr), meaning low-income renters bear a per-household property tax burden comparable to — or exceeding — that of low-income owners.
Why property taxes are regressive
Property taxes are levied on assessed property value — not on income and not on ability to pay. Three structural features produce the regressivity pattern documented above. First, lower-income homeowners tend to hold a larger share of their total wealth in their home, so property taxes consume a larger share of both their assets and their income than they do for wealthier households. Second, assessed values can rise faster than income — particularly for fixed-income and retired homeowners in appreciating markets — creating a widening gap between taxable wealth and available cash flow. Third, renters, who are disproportionately lower-income, pay property taxes through rent with no access to the homestead exemption, the over-65 freeze, the disabled veteran exemption, or any other relief mechanism available to owner-occupants under Texas law. The result is a tax structure that is simultaneously visible and partially remediable for some households, and invisible and inescapable for others.
Working Family Livability: The Living Wage Reality
For Texas families near or below the living wage threshold, property taxes are not a line item they can absorb — they compete directly with rent, groceries, and healthcare. This panel examines the minimum household income required to cover basic necessities in Dallas County, compares that floor to the actual incomes of Texas households across all five income quintiles, and quantifies how much of that income is already consumed by property taxes before a family can pay for anything else.
MIT Living Wage Calculator — Dallas County, TX (February 15, 2026)
The living wage is the bare minimum a working adult must earn, full-time, to cover basic food, housing, healthcare, transportation, and other necessities — with no savings margin, no retirement contributions, and no financial cushion. It is not a middle-class income; it is the starting line.
| Household type | Living wage ($/hr) |
Annual income (before tax) |
Annual income (after federal tax) |
Housing ($/yr) |
Food ($/yr) |
Child care ($/yr) |
Medical ($/yr) |
Transportation ($/yr) |
|---|---|---|---|---|---|---|---|---|
| ONE ADULT HOUSEHOLDS | ||||||||
| 1 Adult, 0 Children | $23.31 | $48,489 | $41,399 | $17,805 | $4,019 | — | $3,032 | $8,440 |
| 1 Adult, 1 Child | $37.90 | $78,832 | $70,117 | $21,732 | $5,896 | $10,755 | $8,759 | $9,767 |
| 1 Adult, 2 Children | $47.71 | $99,239 | $88,273 | $21,732 | $8,834 | $21,211 | $8,906 | $12,303 |
| 1 Adult, 3 Children | $59.68 | $124,137 | $107,998 | $27,360 | $11,758 | $28,854 | $9,068 | $14,156 |
| TWO ADULTS — ONE WORKING | ||||||||
| 2 Adults, 1 Working, 0 Children | $30.79 | $64,034 | $56,679 | $18,547 | $7,369 | — | $7,214 | $9,767 |
| 2 Adults, 1 Working, 2 Children | $38.88 | $80,866 | $75,014 | $21,732 | $11,763 | — | $9,986 | $14,156 |
| 2 Adults, 1 Working, 3 Children | $44.80 | $93,176 | $87,093 | $27,360 | $14,352 | — | $10,322 | $15,849 |
| TWO ADULTS — BOTH WORKING | ||||||||
| 2 Adults, Both Working, 0 Children | $15.39 ea. | $64,034 | $56,679 | $18,547 | $7,369 | — | $7,214 | $9,767 |
| 2 Adults, Both Working, 2 Children | $25.78 ea. | $107,251 | $96,225 | $21,732 | $11,763 | $21,211 | $9,986 | $14,156 |
| 2 Adults, Both Working, 3 Children | $31.03 ea. | $129,088 | $115,948 | $27,360 | $14,352 | $28,854 | $10,322 | $15,849 |
Source: Glasmeier, A., et al. (2026, February 15). Living wage calculation for Dallas County, Texas [County-level data]. MIT Living Wage Calculator. Massachusetts Institute of Technology, Department of Urban Studies & Planning. https://livingwage.mit.edu/counties/48113. Texas has no state income tax; after-tax income estimated from federal tax only. Living wage is the minimum hourly rate at 2,080 hrs/yr to cover basic necessities.
What the living wage means in practice
A single adult in Texas must earn $23.31/hr ($48,489/yr before taxes) just to cover basic necessities in Dallas County — housing, food, healthcare, transportation, and minimal other costs. There is zero margin for savings, retirement, or unexpected expenses. This is the financial starting line, not a comfortable standard of living. A household with one working adult and two children needs $80,866/yr simply to meet basic needs. The statewide BLS average Texas household income is $91,099 — but the average Q1 household earns only $13,292, Q2 only $35,058, and Q3 only $60,726. The majority of Texas households earn below or barely above the living wage threshold for a family with children.
Current property tax burden vs. MIT living wage benchmark — Texas income quintiles
BLS Consumer Expenditure Survey TX 2022–23 income quintile averages benchmarked to the applicable MIT living wage household type. Level 1 property tax burden = direct owner property taxes (BLS CE TX) + renter passthrough at 18.5% of annual rent (TX Comptroller Pub. 96-463 midpoint).
| Income quintile | Avg annual income (BLS CE TX 2022–23) |
MIT living wage benchmark | Income as % of living wage | Level 1 PT burden (direct + renter passthrough) |
PT as % of income | PT as % of living wage |
|---|---|---|---|---|---|---|
| Q1 — Lowest 20% | $13,292 | $48,489 (1 Adult, 0 Ch.) | 27.4% | $1,928 | 14.5% | 4.0% |
| Q2 — Second 20% | $35,058 | $48,489 (1 Adult, 0 Ch.) | 72.3% | $2,665 | 7.6% | 5.5% |
| Q3 — Middle 20% | $60,726 | $80,866 (2A 1Wkg, 2 Ch.) | 75.1% | $3,065 | 5.0% | 3.8% |
| Q4 — Fourth 20% | $103,587 | $80,866 (2A 1Wkg, 2 Ch.) | 128.1% | $4,037 | 3.9% | 5.0% |
| Q5 — Highest 20% | $230,158 | $80,866 (2A 1Wkg, 2 Ch.) | 284.6% | $6,375 | 2.8% | 7.9% |
| All TX households (BLS avg) | $91,099 | $80,866 | 112.7% | $3,666 | 4.0% | 4.5% |
| MIT LIVING WAGE REFERENCE HOUSEHOLDS — DALLAS COUNTY | ||||||
| MIT 1 Adult, 0 Children — living wage floor | $48,489 | $48,489 | 100.0% | $3,666 (TX avg PT) | 7.6% | 7.6% |
| MIT 2 Adults, 1 Working, 2 Children — family floor | $80,866 | $80,866 | 100.0% | $3,666 (TX avg PT) | 4.5% | 4.5% |
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023 — income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm; Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025, August 5). 2024 property tax rates and levies [Certified data files]. https://comptroller.texas.gov/taxes/property-tax/rates; Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence report (Pub. 96-463) [renter passthrough rate 17–20%, midpoint 18.5%]. https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf; Glasmeier, A., et al. (2026, February 15). MIT Living Wage Calculator, Dallas County. https://livingwage.mit.edu/counties/48113.
Level 1 PT burden = direct owner property tax (BLS CE TX line) + renter passthrough at 18.5% of annual gross rent. MIT reference rows use the statewide BLS average PT burden ($3,666/yr) as the applicable Texas household benchmark. Q1–Q2 benchmarked to MIT 1 Adult, 0 Children ($48,489); Q3–Q5 and statewide average benchmarked to MIT 2 Adults, 1 Working, 2 Children ($80,866).
Level 1 PT burden = direct owner property tax (BLS CE TX line) + renter passthrough at 18.5% of annual gross rent. MIT reference rows use the statewide BLS average PT burden ($3,666/yr) as the applicable Texas household benchmark. Q1–Q2 benchmarked to MIT 1 Adult, 0 Children ($48,489); Q3–Q5 and statewide average benchmarked to MIT 2 Adults, 1 Working, 2 Children ($80,866).
Texas Household Income as a % of MIT Living Wage Threshold — by Quintile
Sources: U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas, 2022–2023. https://www.bls.gov/cex; Glasmeier, A., et al. (2026, February 15). MIT Living Wage Calculator, Dallas County. https://livingwage.mit.edu/counties/48113.
Key findings: working family livability & the property tax
- Three of five Texas income quintiles earn below the living wage floor for a family with children. Q1 earns 27.4%, Q2 earns 72.3%, and Q3 earns 75.1% of the MIT living wage threshold for a two-adult, one-working, two-children household in Dallas County ($80,866/yr). That threshold is not a comfortable middle-class standard — it is the bare minimum to cover food, housing, healthcare, and transportation. Three quintiles — representing 60% of Texas households — fall below it (BLS CE TX 2022–23; Glasmeier et al., 2026).
- Q1 households earn only 27.4% of the applicable living wage threshold. The average Q1 Texas household earns $13,292/yr — less than $1,108/month before taxes — against a single-adult living wage floor of $48,489/yr. Their Level 1 property tax burden of $1,928/yr represents 14.5% of total annual income. These households have no financial margin: they are simultaneously earning far below the subsistence floor and paying a disproportionate share of what little they have in property taxes (BLS CE TX 2022–23; TX Comptroller Pub. 96-463, 2025).
- A household earning exactly the single-adult living wage pays 7.6% of total income in property taxes. At the statewide average property tax burden of $3,666/yr, a Texas household earning the MIT living wage minimum of $48,489/yr devotes 7.6 cents of every dollar earned to property taxes — before paying rent, buying groceries, or covering healthcare. For a household with children, at the family living wage floor of $80,866/yr, the same $3,666 burden represents 4.5% of income (TX Comptroller PTAD TY2024; Glasmeier et al., 2026).
- Q2 households are still well below the living wage floor, earning 72.3% of the threshold. The Q2 average of $35,058/yr is $13,431 short of the single-adult living wage. With a Level 1 property tax burden of $2,665/yr — 7.6% of income — these households are simultaneously income-constrained and carrying a significant fixed tax obligation that does not decrease when hours are cut or income falls (BLS CE TX 2022–23; TX Comptroller Pub. 96-463, 2025).
- The statewide average household barely clears the family living wage floor. The BLS average Texas household income of $91,099/yr is only 112.7% of the MIT living wage for a two-adult, two-children household ($80,866/yr) — meaning the average Texas household has only a modest buffer above the family subsistence floor. At that income level, the average $3,666/yr property tax burden consumes 4.0% of income (BLS CE TX 2022–23; Glasmeier et al., 2026).
- The property tax does not adjust when income falls. Unlike a consumption-based tax that scales with what a household actually spends, the property tax is fixed to assessed property value. A Q2 worker whose hours are cut, a Q1 renter whose rent is raised, or a fixed-income senior whose Social Security check stays flat all owe the same property tax bill regardless of what happened to their income that year. For households already below or barely above the living wage threshold, this creates a structural fiscal trap: the obligation is fixed and the income is not (TX Comptroller of Public Accounts, Pub. 96-463, 2025).
- Renters pay the same property tax as owners — invisibly. The Texas Comptroller's own Tax Incidence Report documents that landlords pass through 17–20% of rent as embedded property tax costs to tenants. For a Texas renter paying the Census median rent of $1,339/month ($16,068/yr), that is an estimated $2,973/yr in property taxes embedded in the monthly rent check — with no homestead exemption, no appeal right, and no bill they can see or dispute. Renters in Q1 and Q2, who are disproportionately represented in lower income quintiles, bear this burden invisibly on top of already-strained budgets (TX Comptroller of Public Accounts, Pub. 96-463, 2025; U.S. Census Bureau, QuickFacts TX, 2024).
Data methodology & source notes
Living wage data are drawn directly from the MIT Living Wage Calculator, Dallas County, last updated February 15, 2026 (Glasmeier et al., 2026). The living wage represents the minimum pre-tax hourly rate required for full-time employment (2,080 hrs/yr) to cover itemized basic necessities — housing, food, childcare, healthcare, transportation, and other essentials — with no surplus for savings, retirement, or discretionary spending. It is not a recommended living standard; it is a subsistence floor derived from current cost data for Dallas County, Texas. Texas has no state income tax; federal income tax estimates follow standard withholding schedules for each household type. Income quintile data are from the BLS Consumer Expenditure Survey, Texas, 2022–23 two-year average statewide table. Property tax burden (Level 1) equals direct owner property taxes paid (BLS CE TX line item) plus renter passthrough at 18.5% of annual gross rent, using the midpoint of the 17–20% renter incidence range documented by the Texas Comptroller in the Tax Exemptions and Tax Incidence Report (Pub. 96-463, January 2025). MIT living wage reference rows in Table 2 use the statewide BLS average Level 1 property tax burden of $3,666/yr as the applicable Texas household benchmark, since the living wage itself is not a quintile-defined group and does not carry a quintile-specific BLS property tax line.
References
All sources are cited in APA 7th edition format with annotations. Sources are listed alphabetically by author or issuing organization. All data in Section 2 derives from primary official government sources and institutional research organizations; no figures are drawn from news articles, advocacy publications, or unverified third-party estimates.
Federal Reserve Bank of St. Louis. (2025). Homeownership rate for Texas [TXHOWN] [Data series]. FRED Economic Data. https://fred.stlouisfed.org/series/TXHOWN
Annual homeownership rate series for Texas. Used in this section for the statewide homeownership rate of 62.9% (2024 annual value), which drives the owner/renter household split across all income quintile burden calculations.
Glasmeier, A., Glasmeier, R., & Nadeau, C. A. (2026, February 15). Living wage calculation for Dallas County, Texas [County-level data tool]. MIT Living Wage Calculator. Massachusetts Institute of Technology, Department of Urban Studies & Planning. https://livingwage.mit.edu/counties/48113
Primary source for all living wage benchmarks in the Working Family Livability panel. Provides minimum hourly wage rates, annual pre- and post-tax income requirements, and itemized basic-needs cost breakdowns (housing, food, childcare, healthcare, transportation) for twelve household types in Dallas County, TX. Living wage figures are derived from current government and institutional price data at the county level. Texas has no state income tax; after-tax values reflect federal withholding only. Used to benchmark each BLS income quintile's average income against the applicable household-type living wage floor.
Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence (Publication No. 96-463). Texas Comptroller of Public Accounts. https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.pdf
Biennial report required by Texas Tax Code §403.014. Primary source for the 17–20% renter property tax passthrough rate used to calculate the indirect property tax burden carried by Texas renter households. Also used for current sales tax base definitions, statutory exemption categories, and the reclassified expenditure analysis. The midpoint passthrough rate of 18.5% is applied throughout Section 2 burden calculations.
Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025, August 5). 2024 certified property tax rates and levies by county, city, school district, and special district [Certified data files]. Texas Comptroller of Public Accounts. https://comptroller.texas.gov/taxes/property-tax/rates
Certified TY2024 property tax levy data covering all 254 counties, 1,187 cities, 1,013 ISDs, and 2,530 special districts statewide. Primary source for the total 2024 Texas property tax levy of $86.6 billion used throughout Section 2. Levy totals by jurisdiction type underpin the per-household burden calculations and income quintile burden distribution tables.
Texas Taxpayers and Research Association. (2023, January). The myth of Texas as a low-tax state [Research brief]. TTARA. https://ttara.org/wp-content/uploads/2023/01/TTARATaxBurdenResearchBrief123.pdf
Institutional research brief from the Texas Taxpayers and Research Association, a nonpartisan Texas tax policy research organization. Primary source for the 40/60 residential-to-commercial property tax burden split used to allocate the total $86.6B levy between direct homeowner burden ($34.6B) and commercial/landlord burden ($52.0B). The 40% residential share drives the owner-occupied Level 1 burden calculation in the property tax distribution table.
U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey: Texas state table, 2022–2023 — mean annual expenditures, income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Texas-specific Consumer Expenditure Survey data, 2022–23 two-year average. Primary source for all household expenditure figures, income quintile averages, and spending category breakdowns used throughout Section 2. Provides average income and expenditure data for each of the five income quintiles and the statewide household average ($91,099 income / $69,802 expenditures across 10.75M consumer units). Also the basis for the BLS base expenditure table, reclassified tax-status table, three-tier income model, and all quintile-level property tax burden calculations. Dallas–Fort Worth ($117,340 income / $81,954 spending) and Houston ($85,377 spending) metro figures from the 2023–24 BLS metropolitan CE tables are cited in the conservative baseline context note.
U.S. Census Bureau. (2025). QuickFacts: Texas [2024 estimates]. U.S. Department of Commerce. https://www.census.gov/quickfacts/fact/table/TX/PST045224
Current demographic and housing estimates for Texas from the U.S. Census Bureau. Primary source for total Texas household count (10.75M), median gross rent ($1,339/month), and statewide homeownership context used throughout Section 2. The household count is used as the denominator for all per-household burden calculations. The median rent figure is used in the renter indirect burden calculation in conjunction with the TX Comptroller Pub. 96-463 passthrough rate.
Section 3
Texas House District 109 – Demographics, Income, & Current Tax Burden
A district-level look at who lives in HD 109, how households earn and spend, and what the current property tax and sales tax structure costs the average resident — using ACS, Texas Legislative Council, BLS, and Comptroller data.
HD 109 at a Glance
This panel summarizes HD 109's core profile — population, households, income, homeownership, and tax burden — built from Texas Legislative Council ACS 2019–2023, Census ACS, BLS, and Comptroller data, aligned with the statewide present-state framework from Sections 1 and 2.
Total population
185,049
ACS 2019–2023 5‑year estimates
Total households
62,106
Occupied housing units
Per‑capita income
$32,612
17.4% below Texas average of $39,446
Median household income
$57,836
16.2% below Texas median of $69,021
Homeownership rate
67.5%
4.6 pts above statewide rate of 62.9%
Renters cost-burdened (>35% on housing)
52.8%
14 pts above statewide rate of 38.8%
Key HD 109 context points
- Significantly below-average incomes: HD 109 median household income ($57,836) is 16.2% below the Texas median of $69,021. This gap means HD 109 households have less cushion to absorb fixed-charge tax obligations that don't adjust when incomes are lower.
- Near the living wage floor: HD 109's median household income barely clears the MIT Living Wage Calculator's single-adult floor for Dallas County ($48,489/yr). A family with two adults and two children requires $80,866/yr — 40% above the district median. (Glasmeier et al., 2026)
- Higher direct property tax exposure: at 67.5% owner-occupancy — 4.6 points above the statewide rate — a clear majority of HD 109 households receive a property tax bill directly. The district's lower-than-average home values provide only partial relief because combined local tax rates in HD 109 average 1.886% (TX Comptroller PTAD, TY2024), producing annual bills of $4,800–$5,300 on the average HD 109 home.
- Renters face the burden too — and at a severe cost: 52.8% of HD 109 renters already spend more than 35% of their income on housing — 14 points above the statewide rate. Property taxes embedded in rent (17–20% of gross rent, Pub. 96-463) add to that cost without ever appearing on a separate bill.
- Low-income households bear the heaviest burden as a share of income: Q1 households in Texas (and HD 109) pay approximately 14.5% of their income in property taxes at the Level 1 measure — more than five times the 2.8% share borne by Q5 households (BLS CE TX 2022–23; TX Comptroller PTAD TY2024). With HD 109 income concentrated in Q2–Q3 nationally, a disproportionate share of district households fall into the highest-burden brackets.
HD 109 Demographics (ACS 2019–2023)
District-level demographics from the Texas Legislative Council profile for PLANH2316 and ACS 2019–2023, comparing HD 109 to statewide racial/ethnic, age, household structure, and employment distributions. These characteristics directly shape who bears property tax burdens and how heavily.
Majority-minority district
85.7%
Non-Anglo residents — 25.6 pts above statewide 60.1%
Single-parent households
26.3%
Female-headed, no spouse — 11.3 pts above statewide 15.0%
Children under 18
27.9%
2.4 pts above statewide 25.5% — highest school finance exposure
Population and race/ethnicity
| Characteristic | HD 109 | HD 109 % | Texas % | Difference |
|---|---|---|---|---|
| Total population | 185,049 | 100.0% | — | — |
| Anglo (non-Hispanic White) | 26,405 | 14.3% | 39.9% | −25.6 pts |
| Hispanic | 58,260 | 31.5% | 39.5% | −8.0 pts |
| Black / African American | 97,447 | 52.7% | 14.0% | +38.7 pts |
| Asian | 3,067 | 1.7% | 6.3% | −4.6 pts |
| Non-Anglo (minority) | 158,644 | 85.7% | 60.1% | +25.6 pts |
Table 1. HD 109 population and race/ethnicity compared to Texas statewide. Adapted from Texas Legislative Council (2024), PlanH2316: House District 109 demographic and socioeconomic profile (ACS 2019–2023). Retrieved from https://tlc.texas.gov
Age and household structure
| Age / household type | HD 109 % | Texas % | Difference |
|---|---|---|---|
| Children under 18 | 27.9% | 25.5% | +2.4 pts |
| Age 18–64 | 59.0% | 61.7% | −2.7 pts |
| Age 65 and over | 13.1% | 12.8% | +0.3 pts |
| Married-couple families | 40.6% | 48.3% | −7.7 pts |
| Female householder, no spouse | 26.3% | 15.0% | +11.3 pts |
| Average household size | 2.82 | 2.82 | ≈0 |
Table 2. HD 109 age and household structure compared to Texas statewide. Adapted from Texas Legislative Council (2024), PlanH2316: House District 109 demographic and socioeconomic profile (ACS 2019–2023). Retrieved from https://tlc.texas.gov; U.S. Census Bureau (2024), American Community Survey 5-year estimates, 2019–2023. Retrieved from https://data.census.gov
Demographic implications for tax policy
- Heavily Black and Hispanic district: at 85.7% non-Anglo, HD 109 is a majority-minority district — 25.6 points above the statewide share. Historic racial wealth gaps and homeownership disparities amplify the distributional stakes of property tax policy: households that were systematically excluded from wealth-building through homeownership in prior generations now face the highest property tax burdens as a share of income.
- High share of single-parent households amplifies tax sensitivity: at 26.3% female-headed households with no spouse — 11.3 points above the statewide rate — a disproportionate share of HD 109 households are single-earner. The MIT Living Wage Calculator (Glasmeier et al., 2026) sets the single-adult living wage for Dallas County at $48,489/yr; a single parent with two children requires $80,866/yr. These households have no second income to absorb property tax increases.
- Younger population increases school finance exposure: with 27.9% of residents under 18 — 2.4 points above the statewide share — HD 109 has an above-average stake in school district funding. School districts account for 48.1% of all Texas property tax levies (TX Comptroller PTAD, TY2024), making ISD tax rates the single largest line on most HD 109 property tax bills.
- Employment concentrated in lower-wage sectors: HD 109's top employment sectors — Education & Health Care (20.9%) and Transportation & Warehousing (11.0%, 70% above the statewide share) — carry median wages well below Professional & Business Services and Technology sectors where Texas statewide employment is proportionally greater. Lower sector wages reinforce the income gap visible in the Overview panel.
- Age structure means tax changes ripple across generations: with working-age adults (59.0%), children (27.9%), and seniors (13.1%) all well-represented, property tax changes in HD 109 simultaneously affect school finance for families, mortgage affordability for working-age households, and fixed-income stability for retirees.
Income & Housing in HD 109
Income distribution and housing tenure patterns for HD 109, benchmarked against Texas overall. These distributions establish the structural baseline for understanding who bears property tax burdens and how heavily — the foundation for all regressivity and burden analysis that follows.
How this panel's data is constructed
Income bracket shares and tenure splits are taken directly from ACS 2019–2023 five-year estimates as reported in the Texas Legislative Council PLANH2316 district profile, organized into brackets consistent with the statewide BLS Consumer Expenditure Survey quintile structure so that distributional comparisons are structurally aligned. The property tax burden percentages in Figure 4 are derived exclusively from BLS CE TX 2022–23 (direct owner property tax line) and TX Comptroller Pub. 96-463 (renter passthrough rate of 17–20%, midpoint 18.5%), applying the Level 1 incidence framework adopted as the project-wide canonical standard. No secondary analyst estimates or opinion-based characterizations of the tax burden are used.
Key income and housing findings for HD 109
- Income is concentrated below the Texas median: HD 109's median household income of $57,836 is 16.2% below the Texas median of $69,021, and the district has a larger proportion of households in the $25K–$50K range than the state as a whole. These households fall into Q2 of the statewide income distribution — where the Level 1 property tax burden is 7.6% of income, nearly double the 3.9% share borne by Q4 households.
- The regressivity ratio is 5.24× at Level 1: Q1 households pay 14.5% of income in property taxes; Q5 households pay 2.8%. This is not a marginal difference — it is a structural feature of how property taxes are assessed without regard to ability to pay. With HD 109 income concentrated in Q2–Q3, a disproportionate share of district households sit in the steepest part of this curve (BLS CE TX 2022–23; TX Comptroller Pub. 96-463, 2025).
- Two-thirds of households own — both groups pay: at 67.5% owner-occupancy, a clear majority of HD 109 households receive property tax bills directly. The 32.5% who rent are not insulated: at 18.5% passthrough (Pub. 96-463 midpoint), a renter paying $1,100/month in gross rent bears approximately $2,442/yr in embedded property taxes that never appear on a separate bill.
- Lower home values do not fully protect owners: HD 109 home values are below the Dallas metro average, but combined local tax rates averaging 1.886% (TX Comptroller PTAD, TY2024) still produce estimated annual bills of $4,800–$5,300 on the average HD 109 home — a heavier share of income than the same bill represents for higher-income households in higher-value districts.
HD 109 Household Expenditures (BLS-Based)
HD 109 household expenditures calibrated from the Texas-wide BLS Consumer Expenditure Survey, using the same category structure, tax-status groupings, and Level 1 incidence framework as Section 2 — scaled to the HD 109 income and household profile. These figures establish the spending baseline for all burden analysis that follows.
| Category | Pre-tax / base amount | Current tax paid | Total (as spent) | % of total | Tax type & rate |
|---|---|---|---|---|---|
| Housing (rent / mortgage principal & interest) | $15,361 | — | $15,361 | 22.2% | Not taxed — housing services; property tax is a separate levy |
|
Property taxes — Level 1 (direct owner + renter passthrough at 18.5%) Level 2 extended estimate: $5,474/yr — full incidence incl. commercial passthrough (Pub. 96-463) |
— | $3,666 L2: $5,474 |
$3,666 L2: $5,474 |
5.3% L2: 7.9% |
Ad valorem levy — not a sales tax; assessed on property value regardless of income or cash flow |
| Groceries (food at home) | $4,845 | — | $4,845 | 7.0% | Exempt from Texas sales tax (TX Tax Code § 151.314) |
| Gasoline & motor fuels | $2,684 | $173 | $2,857 | 4.1% | State motor fuel tax — $0.20/gal (gasoline); ~6.45% effective rate on pump price. Not subject to sales tax (TX Tax Code § 151.317) |
| Taxed expenditures (current law, narrow base) | $27,282 | $2,251 | $29,533 | 42.6% | Subject to 6.25% state sales tax + applicable local rate; composite up to 8.25% (TX Tax Code § 151.051) |
| Non-taxed expenditures (services, insurance, contributions, pensions, etc.) | $13,080 | — | $13,080 | 18.9% | Not taxed — services and non-transactional items outside TX sales tax base |
| Total annual expenditures | $63,252 | $6,090 | $69,342 | 100.0% |
Table 3. Average HD 109 household expenditures by category, current tax paid, and gross total as spent. Pre-tax base and tax-paid columns back-calculated from gross BLS expenditure totals using current-law rates: sales tax composite 8.25% (TX Tax Code § 151.051; TX Comptroller CY2024); motor fuel tax $0.20/gal effective ~6.45% (TX Tax Code § 162.101). Property tax shown at Level 1 canonical value ($3,666/yr, all-HH blended) and Level 2 extended estimate ($5,474/yr). Sources: U.S. Bureau of Labor Statistics (2025), Consumer Expenditure Survey: Texas tables, 2022–2023 two-year average. Retrieved from https://www.bls.gov/cex; Texas Comptroller of Public Accounts (2025), Tax exemptions and tax incidence report (Pub. 96-463). Retrieved from https://comptroller.texas.gov/taxes/publications/96-463.php; Texas Comptroller of Public Accounts (2025), Sales tax rates. Retrieved from https://comptroller.texas.gov/taxes/sales/; Texas Comptroller of Public Accounts (2025), Motor fuel taxes. Retrieved from https://comptroller.texas.gov/taxes/fuels/; Texas Legislative Council (2024), PlanH2316. Retrieved from https://tlc.texas.gov
HD 109 calibration method
Category shares mirror the Texas BLS CE TX 2022–23 pattern, with level adjustments reflecting HD 109's median household income ($57,836), tenure mix (67.5% owner / 32.5% renter), and household count (62,106). The property tax row uses the Level 1 canonical all-household blended burden of $3,666/yr — the controlling baseline confirmed for this project — sourced to BLS CE TX 2022–23 (direct owner property tax line) and TX Comptroller Pub. 96-463 (18.5% renter passthrough midpoint). The Level 2 extended estimate of $5,474/yr applies the full commercial passthrough incidence per Pub. 96-463 and is labeled as an estimate throughout. The taxed expenditure total of $29,533 represents the current narrow-base taxable spending under existing Texas sales tax law, and serves as the spending baseline for any comparative rate analysis that follows in later panels.
Key expenditure findings for HD 109
- Property taxes consume 5.3%–7.9% of total household spending: at the Level 1 canonical burden of $3,666/yr (rising to $5,474/yr at the Level 2 extended estimate), HD 109 households spend more on property taxes than on gasoline ($2,857) and approach or exceed the grocery spend ($4,845) — for a charge that provides no choice, no substitute, and no reduction when income falls.
- 42.6% of spending is currently taxable — the current-law base: the $29,533 in currently taxed expenditures is the foundation for estimating what HD 109 households pay under the current sales tax structure. At the current weighted average effective rate, this generates approximately $2,422/yr in sales tax per household (TX Comptroller CY2024 base / BLS CE TX cross-reference).
- Housing and property taxes together represent 27.5%–30.1% of total spending: combining the housing row ($15,361) with the Level 1 property tax burden ($3,666) shows that HD 109 households commit more than a quarter of all spending to shelter costs before any other expense — a figure that rises toward 30% at the Level 2 estimate. For households earning near the district median of $57,836, this leaves limited margin for unexpected costs.
- The current system taxes consumption but not wealth-based income: property taxes fall on assessed value regardless of current cash flow. A household earning $57,836 in HD 109 that owns a $285,000 home pays the same estimated $5,300 annual tax bill regardless of whether income dropped that year. The expenditure table makes this fixed-charge dynamic visible and establishes the baseline from which any reform's impact on HD 109 households would be measured.
Property Tax Burden & Regressivity in HD 109
This panel quantifies the current property tax burden on HD 109's 62,106 households — by tenure, by income group, and in aggregate — and documents how that burden falls regressively across income levels. All per-household figures are calibrated to HD 109's home values, rent levels, ownership rate, and income distribution using BLS Consumer Expenditure Survey data, TX Comptroller PTAD TY2024 rates, and Pub. 96-463 renter passthrough methodology. The statewide $86.6B TY2024 levy provides structural context.
HD 109 owner HH property tax
$5,281/yr
41,922 owner HH × 1.886% combined rate on ~$280K avg home value (TX Comptroller PTAD TY2024; TLC ACS 2019–2023)
HD 109 renter HH property tax
$2,997/yr
20,184 renter HH — embedded in rent at 18.5% of $1,350/mo estimated median gross rent (TX Comptroller Pub. 96-463)
HD 109 Level 1 blended burden
$4,539/yr
All 62,106 HD 109 HH — (41,922 × $5,281 + 20,184 × $2,997) ÷ 62,106. 7.8% of district median income (BLS CE TX 2022–23; Pub. 96-463)
HD 109 Level 2 extended burden
$6,778/yr
Estimate — adds commercial/industrial property tax passthrough through consumer prices. Level 2/Level 1 ratio 1.4932× applied to HD 109 Level 1 (Pub. 96-463)
HD 109 aggregate annual burden
~$281.9M
Direct residential incidence: $221.4M owner + $60.5M renter passthrough. Pro-rata share of full $86.6B TX levy: ~$500.5M. See Table 6.
HD 109 property tax burden by income quintile
The "Burden as % of income" column is the core regressivity measure for HD 109. The Q1 burden is 4.0× the Q5 burden as a share of income — a structural consequence of taxing asset values rather than income. For comparison, the statewide BLS canonical Level 1 ratio is 5.24× (Q1 = 14.5%, Q5 = 2.8%); HD 109's district-calibrated ratio is lower at 4.0× because HD 109's lower home values moderate the owner burden for Q1 households relative to their statewide counterparts, while still applying the full passthrough to renters.
| HD 109 income group | Approx. income | Owner HH | Renter HH | Owner burden/HH | Renter burden/HH | Blended burden/HH | Burden as % of income |
|---|---|---|---|---|---|---|---|
| Lowest 20% (Q1) | ~$13,292 | 5,577 | 6,844 | $2,532 | $1,998 | $2,238 | 16.8% |
| Second 20% (Q2) | ~$35,058 | 6,148 | 6,273 | $4,112 | $2,442 | $3,269 | 9.3% |
| Middle 20% (Q3) | ~$60,726 | 7,515 | 4,906 | $5,411 | $2,775 | $4,370 | 7.2% |
| Fourth 20% (Q4) | ~$103,587 | 8,707 | 3,714 | $7,068 | $3,219 | $5,917 | 5.7% |
| Top 20% (Q5) | ~$230,158 | 10,682 | 1,739 | $10,535 | $3,996 | $9,619 | 4.2% |
| All HD 109 HH | ~$57,836 median | 41,922 | 20,184 | $5,281 | $2,997 | $4,539 | 7.8% avg |
| Q1 ÷ Q5 regressivity ratio | 4.0× (HD 109 calibrated) |
Table 4. Calibrated estimate of HD 109 property tax burden by income quintile — Level 1 incidence. Income and ownership rates from U.S. Bureau of Labor Statistics (2025), Consumer Expenditure Survey: Texas tables, 2022–2023 two-year average. Retrieved from https://www.bls.gov/cex. Combined local tax rate (1.886%) from Texas Comptroller of Public Accounts (2025), Property tax rates and levies, tax year 2024. Retrieved from https://comptroller.texas.gov/taxes/property-tax/rates. Renter passthrough at 18.5% midpoint from Texas Comptroller of Public Accounts (2025), Tax exemptions and tax incidence report (Pub. 96-463). Retrieved from https://comptroller.texas.gov/taxes/publications/96-463.php. HD 109 household profile from Texas Legislative Council (2024), PlanH2316. Retrieved from https://tlc.texas.gov. Statewide BLS canonical Level 1 regressivity ratio is 5.24× (Q1 = 14.5%, Q5 = 2.8%); HD 109 district-calibrated ratio is 4.0× (Q1 = 16.8%, Q5 = 4.2%).
Residential vs. business split — statewide TY2024 context
| Property class | Share of TX levy | TX amount (TY2024) | HD 109 pro-rata share |
|---|---|---|---|
| Residential (owner-occupied & rental) | 40% | $34.65B | ~$200.2M |
| Business (commercial, industrial, utilities, etc.) | 60% | $51.98B | ~$300.3M |
| Total | 100% | $86.63B | ~$500.5M |
Table 5. Residential vs. business property class split applied to TY2024 Texas levy total; HD 109 pro-rata column calculated at 0.5777% of each class (HD 109 62,106 HH ÷ TX 10.75M HH). 40/60 residential/business split from Texas Taxpayers and Research Association (2023), Texas property tax burden by property class [raw data only]. Retrieved from https://ttara.org. Levy total from Texas Comptroller of Public Accounts (2025), Property tax rates and levies, tax year 2024. Retrieved from https://comptroller.texas.gov/taxes/property-tax/rates
HD 109 annual property tax burden — three measures compared
Three valid measures of HD 109's total annual property tax burden serve different analytical purposes. All three are correct; the right measure depends on what is being analyzed.
| Measure | Annual total | Per HH avg | % of HD 109 median income | What it captures | Source basis |
|---|---|---|---|---|---|
| Level 1 — residential incidence | ~$281.9M | $4,539 | 7.8% | Direct owner bills ($221.4M) + renter passthrough at 18.5% of gross rent ($60.5M). Residential property only. | BLS CE TX 2022–23; TX Comptroller PTAD TY2024; Pub. 96-463 |
| Level 2 — extended incidence | ~$420.9M | $6,778 | 11.7% | Level 1 extended to include commercial and business property taxes passed through in consumer prices. 1.4932× ratio applied to HD 109 Level 1. Estimate. | Pub. 96-463 full incidence methodology |
| Pro-rata share of full TX levy | ~$500.5M | $8,059 | 13.9% | HD 109's 0.5777% share of the full $86.6B TY2024 levy across all property classes — residential, commercial, industrial, utility, and agricultural. | TX Comptroller PTAD TY2024; HD 109 HH share 62,106 ÷ 10,750,000 |
Table 6. HD 109 total annual property tax burden under three measures. Level 1 calculated bottom-up from 41,922 owner HH and 20,184 renter HH with district-calibrated rates and Pub. 96-463 passthrough. Level 2 applies the statewide Level 2/Level 1 ratio (1.4932×) per Pub. 96-463 full incidence methodology and is labeled as an estimate. Pro-rata measure allocates HD 109's household-count share (0.5777%) of the full TY2024 Texas levy. Sources: Texas Comptroller of Public Accounts (2025), Property tax rates and levies, tax year 2024. Retrieved from https://comptroller.texas.gov/taxes/property-tax/rates; Texas Comptroller of Public Accounts (2025), Tax exemptions and tax incidence report (Pub. 96-463). Retrieved from https://comptroller.texas.gov/taxes/publications/96-463.php; U.S. Bureau of Labor Statistics (2025), Consumer Expenditure Survey: Texas tables, 2022–2023 two-year average. Retrieved from https://www.bls.gov/cex
What the current tax structure means for HD 109 households
- HD 109 owners pay an estimated $5,281/yr directly: at 1.886% combined rate on an average home value of ~$280,000, this levy consumes 9.1% of the district's $57,836 median household income before any other expense — and the bill arrives whether household income grew that year or not.
- HD 109's 20,184 renter households pay ~$2,997/yr they never see itemized: roughly $249 of every monthly rent check is attributable to the landlord's property tax passed through to the tenant (TX Comptroller, Pub. 96-463, 2025). The burden is real; only the visibility is missing.
- The burden is demonstrably regressive — lowest-income HD 109 households pay 4× more as a share of income than the highest: Q1 households bear 16.8% of income in property taxes; Q5 households bear 4.2%. The burden is concentrated most heavily on the households least able to absorb a fixed-charge obligation disconnected from their income. The statewide BLS canonical ratio is even higher at 5.24× — HD 109's moderately lower ratio reflects lower Q1 home values in the district, not a less regressive structure.
- The full economic burden on HD 109 ranges from $281.9M to $500.5M annually depending on how it is measured: the Level 1 residential measure ($281.9M, $4,539/HH) counts direct and renter-embedded burdens. The Level 2 extended estimate ($420.9M, $6,778/HH) adds commercial property tax passed through in consumer prices. The pro-rata full levy share ($500.5M, $8,059/HH) captures HD 109's total stake in the statewide $86.6B levy. All three measures are documented in Table 6.
- ISDs drive nearly half the total burden: school districts — including Cedar Hill ISD and Lancaster ISD — account for 48.1% of the statewide $86.6B levy. HD 109 households fund their local schools primarily through this property tax layer, which is also the most volatile component because it is most sensitive to appraisal increases.
Calibration and methodology notes
Owner burden is modeled at the combined local average rate of 1.886% (TX Comptroller PTAD TY2024, Dallas County area) applied to an estimated average HD 109 home value of ~$280,000 — below the Dallas metro average of ~$380,000, reflecting the Cedar Hill, Lancaster, and Duncanville submarkets within the district. Renter burden applies the TX Comptroller Pub. 96-463 passthrough range of 17–20% (midpoint 18.5%) to an estimated HD 109 median gross rent of $1,350/month. The Level 1 blended figure of $4,539/yr is the weighted average across all 62,106 households. The Level 2 extended estimate of $6,778/yr applies the statewide Level 2/Level 1 ratio (1.4932×) from Pub. 96-463 and is labeled as an estimate throughout. All passthrough figures use Pub. 96-463 as the sole source.
Property taxes are levied on asset value, not income. When household income grows more slowly than property valuations — as has been the case in southern Dallas County over the past decade — the effective tax rate as a share of income rises even if the nominal rate holds steady. HD 109's lower-than-average incomes and high concentrations of single-parent and minority households mean this structural mismatch is especially acute here. The HD 109 district-calibrated Q1÷Q5 regressivity ratio of 4.0× represents a conservative floor; the Level 2 burden would produce a steeper ratio. Actual economic burden, including all commercial property tax costs passed through into consumer prices, is higher than the Level 1 figures shown in Table 4.
Living Wage Context for HD 109
Property tax burdens don't exist in a vacuum — they sit on top of household budgets that are already stretched against the actual cost of living. This panel benchmarks HD 109's income distribution against the MIT Living Wage Calculator thresholds for Dallas County to show how much room households have left after the current property tax obligation. The living wage is defined as the minimum income necessary to cover basic needs without public subsidy (Glasmeier et al., 2026).
Single adult living wage — Dallas County
$48,489/yr
$23.31/hr before tax — the minimum to cover basic needs for one adult with no dependents (MIT Living Wage Calculator, Dallas County, Feb 2026)
Family living wage — 2 adults, 2 children
$80,866/yr
$38.88/hr before tax, one working adult — HD 109 median income of $57,836 is $23,030 below this floor (MIT Living Wage Calculator, Dallas County, Feb 2026)
HD 109 median vs. single-adult floor
119.3%
HD 109's $57,836 median household income barely clears the single-adult floor — and falls to 109.9% after subtracting the $4,539 Level 1 property tax burden
Q1 income as % of single-adult floor
27.4%
HD 109's lowest-income quintile averages $13,292/yr — after a $2,238 property tax burden, only $11,054 remains, equal to 22.8% of the single-adult living wage floor
MIT Living Wage thresholds vs. HD 109 income quintiles — Dallas County, 2026
The table below compares HD 109 quintile average incomes to the living wage thresholds for Dallas County and shows how much income remains after subtracting the district-calibrated Level 1 property tax burden. The "after PT" column shows what each quintile has left to cover all other household expenses.
| HD 109 income group | Avg income | Level 1 PT burden | Income after PT | % of single-adult LW floor ($48,489) | % of family LW floor ($80,866) |
|---|---|---|---|---|---|
| Lowest 20% (Q1) | $13,292 | $2,238 | $11,054 | 22.8% | 13.7% |
| Second 20% (Q2) | $35,058 | $3,269 | $31,789 | 65.6% | 39.3% |
| Middle 20% (Q3) | $60,726 | $4,370 | $56,356 | 116.2% | 69.7% |
| Fourth 20% (Q4) | $103,587 | $5,917 | $97,670 | 201.4% | 120.8% |
| Top 20% (Q5) | $230,158 | $9,619 | $220,539 | 455.0% | 272.7% |
| HD 109 median household | $57,836 | $4,539 | $53,297 | 109.9% | 65.9% |
Table 7. HD 109 income quintile averages compared to MIT Living Wage Calculator thresholds for Dallas County. Living wage figures from Glasmeier, A. K., & Massachusetts Institute of Technology. (2026, February 15). Living wage calculator: Dallas County, Texas. MIT Living Wage Calculator. Retrieved from https://livingwage.mit.edu. HD 109 income quintile averages from U.S. Bureau of Labor Statistics (2025), Consumer Expenditure Survey: Texas tables, 2022–2023 two-year average. Retrieved from https://www.bls.gov/cex. Level 1 property tax burden from HD 109 district-calibrated model using TX Comptroller PTAD TY2024 and Pub. 96-463 renter passthrough (18.5% midpoint). HD 109 median household income from U.S. Census Bureau (2024), American Community Survey 5-year estimates, 2019–2023. Retrieved from https://data.census.gov; Texas Legislative Council (2024), PlanH2316. Retrieved from https://tlc.texas.gov
MIT Living Wage Calculator — Dallas County thresholds by household type
| Household type | Living wage (hourly) | Living wage (annual, before tax) | HD 109 median as % of this floor |
|---|---|---|---|
| 1 Adult, 0 Children | $23.31/hr | $48,489/yr | 119.3% |
| 2 Adults (1 working), 0 Children | $30.79/hr | $64,034/yr | 90.3% |
| 2 Adults (1 working), 2 Children | $38.88/hr | $80,866/yr | 71.5% |
| 2 Adults (both working), 2 Children | $25.78/hr each | $107,251/yr combined | 53.9% |
Table 8. MIT Living Wage Calculator thresholds for Dallas County, Texas by household type. Glasmeier, A. K., & Massachusetts Institute of Technology. (2026, February 15). Living wage calculator: Dallas County, Texas. MIT Living Wage Calculator. Retrieved from https://livingwage.mit.edu. Note: HD 109 encompasses communities in southern Dallas County including Cedar Hill, DeSoto, Lancaster, and portions of surrounding municipalities; Dallas County thresholds are the applicable geographic unit for this analysis.
What living wage context reveals about HD 109's current tax burden
- HD 109's lowest-income households are well below the single-adult living wage floor before paying a dollar in property taxes: Q1 averages $13,292/yr — 27.4% of the $48,489 single-adult minimum for Dallas County. After the $2,238 Level 1 property tax burden, only $11,054 remains — 22.8% of that floor. These households are not paying an inconvenient tax; they are paying a tax that directly competes with groceries, utilities, and rent for a budget that has almost nothing to spare.
- The district median household barely clears the single-adult floor — and falls below it for families: at $57,836/yr, the HD 109 median household income sits 19.3% above the single-adult living wage floor of $48,489. But it is $6,198 below the two-adult household floor ($64,034), and $23,030 below the floor for a family with two adults and two children ($80,866). HD 109's high share of single-parent households (26.3%) means the family floor is the relevant benchmark for a significant portion of the district.
- After property taxes, the median HD 109 household retains only 109.9% of the single-adult floor: the $4,539 Level 1 property tax burden drops the median HD 109 household from 119.3% to 109.9% of the single-adult living wage floor — a margin of just $4,808 above bare subsistence for a single person, before any other discretionary expense.
- Q2 households — the second-lowest quintile — remain well below subsistence level for families even after all income: the Q2 average income of $35,058 represents only 43.4% of the two-adult/two-child living wage floor. After a $3,269 property tax burden, $31,789 remains — 39.3% of what a family needs by MIT's data. These households are structurally unable to reach a basic living standard under the current income and tax structure.
- HD 109's demographics amplify this pressure: with 26.3% of households headed by a single parent — nearly double the statewide rate of 15.0% — and 52.7% of the population identifying as Black or African American (a demographic group that nationally carries higher rates of housing cost burden), the living wage gap is not an abstraction. It is the daily financial condition of a large share of HD 109 residents.
About the MIT Living Wage Calculator
The MIT Living Wage Calculator estimates the minimum income required to cover basic household needs — food, housing, transportation, healthcare, childcare, and taxes — without reliance on public subsidies. It is calculated by county and updated periodically by MIT researchers. The February 15, 2026 Dallas County figures are the current authoritative values used in this analysis (Glasmeier et al., 2026). The living wage is a consumption floor, not a prosperity benchmark — households at the living wage have no discretionary income. A fixed-charge tax obligation such as a property tax levy applied to this income level directly compresses the budget below that floor.
Your Property Tax Bill: Who's Actually Charging You?
Most HD 109 residents receive a single property tax bill but are actually paying five separate taxing entities at once. Every property in HD 109 pays the same three county-wide layers — Dallas County, Dallas College, and Parkland Hospital — plus a city rate and an ISD rate that vary depending on exactly where in the district your property is located. This panel breaks down each layer for every major community in HD 109 using TY2024 adopted rates from each taxing entity.
Three layers every HD 109 property owner pays — regardless of city or ISD
Dallas County
$0.2155 / $100
M&O: $0.208765 + I&S: $0.006735. Funds county courts, sheriff, road & bridge, and county operations. Adopted rate unchanged FY2024–FY2026 (Dallas County Tax Office, TY2024)
Dallas College (DCCCD)
$0.1056 / $100
Community college district levy covering all Dallas County properties. FY2024 adopted rate $0.105595 — reduced from $0.110028 in TY2023 (Dallas College FY2024 Adopted Budget)
Parkland Hospital District
$0.2120 / $100
Dallas County Hospital District. Funds Parkland Health's safety-net hospital system. TY2024 adopted rate held flat through FY2026 (Dallas County Commissioners Court, TY2024)
Subtotal — shared county layers
$0.5331 / $100
Every HD 109 property pays this combined 0.5331% before a single city or ISD dollar is added. On a $280,000 home: $1,493/yr in county-level charges alone.
Full combined rate stack by HD 109 community — TY2024 adopted rates
All rates expressed per $100 of assessed value. M&O = Maintenance & Operations; I&S = Interest & Sinking (bond debt service). The ISD layer is consistently the largest single component — ranging from 47% to 50% of the total combined rate depending on the district.
| Community / ISD | Dallas County | Dallas College | Parkland | City rate | ISD rate | Combined rate | Annual tax — $200K home | Annual tax — $280K home | Annual tax — $350K home |
|---|---|---|---|---|---|---|---|---|---|
| Cedar Hill (Cedar Hill ISD) | 0.2155% | 0.1056% | 0.2120% | 0.6364% | 1.1279% | 2.2974% | $4,595 | $6,433 | $8,041 |
| Duncanville (Duncanville ISD) | 0.2155% | 0.1056% | 0.2120% | 0.6148% | 1.1057% | 2.2536% | $4,507 | $6,310 | $7,888 |
| Lancaster (Lancaster ISD) | 0.2155% | 0.1056% | 0.2120% | 0.5995% | 1.2244% | 2.3570% | $4,714 | $6,600 | $8,249 |
| DeSoto (DeSoto ISD) | 0.2155% | 0.1056% | 0.2120% | 0.6849% | 1.2252% | 2.4432% | $4,886 | $6,841 | $8,551 |
| HD 109 range | 2.2536% – 2.4432% | $4,507 – $4,886 | $6,310 – $6,841 | $7,888 – $8,551 |
Table 9. TY2024 adopted property tax rates by taxing entity for HD 109 communities. Dallas County rate ($0.215500) from Dallas County Tax Office (2024), 2024 Ad valorem tax rates for Dallas County. Retrieved from https://www.dallascad.org. Dallas College rate ($0.105595) from Dallas College (2024), FY2024–2025 adopted budget. Retrieved from https://www.dallascollege.edu. Parkland Hospital District rate ($0.212000) from Dallas County Commissioners Court (2024), FY2024 Dallas County Hospital District adopted budget. Retrieved from https://www.parklandhealth.org/reports-disclosures. Cedar Hill ISD ($1.1279) and Lancaster ISD ($1.2244) from Dallas County Tax Office (2025), 2024 tax rate table. Retrieved from https://www.dallascounty.org/departments/tax/tax-rates.php. Duncanville ISD ($1.1057) from Chicago Title (2024), 2024 Dallas County property tax rates. Retrieved from https://dallas.ctic.com. DeSoto ISD ($1.2252) from Dallas County Tax Office (2024) same table. City of Cedar Hill ($0.6364), City of Lancaster ($0.5995) from Dallas County Tax Office 2024 rate table. City of Duncanville ($0.6148) from Chicago Title (2024). City of DeSoto ($0.6849) from City of DeSoto (2024), Ordinance No. 2415-24 levying ad valorem taxes for tax year 2024. Retrieved from https://www.desototx.gov. All rates are per $100 of assessed value.
What the rate stack means for HD 109 residents
- Your property tax bill is five taxing entities on a single check: every homeowner in HD 109 is simultaneously funding Dallas County general operations, Dallas College's community college system, Parkland Hospital's safety-net health system, their city's municipal services, and their local ISD. Three of those five layers are identical regardless of where in the district you live — you have no ability to avoid them by choosing a different neighborhood within HD 109.
- The ISD is the dominant layer — and the one most residents never scrutinize: across all four HD 109 communities, the ISD rate accounts for 47%–50% of the total combined rate. On a $280,000 home in Lancaster, the Lancaster ISD alone collects $3,428/yr. Cedar Hill ISD collects $3,158/yr. These figures represent a standing annual obligation that does not adjust downward when household income falls.
- Two residents with identical homes in different HD 109 communities pay up to $531/yr more or less solely due to their ISD and city assignment: the rate spread across HD 109 communities is 0.19 percentage points — from Duncanville's 2.2536% to DeSoto's 2.4432%. On a $280,000 home, that is $6,310/yr vs. $6,841/yr — a $531 annual difference with no corresponding difference in state services or household income.
- The county layers alone cost $1,493/yr on a $280,000 home before city or ISD is added: Dallas County ($603/yr), Dallas College ($296/yr), and Parkland Hospital ($594/yr) together consume $1,493/yr of every HD 109 homeowner's budget. Renters pay these costs invisibly through the Pub. 96-463 passthrough embedded in rent — they fund county government, a community college, and a hospital they may never use, with no billing notification and no line item on any statement they receive.
Rate stack methodology notes
All rates are TY2024 adopted rates — the rates applied to January 1, 2024 property valuations, billed in fall 2024. Rates are expressed per $100 of assessed value. The three county-wide layers (Dallas County, Dallas College, Parkland Hospital District) apply uniformly to all taxable property within Dallas County and therefore to all HD 109 properties. City rates apply only to incorporated properties within each city's boundaries; unincorporated Dallas County properties within HD 109 pay no city layer. ISD rates apply to all properties within each ISD's attendance zone boundary regardless of city incorporation status. Home value scenarios ($200K, $280K, $350K) are applied to the full assessed value without homestead exemption deduction; actual tax bills for owner-occupied homesteads are lower to the extent homestead, over-65, or disability exemptions apply. All rates sourced directly from official taxing entity adopted rate ordinances, Dallas County Tax Office published rate tables, and Dallas Central Appraisal District records.
References
All sources cited in APA 7th edition format with annotations, alphabetically by author or issuing organization. All data in Section 3 derives from primary official government sources and institutional research organizations. No figures are drawn from news articles, advocacy publications, or unverified third-party estimates.
Chicago Title. (2024). 2024 Dallas County property tax rates. Chicago Title Insurance Company. Retrieved from https://dallas.ctic.com
Compiled TY2024 property tax rate table for Dallas County taxing entities. Corroborating source for the TY2024 Duncanville ISD adopted rate ($1.1057 per $100) and City of Duncanville adopted rate ($0.6148 per $100) used in the Rate Stack panel.
City of DeSoto. (2024). Ordinance No. 2415-24 levying ad valorem taxes for the use and support of the municipal government of the City of DeSoto, Texas for the tax year 2024. City of DeSoto. Retrieved from https://www.desototx.gov
Official City of DeSoto ordinance adopting the TY2024 ad valorem tax rate of $0.684934 per $100 of assessed value. Primary source for the City of DeSoto layer in the Rate Stack panel.
Dallas College. (2024). FY2024–2025 adopted budget. Dallas College. Retrieved from https://www.dallascollege.edu/about/financial/notice-public-hearing/
Official adopted budget establishing the TY2024 Dallas College district-wide property tax levy rate of $0.105595 per $100 of assessed value. This layer applies uniformly to all Dallas County properties, including all HD 109 locations, and is the second of three shared county-level layers in the Rate Stack panel.
Dallas County Commissioners Court. (2024). FY2024 Dallas County Hospital District (Parkland Health) adopted budget and tax rate. Dallas County. Retrieved from https://www.parklandhealth.org/reports-disclosures
Official Dallas County Hospital District adopted tax rate for TY2024 at $0.212000 per $100 of assessed value. Primary source for the Parkland Hospital District layer in the Rate Stack panel, applicable to all Dallas County properties. On a $280,000 home this layer alone costs $594 per year.
Dallas County Tax Office. (2024). 2024 ad valorem tax rates for Dallas County. Dallas County. Retrieved from https://www.dallascad.org/ViewPDFs.aspx?type=1
Official Dallas County compiled rate table listing TY2024 adopted rates for all taxing entities within the county. Primary source for Dallas County general rate ($0.2155 per $100), Cedar Hill ISD ($1.1279), Lancaster ISD ($1.2244), DeSoto ISD ($1.2252), City of Cedar Hill ($0.6364), and City of Lancaster ($0.5995) used in the Rate Stack panel.
Federal Reserve Bank of St. Louis. (2025). Homeownership rate for Texas [TXHOWN] [Data series]. FRED Economic Data. Retrieved from https://fred.stlouisfed.org/series/TXHOWN
Annual homeownership rate series for Texas. Source for the 62.9% statewide homeownership benchmark used in the Overview panel to establish that HD 109's 67.5% owner-occupancy rate is 4.6 percentage points above the state average — meaning a larger share of district households receive property tax bills directly in their own names.
Glasmeier, A., Glasmeier, R., & Nadeau, C. A. (2026, February 15). Living wage calculation for Dallas County, Texas [County-level data tool]. MIT Living Wage Calculator. Massachusetts Institute of Technology, Department of Urban Studies & Planning. Retrieved from https://livingwage.mit.edu/counties/48113
Primary source for all living wage benchmarks used in the Living Wage Context panel. Provides minimum hourly wage rates and annual pre- and post-tax income requirements for twelve household types in Dallas County, TX. Key values: single adult ($48,489/yr at $23.31/hr); two adults, two children, one working ($80,866/yr at $38.88/hr). Texas has no state income tax; after-tax values reflect federal withholding only. Used to benchmark HD 109 median household income and each income quintile against applicable living wage floors.
Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025, August 5). 2024 certified property tax rates and levies by county, city, school district, and special district [Certified data files]. Texas Comptroller of Public Accounts. Retrieved from https://comptroller.texas.gov/taxes/property-tax/rates
Certified TY2024 property tax levy data covering all 254 counties, 1,187 cities, 1,013 ISDs, and 2,530 special districts statewide. Primary source for the total 2024 Texas property tax levy of $86.6 billion — School Districts ($41.7B, 48.1%), Counties ($15.7B, 18.2%), Cities ($15.7B, 18.2%), Special Districts ($13.5B, 15.6%) — and the 1.886% combined local average rate applied to HD 109 owner burden modeling. Also the basis for the levy distribution chart (Figure 6) and all pro-rata HD 109 share calculations.
Texas Comptroller of Public Accounts. (2025, January). Tax exemptions and tax incidence: A report to the Governor and the Legislature of the State of Texas (Publication No. 96-463). Texas Comptroller of Public Accounts. Retrieved from https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/2025/96-463.php
Biennial report required by Texas Tax Code §403.014. Sole primary source for the 17–20% renter property tax passthrough rate (18.5% midpoint) applied to all HD 109 renter burden calculations. Also provides the Level 2 extended incidence methodology and the Level 2/Level 1 ratio (1.4932×) used to produce the $6,778 per-household extended burden estimate. All renter passthrough figures in Section 3 are sourced exclusively from this publication.
Texas Legislative Council. (2024). PlanH2316: House District 109 demographic and socioeconomic profile (ACS 2019–2023). Texas Legislative Council. Retrieved from https://tlc.texas.gov
Official district-level profile for HD 109 providing population (185,049), racial and ethnic composition (52.7% Black or African American, 31.5% Hispanic), household count (62,106), age structure, homeownership rate (67.5%), median household income ($57,836), and per-capita income ($32,612), all based on ACS 2019–2023. Primary source for the Overview panel stat cards, Demographics panel tables, and all HD 109 baseline figures used throughout Section 3.
Texas Taxpayers and Research Association. (2023, January). The myth of Texas as a low-tax state [Research brief]. TTARA. Retrieved from https://ttara.org/wp-content/uploads/2023/01/TTARATaxBurdenResearchBrief123.pdf
Research brief from the Texas Taxpayers and Research Association, a nonpartisan Texas tax policy research organization. Raw data source for the 40%/60% residential-to-business property tax burden split applied in Table 5 to allocate the $86.6B statewide levy. Referenced for raw data only; no analytical conclusions, policy positions, or interpretations from TTARA are incorporated into this section.
U.S. Bureau of Labor Statistics. (2025). Consumer expenditure survey Texas state table, 2022–2023: Mean annual expenditures, income quintiles before taxes, 2-year average [Data tables]. U.S. Department of Labor. Retrieved from https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Texas-specific Consumer Expenditure Survey data, 2022–23 two-year average. Primary source for all five quintile average incomes (Q1 $13,292 through Q5 $230,158), ownership rates by quintile, and household expenditure category shares used in the HD 109 quintile burden model (Table 4), regressivity analysis (Q1 = 16.8%, Q5 = 4.2%, ratio 4.0×), living wage context, and HD 109 household expenditure table (Table 3).
U.S. Census Bureau. (2024). American Community Survey 5-year estimates, 2019–2023: Selected housing and economic characteristics, Texas and Texas House District 109. U.S. Department of Commerce. Retrieved from https://data.census.gov
ACS 5-year estimates providing Texas statewide benchmarks for median household income ($69,021), per-capita income ($39,446), and homeownership context used in the Overview panel comparisons. Also provides HD 109-level income distribution by bracket (Figure 2), housing tenure breakdown, and vacancy data cross-referenced with TLC PlanH2316 throughout Section 3.
Section 4 of 6
The Texas Property Tax Replacement Plan
What it is, what it replaces, what gets taxed, and how one flat rate of 4.6732% eliminates every property tax in Texas — permanently.
The Plan at a Glance
The Texas Property Tax Replacement Plan replaces all state taxes, all local property taxes, and all local sales taxes with one flat sales tax. The plan is introduced at a 6.00% starting rate cap to provide implementation and transition buffer, while the underlying math shows the minimum required floor rate is 4.6732% on the post-TLES net base. Six essential living expense categories are protected by the Texas Living Exemption Set (TLES) — groceries, residential rent, utilities, prescription drugs, medical care, and education tuition at licensed providers. Every other special-interest exemption currently in the Texas tax code is eliminated. The result: a simpler, broader, lower-rate tax system where no Texan pays property taxes on their home, business, or land.
Total Replacement Obligation
$178.77B
All state taxes + all local property & sales taxes — FY/TY2024
Property Taxes Eliminated
$86.60B
ISDs $41.7B · Counties $15.7B · Cities $15.7B · Special $13.5B — TY2024
Plan Starting Rate
6.00%
Policy cap for implementation — 2.25 pts below 8.25% constitutional cap
Minimum Floor Rate
4.6732%
Confirmed April 11, 2026 — post-TLES net base of $3.825T
Current State & Local Tax Mix — Scope 2 Taxes Being Replaced
Sources: Texas Comptroller Revenue Watch FY2024; PTAD TY2024; Texas Open Data Portal CY2024
| Tax Type | State | Counties | Cities | ISDs | Special Districts | Total |
|---|---|---|---|---|---|---|
| Sales & Use Taxes | $47,159,947,193 | $840,721,618 | $8,747,725,627 | $0 | $0 | $56,748,394,438 |
| Other State Taxes | $73,690,000,000 | $0 | $0 | $0 | $0 | $73,690,000,000 |
| Property Taxes | $0 | $15,729,755,794 | $15,710,015,039 | $41,657,752,748 | $13,499,241,657 | $86,596,765,238 |
| Total — All Taxes Replaced (Scope 2) | $120,849,947,193 | $16,570,477,412 | $24,457,740,666 | $41,657,752,748 | $13,499,241,657 | $178,769,100,483 |
Gross Tax Base (Pre-TLES)
$4.40T
Six-component Hybrid Gross Base — full Texas economic activity
TLES: Six Living Protections
$574.2B
Groceries · Rent · Utilities · Rx Drugs · Medical · Education Tuition
Net Taxable Base (Post-TLES)
$3.825T
The base on which 4.6732% raises $178.77B
Special-Interest Carve-Outs Returning to the Base vs. TLES Household Protections Removed from the Base
Source: Texas Comptroller, Tax Exemptions & Tax Incidence Report (Pub. 96-463), FY2025 Table 2. Values shown as tax base (foregone revenue ÷ 6.25%). See Panel 4 (Living Exemptions) for the full framing and methodology.
| Special-Interest & Industry Carve-Outs Added Back Into the Taxable Base | Texas Living Exemption Set (TLES) — Household Protections Removed From the Taxable Base | ||
|---|---|---|---|
| Carve-Out | Tax Base Value | Living Exemption | Tax Base Value |
| Property used in qualified data centers (Tex. Tax Code § 151.359) | $16,249,600,000 | Groceries | $97,185,000,000 |
| Property used in media production, recording & broadcasting | $2,230,400,000 | Residential rent | $71,023,582,572 |
| Railroad rolling stock, fuel & supplies | $1,212,800,000 | Residential utilities | $40,598,422,000 |
| Boats & boat motors (taxed under separate law) | $1,120,000,000 | Prescription drugs | $41,563,000,000 |
| Newspapers & newspaper inserts | $704,000,000 | Medical services (patient-facing) | $295,000,000,000 |
| All 20 other identified industry carve-outs combined — itemized in the downloadable CSV | $235,752,000,000 | Education tuition at licensed providers | $28,875,989,500 |
| Total carve-out tax base returning to the TPTR taxable economy (25 identified items) | $257,268,800,000 | Total TLES tax base removed to protect households | $574,245,994,072 |
| The Texas Property Tax Replacement Plan adds $257.27B of currently-untaxed industry and special-interest economic activity back into the taxable base, then removes $574.25B of essential household living costs to protect Texas families. Every other dollar of Texas economic activity pays the same flat rate. | |||
Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. https://comptroller.texas.gov/transparency/revenue/watch.php; Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025). Property tax rates and levies: Tax year 2024. https://comptroller.texas.gov/taxes/property-tax/rates/; Texas Comptroller of Public Accounts. (2025). State sales and use tax analysis report: Q3 2025. https://comptroller.texas.gov/transparency/local/quarterly-report/stxqtr01.php; Texas Comptroller of Public Accounts. (2025, January 16). Tax Exemptions and Tax Incidence Report (Pub. 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/; Tex. Tax Code § 151.051.
What Makes This Plan Different
- It replaces everything — not just property taxes. The Total Replacement Obligation covers all $178.77B in state and local taxes. Property taxes are eliminated entirely, but so is the franchise tax and every other state and local tax, replaced by one transparent rate.
- The base is the key. Today only 23.1% of Texas economic activity is taxed. By applying the rate consistently across the full $4.4 trillion economy — with six targeted living expense exemptions — a rate of 4.6732% replaces $178.77B. No new taxes. No new categories. One rule applied equally to everyone.
- Six protections, not zero. The TLES shields the essential costs of living for every Texas family — groceries, rent, utilities, prescriptions, medical care, and education tuition at licensed providers. Every special-interest exemption that benefits industries instead of people is eliminated.
- 6% is the starting cap. 4.6732% is the floor. The plan is intentionally introduced at 6.00% to provide room for implementation, transition management, and constitutional conversion steps. The underlying replacement math confirms the state can fully fund the system at just 4.6732%. The 1.326-point buffer above the floor is real fiscal headroom, not a guess.
What the Plan Replaces: The Scope
The Texas Property Tax Replacement Plan replaces every state tax, every local property tax, every local sales tax, and the annual debt service on every property-tax-backed bond with one statewide flat sales tax structure. The full target obligation — the total revenue the plan must generate — is $178,769,100,483.
Most discussions about property tax relief focus only on the property tax line. This plan goes further. It eliminates the franchise tax on Texas businesses, the motor vehicle sales tax, oil and gas production taxes, insurance premium taxes, and every other state and local tax currently on the books — and it explicitly covers the interest-and-sinking (I&S) debt service that property owners pay today inside their annual property tax bill. Every dollar is replaced by one transparent, flat rate applied consistently across the economy.
Table 2.1 shows every revenue stream the plan replaces at each level of government, split into its two components: Maintenance & Operations (M&O), which funds day-to-day government services, and Interest & Sinking (I&S) Bond Debt Service, which retires the outstanding bonds backed by those taxes. Adding the two columns together yields the certified annual total for each line. This makes explicit what is often hidden: bond obligations are fully covered, dollar-for-dollar, by the new flat rate — not separately, not on top, but inside the same replacement obligation.
Table 2.1. Full Replacement Obligation — All Taxes and Bond Debt Service the Plan Eliminates
Sources: Texas Comptroller Revenue Watch FY2024; Texas Comptroller PTAD TY2024; Texas Open Data Portal CY2024; Texas Bond Review Board Annual Report 2025; TPTR Entity Assignment Schema v0.4
| Revenue Stream | M&O | I&S (Bond Debt Service) | Annual Total | Source |
|---|---|---|---|---|
| State Taxes & State Bond Debt Service — Eliminated | ||||
| State Sales & Use Tax | $47,159,947,193 | $0 | $47,159,947,193 | TX Comptroller Revenue Watch FY2024 |
| Franchise / Margin Tax | $7,081,852,807 | $0 | $7,081,852,807 | TX Comptroller Revenue Watch FY2024 |
| Motor Vehicle Sales & Use Tax | $6,840,000,000 | $0 | $6,840,000,000 | TX Comptroller Revenue Watch FY2024 |
| Oil Production Tax | $6,300,000,000 | $0 | $6,300,000,000 | TX Comptroller Revenue Watch FY2024 |
| Insurance Premiums Tax | $2,980,000,000 | $0 | $2,980,000,000 | TX Comptroller Revenue Watch FY2024 |
| Natural Gas Production Tax | $2,130,000,000 | $0 | $2,130,000,000 | TX Comptroller Revenue Watch FY2024 |
| Alcoholic Beverage Tax | $1,770,000,000 | $0 | $1,770,000,000 | TX Comptroller Revenue Watch FY2024 |
| Cigarette & Tobacco Tax | $1,070,000,000 | $0 | $1,070,000,000 | TX Comptroller Revenue Watch FY2024 |
| Hotel Occupancy Tax (State) | $760,000,000 | $0 | $760,000,000 | TX Comptroller Revenue Watch FY2024 |
| Mixed Beverage Tax | $670,000,000 | $0 | $670,000,000 | TX Comptroller Revenue Watch FY2024 |
| Utility Tax | $670,000,000 | $0 | $670,000,000 | TX Comptroller Revenue Watch FY2024 |
| Other State Taxes & Feesa | $4,438,200,000 | $0 | $4,438,200,000 | TX Comptroller Revenue Watch FY2024 |
| State Non-Self-Supporting Bond Debt Serviceb | $0 | $713,888,000 | $713,888,000 | TX Bond Review Board AR 2025 |
| State Subtotal | $81,870,000,000 | $713,888,000 | $82,583,888,000 | |
| Local Property Taxes & Local Bond Debt Service — Eliminated | ||||
| County Property Taxes (254 counties)c | $14,422,116,288 | $1,307,639,506 | $15,729,755,794 | TX Comptroller PTAD TY2024; BRB 2024 Local AR |
| City Property Taxes (1,093 cities)c | $11,552,113,049 | $4,157,901,990 | $15,710,015,039 | TX Comptroller PTAD TY2024; BRB 2024 Local AR |
| ISD Property Taxes (1,013 ISDs)c | $28,792,951,600 | $12,864,801,148 | $41,657,752,748 | TX Comptroller PTAD TY2024; BRB 2024 Local AR |
| Special District Property Taxes (2,349 districts)c | $10,273,658,349 | $3,225,583,308 | $13,499,241,657 | TX Comptroller PTAD TY2024; BRB 2024 Local AR |
| Local Property Taxes Subtotal | $65,040,839,286 | $21,555,925,952 | $86,596,765,238 | |
| Local Sales Taxes — Eliminated | ||||
| County Sales Taxes | $840,721,618 | $0 | $840,721,618 | TX Open Data Portal qsh8-tby8 |
| City Sales Taxes | $8,747,725,627 | $0 | $8,747,725,627 | TX Open Data Portal vfba-b57j |
| Local Sales Taxes Subtotal | $9,588,447,245 | $0 | $9,588,447,245 | |
| Total Replacement Obligation | $156,499,286,531 | $22,269,813,952 | $178,769,100,483 | All taxes and bond debt replaced by one flat rate |
a Other State Taxes & Fees reconciled to Texas Comptroller Revenue Watch FY2024 after removing items already itemized above; matches the $178.769B total obligation in TPTR Part IV.
b State Non-Self-Supporting Bond Debt Service ($713,888,000 annual, FY2026): Texas Bond Review Board Annual Report 2025, Debt Service schedule — General Obligation Non-Self-Supporting $637,148,000 + Non-GO Non-Self-Supporting $76,740,000. Not funded by any state tax today; paid from General Revenue appropriations. Must be added to the obligation because it is a state-level property-of-taxpayers debt that does not currently sit inside any other state tax stream.
c Local M&O / I&S split: Each certified PTAD TY2024 levy is the total property owners pay today, already composed of a Maintenance & Operations portion and an Interest & Sinking (I&S) bond debt service portion. The I&S column shows the FY2026 annual debt service currently absorbed by property tax levies (Texas Bond Review Board 2024 Local Annual Report and TPTR Entity Assignment Schema v0.4), allocated across government types in proportion to tax-supported debt-service obligations. The M&O column is the remainder. Columns sum to the certified PTAD total — no double-count. The flat rate replaces both.
$178.77B Total Replacement Obligation — M&O vs. I&S Bond Debt Service at Each Level
Sources: Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. https://comptroller.texas.gov/transparency/revenue/watch.php; Texas Comptroller of Public Accounts, PTAD. (2025). Property tax rates and levies, TY2024. https://comptroller.texas.gov/taxes/property-tax/rates/; Texas Open Data Portal. (2025). Local sales and use tax allocations CY2024. https://data.texas.gov; Texas Bond Review Board. (2026). Annual report 2025. https://www.brb.texas.gov/wp-content/uploads/2026/01/AR2025.pdf; Texas Bond Review Board. (2025). 2024 Local government annual report. https://www.brb.texas.gov/wp-content/uploads/2025/01/2024LocalARFinal.pdf
Why the Full Replacement Obligation Matters
- Every bond obligation is fully covered. The plan does not leave bondholders or issuers in the lurch. The $22.27 billion in annual I&S bond debt service that Texas property owners currently pay inside their property tax bills — at the state, county, city, school district, and special district levels — is explicitly included in the $178.769B total obligation. Bonds that pledge ad valorem taxes as their repayment source continue to be paid on time, in full, from the flat sales tax the day property taxes end.
- Property taxes are the largest single target — but not the only one. At $86.60 billion, local property taxes (M&O + I&S combined) represent 48.4% of the total obligation. But the plan eliminates all the others too, including the franchise tax that burdens Texas businesses and the patchwork of state excise taxes that add hidden costs throughout the economy.
- Local governments keep their funding — operations and debt service alike. The plan does not cut city, county, ISD, or special district revenue. Every dollar currently raised through property taxes and local sales taxes — including every dollar pledged to repay voter-approved bonds — is replaced dollar-for-dollar through each jurisdiction's allocated share of the flat sales tax. No city loses funding. No school district takes a cut. No bondholder is impaired.
- One rate replaces 18 different taxes and eliminates hidden debt service. Today Texans pay state sales tax, local sales tax, property tax (M&O), property tax (I&S bond debt service), franchise tax, motor vehicle tax, production taxes, and more — each with its own rules, rates, and compliance burden. The plan replaces all of them with one flat rate, one base, and one set of rules applied equally to everyone.
- The $178.77 billion figure is conservative. It is built from certified FY2024 and TY2024 actuals, plus FY2026 certified debt service schedules from the Texas Bond Review Board. As the Texas economy grows, the revenue generated at the flat rate grows with it — creating a naturally self-funding system that retires bond obligations on their existing amortization schedules without requiring rate increases.
A Note on Education Funding: Not All State Education Spending Is Texas Taxpayer Money
Of the $53.3 billion in total FY2025 education expenditures flowing through state agencies, roughly $10–13 billion is federal pass-through funding — Title I, IDEA, and other federal education programs that arrive from Washington and flow through TEA to local school districts. The plan does not replace federal funding, nor does it need to.
The approximately $27.0 billion in Texas state aid to school districts is fully accounted for in the plan. It flows directly to ISDs through Tier 4 of the four-tier allocation, funded by the flat sales tax instead of property taxes. School districts receive every dollar they receive today — from a simpler, more direct, and more stable source.
- Total FY2025 education expenditures, all funds: $53,272,170,890 — Texas Comptroller ACFR FY2025
- TEA Agency 701 FY2025 all-funds appropriations: $39,956,729,579 — Texas LBB FY2025
- TEA PEIMS FY2023–24 state aid to ISDs: $27,035,302,012 — TEA PEIMS Financial Data
The Tax Base: What Gets Taxed
Three-quarters of Texas economic activity escapes the current sales tax because the law has built hundreds of exemptions and carve-outs over decades. The Texas Property Tax Replacement Plan replaces all of that with two precise definitions that together capture every transaction in the tax base — and leave no ambiguity about what is in and what is out.
What we are covering here is BEFORE the TLES is applied. We are providing this detail to show how strong the Texas economy is and to put the value of the TLES into perspective.
Gross Tax Base — Pre-TLES
$4.40T
Six-component hybrid gross base — full Texas economic activity
TLES Deductions — Six Living Protections
$574.2B
Groceries · Rent · Utilities · Rx Drugs · Medical · Education Tuition
Net Taxable Base — Post-TLES
$3.825T
The base on which the 4.6732% flat rate is applied
Definition: A Taxable Transaction
A transaction is taxable under the Texas Property Tax Replacement Plan when a clear product is being purchased or a service is being rendered as part of the exchange or sale.
This is the foundational test. If something is being bought — a good, a service, a commodity, a policy, a property — that exchange qualifies. If nothing is being bought or rendered — a loan repayment, a stock purchase, an insurance claim payout, an interest payment — it does not qualify.
Definition: An Agent Transaction
An Agent Transaction is any transaction performed by an agent — a person or business acting on behalf of a principal — where the agent purchases a product or service on the principal's behalf, and separately renders their own labor or provides their own product to the principal.
- Products or services purchased by the agent on behalf of the principal are taxed at the point of purchase. That tax cost is passed through to the principal in the final bill — it is not taxed again.
- The agent's own labor or product rendered to the principal is a separate taxable transaction, and sales tax is collected on that portion of the bill independently.
Transaction Scope: In vs. Out of the Tax Base
Source: Texas Property Tax Replacement Plan — Tax Base Governing Rule Framework
| In Scope — Taxable | Out of Scope — Not Taxable |
|---|---|
| Buying groceries (subject to TLES-1 exemption) | Mortgage principal repayment |
| Paying residential rent (subject to TLES-2 exemption) | Purchasing shares of stock |
| Hiring a contractor — labor portion of bill | Receiving an insurance claim payout |
| Purchasing a home (residential real estate transaction) | Interest earned on savings deposits |
| Paying an insurance premium | Loan proceeds received (not a product purchase) |
| Business buying materials — taxed at purchase, not again at end sale | Financial transfers between accounts |
| Paying for medical services (subject to TLES-5 exemption) | Dividend distributions (return on investment, not a service rendered) |
| Paying for education tuition at a licensed provider (subject to TLES-6 exemption) | Government-to-government transfers and grants |
The base is built from six non-overlapping sectors of the Texas economy. The Texas Comptroller's gross sales data (C1a & C1b) forms the primary and authoritative core. Components C2 through C6 capture economic sectors not fully represented in the Comptroller's quarterly gross sales reporting.
Table 3.1. Full Hybrid Gross Tax Base — Six Components, Pre-TLES
Sources: TX Comptroller Q3 2025 · TX RRC CY2024 · TDI 2024 MCAR · Texas REALTORS 2024 · FDIC TX 2024 · CMS NHE 2024
| Component | Description | Annual Amount | % of Base | Primary Source | Status |
|---|---|---|---|---|---|
| C1a | In-State Gross Sales — all TX permitted sellers, all industries | $2,577,168,340,904 | 58.58% | TX Comptroller Quarterly ST Analysis Q3 2025 ×4 | Confirmed |
| C1b | Out-of-State / Wayfair Remote Seller Gross Sales | $891,089,046,132 | 20.25% | TX Comptroller Quarterly ST Analysis Q3 2025 ×4 | Confirmed |
| C2 | Oil & Gas Wellhead Production Value — crude oil & natural gas at severance | $165,400,000,000 | 3.76% | TX Railroad Commission CY2024; U.S. EIA TX Wellhead Price Data | Confirmed |
| C3 | Insurance Premiums — all lines (P&C $83.1B confirmed; Life/Health/HMO/Title implied) | $270,000,000,000 | 6.14% | TDI 2024 Market Conditions Annual Report; TX Comptroller premium tax back-calculation | Partial |
| C4 | Residential Real Estate Transactions — all TX homes & condos, gross dollar volume | $111,000,000,000 | 2.52% | Texas REALTORS 2024 Annual Report | Confirmed |
| C5 | Banking & Financial Services Gross Revenue — TX-domiciled floor $59.8B; $90B covers all TX-operating institutions | $90,000,000,000 | 2.05% | FDIC TX State Profile 2024; FDIC Summary of Deposits 2025 | Confirmed |
| C6 | Healthcare Services Gross Revenue — hospital, physician/clinical, dental, home health Note: Fully deducted by TLES-5. Net taxable contribution = $0. Shown for transparency. | $295,000,000,000 | 6.71% | CMS National Health Expenditure Accounts 2024 (TX 9.5% GDP share) | Derived |
| GROSS TOTAL — Pre-TLES | $4,399,657,387,036 | 100% | |||
Texas Comptroller of Public Accounts. (2025). State sales and use tax analysis report, Q3 2025. comptroller.texas.gov Texas Railroad Commission. (2025). Oil and gas production data, CY2024. rrc.texas.gov Texas Department of Insurance. (2025, March). 2024 Market Conditions Annual Report. tdi.texas.gov Texas REALTORS. (2024). Texas Residential Real Estate Annual Report. texasrealestate.com Federal Deposit Insurance Corporation. (2025). FDIC Texas State Profile 2024. fdic.gov Centers for Medicare & Medicaid Services. (2026, February). National Health Expenditure Accounts Historical Data, CY2024. cms.gov
The $4.4 Trillion Tax Base — Six Components
C6 Healthcare ($295B, 6.71%) is shown for full transparency. Its net taxable contribution is $0 after TLES-5 deducts it in full. Sources: TX Comptroller Q3 2025 · TDI 2024 MCAR · TX RRC CY2024 · Texas REALTORS 2024 · FDIC 2024 · CMS NHE 2024.
Why the Base Is Built This Way
- The Comptroller's gross sales data is the foundation. C1a and C1b together — $3,468.3B annualized from Q3 2025 — represent every reported dollar of sales activity by Texas-permitted sellers plus out-of-state remote sellers. This is the Comptroller's own data, reported once per transaction at the point of sale, exactly the way the plan taxes.
- C2–C5 fill gaps the quarterly report does not fully capture. Oil and gas wellhead value, insurance premiums, residential real estate sales, and financial services gross revenue flow through separate reporting systems but are real transactions under the plan's governing rule.
- C6 is transparent, not functional. Healthcare ($295B) is included to show the full scope of the plan's base definition. But TLES-5 removes healthcare in full, so its net taxable contribution is zero. It is shown here so no reader thinks healthcare is hidden.
- No transaction is taxed twice. The agent-transaction rule ensures B2B purchases within a supply chain are each taxed once at the point of sale — not again when the finished product reaches the end consumer.
- The 76.9% gap closes, but six protections remain. Applying the rule consistently captures the $4.40T gross base. The TLES removes $574.2B — groceries, rent, utilities, prescriptions, medical care, and licensed education — leaving $3.825T as the net taxable base on which 4.6732% raises $178.77B.
Living Exemptions (TLES)
The Texas Living Exemption Set (TLES) protects essential household spending before the flat rate is ever applied. The plan starts with the full gross base, then removes six categories of basic living costs to arrive at the final net taxable base. These are structural exemptions — not credits, rebates, or income-tested benefits. If a transaction falls inside one of these six essential categories, it is simply not taxed.
Two Directions of the Base
The Texas Property Tax Replacement Plan adjusts the taxable base in two opposite directions, and both are on purpose.
- Carve-outs come back in. 25 industry and special-interest sales-tax exemptions currently sit outside the base. Under TPTR, that economic activity is returned to the base and pays the same flat rate as everyone else — adding $257.27B of previously-untaxed activity back in.
- Living costs come out. Six categories of essential household spending — groceries, rent, residential utilities, prescription drugs, medical care, education tuition at licensed providers — are removed from the base, protecting $574.25B of family spending from sales tax.
One side grows the base so the rate can come down. The other side shrinks the base where it matters most to Texas families.
TLES Waterfall: From Gross Base to Net Taxable Base
Table 4.1. TLES Waterfall — Gross Base to Net Taxable Base
Sources: USDA ERS 2024 · Census ACS 2023 · EIA 2024 · CMS NHE 2024 · SHEEO 2024 · TX Comptroller PTAD
| Full Hybrid Gross Base (Pre-TLES) | $4,399,657,387,036 |
| Less TLES-1 — Groceries (food at home) | −$97,185,000,000 |
| Less TLES-2 — Residential Rent | −$71,023,582,572 |
| Less TLES-3 — Residential Utilities (electric, gas, water) | −$40,598,422,000 |
| Less TLES-4 — Prescription Drugs | −$41,563,000,000 |
| Less TLES-5 — Medical Care (all healthcare services) | −$295,000,000,000 |
| Less TLES-6 — Education Tuition at Licensed Providers | −$28,875,989,500 |
| Total TLES Deductions | −$574,245,994,072 |
| Net Taxable Base (Post-TLES) | $3,825,411,392,964 |
TLES Six Exemption Lines — Dollar Value by Category
TLES-1 Groceries: USDA Economic Research Service. (2024). Food expenditure series. ers.usda.gov
TLES-2 Rent: U.S. Census Bureau. (2023). American Community Survey 1-Year Estimates, Texas. data.census.gov
TLES-3 Utilities: U.S. Energy Information Administration. (2024). State energy profiles — Texas. eia.gov
TLES-4 Rx Drugs: Centers for Medicare & Medicaid Services. (2026, February). National Health Expenditure Accounts, CY2024. cms.gov
TLES-5 Medical: CMS NHE 2024, TX 9.5% GDP share.
TLES-6 Education: State Higher Education Executive Officers Association. (2024). SHEF Report FY2024. sheeo.org; Texas Education Agency PEIMS FY2024.
What the Six Exemptions Cover
These protections are permanent structural rules in the tax base — not policy options subject to annual legislative budget fights. Each protects a category of essential household spending that every Texas family incurs regardless of income.
TLES-1$97.185B
Groceries
Food purchased at grocery stores, supermarkets, and similar retailers for preparation and consumption at home. Restaurant meals, takeout, and food-away-from-home purchases remain taxable.
Source: USDA Economic Research Service, Food Expenditure Series, 2024 — Texas share of national food-at-home spending.
TLES-2$71.024B
Residential Rent
Monthly rent paid for apartments, houses, and other residential rentals in Texas. This protects renters directly on one of the largest recurring household expenses. Commercial and short-term rentals remain taxable.
Source: U.S. Census Bureau, American Community Survey 1-Year Estimates 2023 — gross rent paid, Texas renter households.
TLES-3$40.598B
Residential Utilities
Electricity, natural gas, and water service for residential use. The exemption applies to household utility bills only. Commercial and industrial utility consumption remains taxable.
Source: U.S. Energy Information Administration, State Energy Profiles — Texas residential consumption data, 2024.
TLES-4$41.563B
Prescription Drugs
All FDA-approved prescription medications dispensed to Texas patients. Over-the-counter drugs and non-prescription health products remain taxable under the plan's standard rate.
Source: Centers for Medicare & Medicaid Services, National Health Expenditure Accounts — prescription drug spending, Texas 9.5% GDP share, CY2024.
TLES-5$295.000B
Medical Care
All healthcare services provided by licensed hospitals, physicians, clinics, dental offices, and home health agencies. This is the largest single TLES line, and it covers the full $295B in Texas healthcare services — including C6 in the gross base. Net taxable contribution of C6 is $0.
Source: CMS National Health Expenditure Accounts 2024 — hospital, physician/clinical, dental, and home health services, Texas 9.5% GDP share.
TLES-6$28.876B
Education Tuition
Tuition and mandatory fees paid to licensed educational providers — public and private universities, community colleges, and accredited K–12 schools. Applies to formal instructional tuition only. Other commercial services remain taxable.
Sources: SHEEO SHEF Report FY2024 — Texas higher education tuition revenue; TEA PEIMS Financial Data FY2023–24 — ISD tuition and fees.
TLES Protects the Household Price — Markup and All
TLES removes sales tax from the final price a Texas family pays for the six essential living-cost categories. That protected price includes the producer's markup and profit — and neither is taxed to the consumer under TPTR.
Profit in groceries, housing, utilities, medicine, medical care, and education is a sign of a healthy, functioning market. Grocers, landlords, utility providers, pharmacies, hospitals, doctors, and schools pay the flat sales tax on the supplies, equipment, and services they buy — the same way every Texas business does. What the Texas Property Tax Replacement Plan does not do is tax a family on the necessity of eating, healing, keeping the lights on, staying housed, or learning.
The state funds itself from the broad Texas economy. Not from the weekly grocery run. Not from the pharmacy counter when someone is sick.
One Transaction, Taxed Once — Never on the Patient or the Family
Under the Texas Property Tax Replacement Plan, every dollar of economic activity inside the taxable base is taxed exactly once, at the point the business buys its inputs. The family’s out-of-pocket payment for a protected essential is never the taxed transaction.
- Medical care: A Texan seeking care for a medical condition — a doctor visit, a hospital stay, an ER bill, a lab, an imaging scan, a surgery, a therapy session — pays no sales tax on that care. The hospital or clinic pays the flat rate on its equipment, materials, and supplies. The patient’s bill for treatment is protected.
- Prescription drugs: No sales tax at the pharmacy counter. The manufacturer and pharmacy pay the flat rate on the business-side inputs that produce and dispense the medication.
- Groceries, rent, residential utilities, education tuition: Same single-transaction structure. Business inputs stay in the taxable base; the household’s essential payment is protected.
There is no double tax, no cascade, no hidden tax on the family’s bill. One clean transaction on the business-input side. Nothing on the household.
Why These Six — and Not Others?
The TLES is designed around one principle: protect the essential household living costs that every Texas family incurs regardless of income. Groceries, rent, utilities, medicine, medical care, and education are the unavoidable costs of maintaining a household and raising children in Texas. Every other exemption in the current Texas tax code benefits a business or interest group, not the household. Those are eliminated. The TLES protects people. Everything else pays its share.
The TLES in Context
- $574.2B in household spending is protected. That is 13.1% of the gross base removed before the rate is ever applied — protecting the categories that matter most to working families.
- Every exemption is structural, not discretionary. These protections are built directly into the definition of the taxable base. They do not require annual budget negotiations or separate rebate programs.
- Healthcare is fully protected, even though it appears in the gross base. The $295B healthcare component is shown transparently in Panel 3 (The Tax Base) to demonstrate that healthcare is in scope under the governing rule. TLES-5 then removes it entirely. Net taxable contribution of all healthcare services is $0.
- Methodology note. TLES dollar values and the Panel 1 carve-out comparison are both expressed as tax base (the dollar value of the underlying activity), not foregone revenue. The Comptroller’s Pub. 96-463 reports exemption values as foregone revenue at the 6.25% state rate; those figures are converted to tax base by dividing by 0.0625 so both sides of the comparison are in the same units used throughout Section 4.
- What remains after TLES is still a $3.825 trillion base. After removing $574.2B in living protections, the plan taxes a net base broader and more consistent than any sales tax in Texas history. A flat 4.6732% on that base raises $178.77B — the full replacement obligation.
The Math: 4.6732% Floor Rate, 6.00% Starting Cap
The plan rests on a single equation: divide the total revenue that must be replaced by the net taxable base after TLES protections are applied. The result is the minimum flat rate required to fully fund the plan — operations and certified bond debt service, together, inside one rate. That mathematical minimum — confirmed April 11, 2026 — is 4.6732%. The plan is introduced at a 6.00% starting cap to create a transition buffer, support smaller jurisdictions while their economic base builds, and provide fiscal room for implementation and constitutional conversion steps.
Minimum Mathematical Floor
4.6732%
The rate required to exactly replace $178.77B on the $3.825T net base — operations plus absorbed bond debt service, together
Plan Starting Rate (Cap)
6.00%
Policy introduction rate — provides 1.326 pts of transition buffer above the floor
Buffer Above the Floor
1.326 pts
6.00% starting cap − 4.6732% minimum floor = $50.76B/yr real fiscal headroom
Constitutional Cap (Art. VIII §1)
8.25%
The starting rate sits 2.25 pts below the constitutional ceiling
Rate Context: Floor → Start → Constitutional Cap
Scale: 0% to 8.25% (constitutional maximum)
0%
4.6732% Floor ✓ Floor Confirmed
8.25%
The orange fill shows the range from 0% to the mathematical floor (4.6732%). The 6.00% start marker and the 8.25% constitutional cap are both shown for context.
The Floor Already Covers Bond Debt Service — Inside the Rate, Not On Top
The single most important thing to understand about the 4.6732% floor rate: it covers both day-to-day government operations and the $22.27 billion per year in certified bond debt service that Texas property owners currently pay inside their property tax bills (the I&S portion). These are not two separate rates stacked on top of each other — they are one combined rate.
Operations Portion
4.0910%
$156.54B/yr — state & local government operations
Debt Service Portion
0.5822%
$22.27B/yr — certified bond debt service absorbed inside the rate
Combined Floor
4.6732%
$178.77B/yr total — one rate, everything covered
This matters because: every bondholder continues to be paid on time, in full, on the same amortization schedule. No voter-approved bond is stranded. No credit rating is impaired. And no Texan sees a second "bond tax" line on top of the flat rate — the floor rate is the whole thing.
The Derivation
The minimum rate is derived from a single division:
Rate = Total Replacement Obligation ÷ Net Taxable Base (Post-TLES)
Rate = $178,769,100,483 ÷ $3,825,411,392,964
Rate = 0.046742... = 4.6732%
Rate = $178,769,100,483 ÷ $3,825,411,392,964
Rate = 0.046742... = 4.6732%
Table 5.1. Rate Derivation & Per-Tier Floor Composition — Operations + Absorbed Debt Service
Sources: TX Comptroller FY2024 Revenue Watch; TX Comptroller PTAD TY2024; TX Open Data Portal CY2024; TX Comptroller Q3 2025 ST Analysis; TDI MCAR 2024; TX RRC CY2024; Texas REALTORS 2024; FDIC TX 2024; CMS NHE 2024; Texas Bond Review Board AR 2025; TPTR Entity Assignment Schema v0.4
| Line Item | Amount | Notes |
|---|---|---|
| Revenue to Replace (Numerator) | ||
| State Taxes (all categories) | $82,091,799,807 | TX Comptroller Revenue Watch FY2024 |
| Local Property Taxes (M&O + I&S combined) | $86,596,765,238 | TX Comptroller PTAD TY2024 — includes $21.55B local I&S bond debt service |
| Local Sales Taxes | $9,588,447,245 | TX Open Data Portal CY2024 |
| State Non-Self-Supporting Bond Debt Service | $713,888,000 | TX Bond Review Board AR 2025 — FY2026 certified |
| (of which total bond debt service absorbed) | $22,272,800,000 | Already counted above in property tax I&S + state NSS lines |
| Total Replacement Obligation | $178,769,100,483 | Numerator — Ops $156.50B + DS $22.27B |
| Net Taxable Base (Denominator) | ||
| Gross Hybrid Base (C1a + C1b + C2 + C3 + C4 + C5 + C6) | $4,399,657,387,036 | Pre-TLES — full Texas economic activity |
| Less TLES-1 through TLES-6 (household protections) | ($574,245,994,072) | Groceries, Rent, Utilities, Rx, Medical, Tuition |
| Net Taxable Base (Post-TLES) | $3,825,411,392,964 | Denominator |
| Floor Rate Result — Operations + Absorbed Debt Service | ||
| Operations rate (Ops $156.50B ÷ $3.825T) | 4.0910% | Day-to-day state and local government |
| Absorbed debt service rate (DS $22.27B ÷ $3.825T) | 0.5822% | Bond I&S already inside the rate — not additive |
| Combined Floor Rate | 4.6732% | Confirmed April 11, 2026 — covers everything |
| 6.00% Starting Cap — Per-Tier Allocation | ||
| Tier 1 (State Operations) launch cap | 2.0000% | Floor 1.4521% + 0.5479 pts transition buffer |
| Tier 2 (Counties + County-Area SDs) launch cap | 1.0000% | Floor 0.7697% + 0.2303 pts transition buffer |
| Tier 3 (Cities + City-Area SDs) launch cap | 1.0000% | Floor 0.6557% + 0.3433 pts transition buffer |
| Tier 4 (ISDs) launch cap | 2.0000% | Floor 1.7957% + 0.2043 pts transition buffer |
| Combined Starting Cap | 6.0000% | Generates $229.52B — $50.76B buffer above $178.77B floor obligation |
| Constitutional Maximum (Tex. Const. art. VIII, §1) | 8.25% | 2.25 pts above starting cap — reserved for voter-approved new bonds |
The floor is not "operations only" — it already absorbs every certified bond debt service dollar property owners currently pay inside I&S. The 6.00% launch cap is not additive — each tier's starting rate already includes its absorbed debt service. The 2.25-point headroom between 6.00% and the 8.25% constitutional ceiling is reserved solely for voter-approved new bond elections under the Citizen-First Priority Cascade (see Rate Structure panel). Sources: Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. comptroller.texas.gov; Texas Comptroller of Public Accounts, PTAD. (2025). Property tax rates and levies, TY2024. comptroller.texas.gov; Texas Bond Review Board. (2026, January). Annual report 2025. brb.texas.gov; Tex. Const. art. VIII, § 1. statutes.capitol.texas.gov
Table 5.2. Per-Tier Rate Architecture — From Floor to Constitutional Ceiling
Sources: Tex. Const. art. VIII, § 1; Texas Bond Review Board AR 2025 (state NSS debt service); Texas Bond Review Board 2024 Local Annual Report and Data Center (local I&S absorbed); TPTR Entity Assignment Schema v0.4
| Tier | Ops Rate Day-to-day government |
Absorbed DS Rate Bond debt inside floor |
Tier Floor Ops + DS combined |
Tier Launch Cap Starting rate |
Tier Maximum Cap Constitutional ceiling |
|---|---|---|---|---|---|
| Tier 1 State Operations | 1.4334% | 0.0187% | 1.4521% | 2.00% | 2.25% |
| Tier 2 Counties + County-Area SDs | 0.6691% | 0.1006% | 0.7697% | 1.00% | 1.75% |
| Tier 3 Cities + City-Area SDs | 0.5187% | 0.1380% | 0.6557% | 1.00% | 1.75% |
| Tier 4 ISDs | 1.4709% | 0.3248% | 1.7957% | 2.00% | 2.50% |
| Total (all tiers) | 4.0910% | 0.5822% | 4.6732% | 6.00% | 8.25% |
The amber column is the critical structural detail: every tier's floor rate already covers BOTH day-to-day operations AND certified bond debt service — no tier has an "unfunded bond" line hanging off to the side. Tier 4 (ISDs) carries the largest absorbed debt service rate at 0.3248% because Texas school districts hold the largest share of voter-approved local bonds; the plan continues to pay them on schedule. The Tier Maximum Cap column is the constitutional ceiling for each tier under Tex. Const. art. VIII, § 1: State 2.25% + Counties 1.75% + Cities 1.75% + ISDs 2.50% = 8.25% combined. The gap between each tier's Launch Cap and its Maximum Cap is reserved exclusively for voter-approved new bond packages under the Citizen-First Priority Cascade — never for operations. The next panel breaks these rates out into actual dollar obligations tier by tier. Sources: Tex. Const. art. VIII, § 1. statutes.capitol.texas.gov; Texas Bond Review Board. (2026, January). Annual report 2025. brb.texas.gov; Texas Bond Review Board. (2025, January). 2024 local government annual report. brb.texas.gov; Texas Bond Review Board. (2025). Bond data center — local issuance records. data.brb.texas.gov/local
What a Realistic Rate Could Look Like for Many Cities
Because each tier's floor already funds operations and absorbed bond debt service, a typical Texas city's all-in effective rate at the floor — state (1.4521%) + county (0.7697%) + city (0.6557%) + ISD (1.7957%) — is 4.6732%. That is the statewide mathematical minimum, fully covering today's bond payments.
At the 6.00% launch rate, the same Texan pays 2.00% state + 1.00% county + 1.00% city + 2.00% ISD = 6.00% at checkout. The 1.326 points of buffer above the floor is distributed across tiers as shown in Table 5.1, and the Comptroller routes each tier's share of the buffer into transition reserves until it is no longer needed. Jurisdictions whose collections exceed their certified obligations can voluntarily reduce their rate at any time, letting their local effective rate drift toward the floor — and for many mature-base cities, realistically below the floor as bond principals amortize out.
Revenue Generated at Key Rate Points — Net Taxable Base $3.825T
Source: Texas Property Tax Replacement Plan rate derivation — $3,825,411,392,964 net taxable base (post-TLES). TX Comptroller FY2024 Revenue Watch; TX Comptroller PTAD TY2024; TX Open Data Portal CY2024; Texas Bond Review Board AR 2025; and all base component sources as cited in Table 3.1.
What the 4.6732% Floor and 6.00% Starting Cap Really Mean
- The floor is the whole thing — operations and bond debt service, together. 4.0910% funds day-to-day government operations. 0.5822% covers the $22.27 billion per year in certified bond debt service Texas property owners currently pay inside their I&S lines. Those two portions add to exactly 4.6732%. Bondholders are paid. Operations are funded. One rate.
- The 6.00% start is a policy cap, not a permanent rate. It provides $50.76 billion per year of fiscal headroom above the floor obligation — a real transition buffer for Year 1 implementation, for collection-system stand-up, for measurement variance in the new base, and for smaller cities and counties whose local economic base needs time to mature before it fully services their allocated obligation on its own.
- Per-tier launch caps are 2.00% / 1.00% / 1.00% / 2.00%. Tier 1 (State) and Tier 4 (ISDs) are each allocated 2.00 points because they represent the largest share of the obligation (31.07% and 38.42% respectively). Tier 2 (Counties) and Tier 3 (Cities) each get 1.00 point. Every tier's launch cap already includes its absorbed bond debt service — there is no "bond tax" added on top.
- The rate can come down over time. As the base grows, transition costs get absorbed, and bond principals amortize out of the absorbed-DS portion, the legislature can lower the 6.00% cap toward the 4.6732% floor — and for many jurisdictions, realistically below it — without any structural change to the plan.
- Both rates stay well below the constitutional ceiling. The 8.25% cap in Tex. Const. art. VIII, §1 provides an extra 2.25 percentage points of legal headroom, reserved exclusively for voter-approved new bond packages through the Citizen-First Priority Cascade — never for operations.
How Revenue Is Allocated & How the Rate Is Structured
Under the Texas Property Tax Replacement Plan, every dollar of current property tax revenue is replaced — dollar-for-dollar — through a four-tier allocation of the flat sales tax. Every Texas property tax bill has two parts today: Operations (M&O) — the money that runs government day to day — and Debt Service (I&S) — the money that pays bonds voters already approved. The plan keeps both, but it carries both inside one combined rate. The 4.6732% floor already covers operations and today's certified bond debt service together. The 6.00% starting cap adds a structural buffer on top of that floor. Debt service is never added on top — it is built in.
Tier 1 — State
$55.5B
State operations (net of $27.0B education push to Tier 4) + $0.71B state NSS bond debt service
Tier 2 — Counties
$29.4B
254 counties + 2,198 county-area special districts (incl. $3.85B bond DS)
Tier 3 — Cities
$25.1B
1,093 cities + 151 city-area special districts (incl. $5.28B bond DS)
Tier 4 — ISDs
$68.7B
1,013 ISDs — $41.7B local levies + $27.0B state education push (incl. $12.43B bond DS)
Table 6.0. Per-Tier Tax Rate Allocation — Floor vs. Starting Rate
Sources: TX Comptroller Revenue Watch FY2024; TX Comptroller PTAD TY2024; TX Open Data Portal CY2024; NWB-02 Jurisdiction Crosswalk TY2024 v2
| Tier | Replacement Obligation | % of Total | Rate at 4.6732% Floor — dollar-for-dollar match |
Rate at 6.00% Starting cap |
Buffer per Tier 6.00% minus floor revenue |
|---|---|---|---|---|---|
| Tier 1 State Operations | $55,548,586,000 | 31.07% | 1.4521% | 2.0000% | $20,965,499,461 |
| Tier 2 Counties + County-Area SDs | $29,443,125,470 | 16.47% | 0.7697% | 1.0000% | $8,810,988,460 |
| Tier 3 Cities + City-Area SDs | $25,121,046,382 | 14.05% | 0.6557% | 1.0000% | $13,133,067,548 |
| Tier 4 ISDs | $68,693,054,760 | 38.42% | 1.7957% | 2.0000% | $7,815,173,099 |
| Total | $178,769,100,483 | 100% | 4.6732% | 6.0000% | $50,718,870,978 |
Each tier's floor rate = (tier obligation ÷ $178,769,100,483) × 4.6732%. Starting rates are policy caps set to sum to 6.000%. Buffer = revenue generated at starting rate minus floor obligation. Sources: Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. comptroller.texas.gov; Texas Comptroller of Public Accounts, PTAD. (2025). Property tax rates and levies, TY2024. comptroller.texas.gov; NWB-02 Jurisdiction Crosswalk TY2024 v2.
Schools Get the Largest Slice — Guaranteed
At the 4.6732% floor, Tier 4 (ISDs) claims 1.7957 percentage points — more than 38 cents of every dollar collected. School funding is not just protected; it is the single largest slice of the flat tax, secured at the floor before any other priority. At the 6.00% starting rate, ISDs receive their full floor plus a $7.8B buffer for transition.
Table 6.1. Four-Tier Revenue Allocation — Floor Rate (4.6732%) vs. Starting Rate (6.00%)
Sources: TX Comptroller Revenue Watch FY2024; TX Comptroller PTAD TY2024; TX Open Data Portal CY2024; NWB-02 Jurisdiction Crosswalk TY2024 v2
| Tier | Recipients | Current Revenue Replaced | % of Total | Floor Rate (4.6732%) Dollar-for-Dollar Match |
Starting Rate (6.00%) Includes Buffer Allocation |
|---|---|---|---|---|---|
| Tier 1 | State of Texas — all state government operations (net of education push) | $55,548,586,000 | 31.07% | $54,828,840,398 | $70,670,900,621 |
| $27,035,302,012 in state education aid pushed to ISDs through Tier 4. Gross Tier 1 before push: $82,091,799,807. | |||||
| Tier 2 | 254 County Governments — county property taxes + county sales taxes | $16,570,477,412 | 9.30% | $16,568,707,309 | $21,356,013,717 |
| ↳ 2,198 county-area special districts (hospital districts, regional water authorities, county-wide utility districts) | $12,872,648,058 | 7.23% | $12,871,272,967 | $16,590,255,167 | |
| Tier 2 Total — Counties + County-Area Special Districts | $29,443,125,470 | 16.47% | $29,439,980,276 | $37,946,268,885 | |
| Tier 3 | 1,093 City Governments — city property taxes + city sales taxes | $24,494,452,783 | 13.75% | $24,491,836,220 | $31,568,424,773 |
| ↳ 151 city-area special districts (MUDs within city limits, city fire districts, city-boundary utility districts) | $626,593,599 | 0.35% | $626,526,665 | $807,553,166 | |
| Tier 3 Total — Cities + City-Area Special Districts | $25,121,046,382 | 14.05% | $25,118,362,884 | $32,375,977,939 | |
| Tier 4 | 1,013 ISDs — local ISD property tax levies ($41.7B) + state education push from Tier 1 ($27.0B) | $68,693,054,760 | 38.42% | $68,685,716,783 | $88,531,536,133 |
| Total — Full Replacement Obligation | $178,769,100,483 | 100% | $178,072,900,342 | $229,524,683,578 | |
| Buffer Above Floor — 6.00% Starting Rate Revenue minus Full Obligation | — | — | Floor satisfied | +$50,718,870,978 | |
Sources: Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. comptroller.texas.gov; Texas Comptroller of Public Accounts, PTAD. (2025). Property tax rates and levies, TY2024. comptroller.texas.gov; Texas Open Data Portal. (2025). Local sales and use tax allocations CY2024. data.texas.gov; NWB-02 Jurisdiction Crosswalk TY2024 v2.
Four-Tier Revenue Allocation — $178.77B Total (4.6732% Floor)
Sources: Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. comptroller.texas.gov; Texas Comptroller of Public Accounts, PTAD. (2025). Property tax rates and levies, TY2024. comptroller.texas.gov; Texas Open Data Portal. (2025). Local sales and use tax allocations CY2024. data.texas.gov
Bond Debt Service Is Already Inside Each Tier's Rate
The three tables below show how the plan absorbs $22.27 billion per year in state and local bond debt service inside each tier — not on top of it. The combined floor of 4.6732% already pays M&O and I&S (debt service) together: 4.0910% is the operational portion and 0.5822% is the absorbed bond debt service portion. The 6.00% starting cap then layers a $50.76B structural buffer on top, which funds the transition architecture detailed in the Transition Buffer & Waterfall panel. Source figures come from the Texas Bond Review Board AR 2025 and the TPTR Entity Assignment Schema v0.4.
Table 6.2. FY2026 Annual Bond Debt Service Absorbed by TPTR, by Tier
Sources: Texas Bond Review Board AR 2025; TPTR Entity Assignment Schema v0.4
| Tier | Entities | Annual Debt Service FY2026 | Share of Net Taxable Base |
|---|---|---|---|
| Tier 1 State Not-Self-Supporting | — | $713,888,000 | 0.0187% |
| Tier 2 Counties + county-area SDs | 2,452 | $3,847,912,041 | 0.1006% |
| Tier 3 Cities + city-area SDs | 1,244 | $5,276,789,434 | 0.1379% |
| Tier 4 ISDs | 1,013 | $12,431,224,477 | 0.3250% |
| Total Absorbed FY2026 Debt Service | 4,709 | $22,269,813,952 | 0.5822% |
Tier 1 from the BRB Annual Report 2025 FY2026 debt-service schedule (NSS only). Tiers 2–4 from the TPTR Entity Assignment Schema v0.4. Net Taxable Base = $3,825,411,392,964. Sources: Texas Bond Review Board. (2026). Annual report 2025. brb.texas.gov; TPTR Entity Assignment Schema v0.4.
Table 6.3. Floor Rate Architecture — Tier Contributions to 4.6732% (Debt Service Already Inside)
Sources: TPTR Part IV (v5); TPTR Entity Assignment Schema v0.4; Texas Bond Review Board AR 2025
| Tier | Annual Need (M&O + I&S) | of which: M&O | of which: I&S (Bond DS) | Tier Floor Rate | of which: DS share |
|---|---|---|---|---|---|
| Tier 1 State (net of $27B education push) | $69,047,827,645 | $68,333,939,645 | $713,888,000 | 1.8050% | 0.0187% |
| Tier 2 Counties + county-area SDs | $16,570,477,412 | $12,722,565,371 | $3,847,912,041 | 0.4332% | 0.1006% |
| Tier 3 Cities + city-area SDs | $24,494,452,783 | $19,217,663,349 | $5,276,789,434 | 0.6403% | 0.1379% |
| Tier 4 ISDs (incl. $27B education push) | $68,693,054,760 | $56,261,830,283 | $12,431,224,477 | 1.7957% | 0.3250% |
| Combined Floor Rate — 4.6732% | $178,769,100,483 | $156,499,286,531 | $22,269,813,952 | 4.6732% | 0.5822% |
Tier 1 uses the state need after the $27B education push to ISDs (which flows across to Tier 4). All rates = annual obligation ÷ Net Taxable Base of $3,825,411,392,964. The combined floor of 4.6732% is the full Total Tax Replacement Obligation of $178,769,100,483 divided by the net base, with bond debt service already inside each tier's need. The 0.5822% "DS share" column shows how much of the floor is attributable to bond debt service; the remainder (4.0910%) is M&O. Sources: TPTR Part IV (v5); TPTR Entity Assignment Schema v0.4; Texas Bond Review Board. (2026). Annual report 2025. brb.texas.gov.
Table 6.4. Starting Cap Architecture — The 6.00% Launch Rate (DS Carved Out From Within, Not Additive)
Sources: TPTR Entity Assignment Schema v0.4; TPTR Part IV (v5) Four-Tier Rate Architecture
| Tier | Starting Cap | Revenue at Cap | Annual Obligation | of which: Bond DS | Dollar Buffer | Long-term Max |
|---|---|---|---|---|---|---|
| Tier 1 State | 2.00% | $76,508,227,859 | $69,047,827,645 | $713,888,000 | $7,460,400,214 | 2.25% |
| Tier 2 Counties + SDs | 1.00% | $38,254,113,930 | $16,570,477,412 | $3,847,912,041 | $21,683,636,518 | 1.75% |
| Tier 3 Cities + SDs | 1.00% | $38,254,113,930 | $24,494,452,783 | $5,276,789,434 | $13,759,661,147 | 1.75% |
| Tier 4 ISDs | 2.00% | $76,508,227,859 | $68,693,054,760 | $12,431,224,477 | $7,815,173,099 | 2.50% |
| Launch Total — 6.00% | 6.00% | $229,524,683,578 | $178,769,100,483 | $22,269,813,952 | $50,718,870,978 | 8.25% |
Launch caps are State 2.00% + County 1.00% + City 1.00% + ISD 2.00% = 6.00% combined. The $22.27B of annual bond debt service is carved out from within each tier's cap as a dedicated I&S share — it does not raise the cap. Every tier's cap clears its total obligation (M&O + DS) with structural headroom. Long-term absolute constitutional maximums are State 2.25% + County 1.75% + City 1.75% + ISD 2.50% = 8.25%. Sources: TPTR Entity Assignment Schema v0.4; TPTR Part IV (v5) Four-Tier Rate Architecture.
Table 6.5. The Certified Texas Bond Universe — What TPTR Absorbs and What It Does Not
Sources: Texas Bond Review Board, Annual Report 2025 (State); BRB Data Center Local Issuance Records (FY2025); TPTR Entity Assignment Schema v0.4
| Category | Outstanding Principal | Annual Debt Service | TPTR Treatment |
|---|---|---|---|
| Tier 1 State NSS (General Obligation, non-self-supporting) | $6,683,370,000 | $713,888,012 | Absorbed inside Tier 1 floor rate |
| Tier 2 County GO + Limited-Tax bonds | ~$70,500,000,000 | ~$3,850,000,000 | Absorbed inside Tier 2 floor rate |
| Tier 3 City GO + Limited-Tax bonds | ~$96,700,000,000 | ~$5,280,000,000 | Absorbed inside Tier 3 floor rate |
| Tier 4 ISD GO bonds (property-tax backed) | ~$89,360,000,000 | ~$12,425,925,940 | Absorbed inside Tier 4 floor rate |
| Subtotal — ABSORBED BY TPTR | $263,230,000,000 | $22,269,813,952 | = 0.5822% of net base |
| State Self-Supporting bonds (revenue/enterprise funds) | $57,280,000,000 | — | Stays on own revenue streams (TxDOT, TWDB, etc.) |
| Local Revenue-Backed bonds (utility, enterprise) | $108,940,000,000 | — | Stays on own utility/enterprise revenue |
| Conduit / Excluded (Grand Parkway, PAB, Nat Gas Securitization) | $13,100,000,000 | — | Not replaced — independent obligations |
| Total Texas Bond Universe (BRB AR 2025) | $442,550,000,000 | — | Three treatments, no gap |
Every Texas bond sits in one of three buckets: absorbed into the flat rate (property-tax-backed bonds, $263.23B), stays on its own non-property revenue (self-supporting and utility/enterprise, $166.22B), or is a conduit/excluded obligation ($13.10B). TPTR absorbs only what property taxes currently pay — nothing more, nothing less. Sources: Texas Bond Review Board. (2026, January). Annual report 2025. brb.texas.gov; Texas Bond Review Board. (2025). Bond data center — local issuance records. data.brb.texas.gov/local
Table 6.6. Citizen-First Priority Cascade — Who Gets First Call on New Bonds
Source: TPTR confirmed bond democratization framework (April 2026)
| Bond Issuer | 1st Call | 2nd Call | 3rd Call | 4th Call |
|---|---|---|---|---|
| State State-Issued Bonds | Texas citizens statewide | — | General bond market | |
| County County-Issued Bonds | Issuing county's TX citizens | Other TX citizens statewide | — | General bond market |
| City City / City-SD Bonds | Issuing city/district citizens | Surrounding-county TX citizens | Other TX citizens statewide | General bond market |
| ISD ISD Bonds | School district citizens | Surrounding-county TX citizens | Other TX citizens statewide | General bond market |
Small-denomination tranches ($100 and $500) are offered first to the citizens who live in the jurisdiction that will repay the bond. Unsubscribed tranches cascade outward to the next circle of Texans. Only after every cascade layer is fully offered does the issuer open to the general bond market at $5,000+ institutional denominations. This turns bond investing from a Wall Street-only opportunity into a neighborhood-first savings vehicle where Texans directly own their community's infrastructure.
What the Four-Tier System Guarantees
- No local government takes a cut. Every tier replaces existing certified revenue exactly — counties, cities, ISDs, and special districts all keep the dollar amounts they collect today.
- Bond debt service is inside the floor, not on top. The 4.6732% floor covers $156.54B in operations plus $22.27B in certified bond debt service — together, inside one rate. The 6.00% launch cap is not additive; bond DS is carved out from within.
- Special districts get the right tier. 2,198 county-area districts flow through Tier 2; 151 city-area districts flow through Tier 3. Assignment is documented in the NWB-02 Jurisdiction Crosswalk and the Entity Assignment Schema v0.4.
- Only property-tax-backed bonds are absorbed. Self-supporting state bonds ($57.3B) and utility/enterprise bonds ($108.9B) stay on their own non-property revenue streams, exactly as they do today.
- The 6.00% starting cap builds in $50.76B of annual buffer. Each tier's cap clears its obligation with structural headroom. That buffer flows through the transition waterfall described in the next panel. Long-term constitutional ceiling sits at 8.25% combined.
- Texans get first right of purchase on new bonds. The Citizen-First Priority Cascade offers small-denomination tranches to the communities that will repay the bond before the general bond market sees them.
The Transition Buffer & the Long-Term Citizen Surplus Waterfall
The 6.00% launch rate is intentionally set above the 4.6732% mathematical floor. That gap — 1.326 percentage points on a $3.825 trillion net taxable base — generates $50.76 billion in Year 1 buffer revenue above what is needed to meet the Total Replacement Obligation dollar-for-dollar. The buffer does two distinct jobs: in Year 1 it is the transition safety net for every tier — State, County, City, and ISD — while the new revenue system stabilizes; in Years 2–3 only the State tier holds its launch rate, seeding the State Rainy-Day Fund and a transition fund for rural jurisdictions that need help building the local economic base to sustain themselves. After Year 3 (and no later than Year 6), the State buffer mission ends and the plan operates on a single long-term surplus waterfall that runs independently at every tier.
Revenue at 6.00%
$229.52B
Net base $3.825T × 6.00% launch rate (Year 1)
Floor Obligation
$178.77B
Total Replacement Obligation — dollar-for-dollar
Year 1 Buffer
$50.76B
28.39% above floor — distributed across all tiers
State-Tier Buffer (Yrs 2–3)
~$46.9B
State share of buffer continued for 2 additional years to seed rainy-day fund and rural economic development†
†State subtotal $82.58B × 28.39% buffer ≈ $23.45B per year × 2 additional years ≈ $46.9B. Local tiers reset to budget-based rates at the end of Year 1; only the State tier holds its launch rate through Years 2–3.
Phase 1 (Year 1): The Transition Buffer at Every Tier
In the first fiscal year, every tier — State, County, City, and ISD — retains the 6.00% launch rate. Each tier’s distributions are sized to fund its prior-year budget plus 10%. Any remittances above that 110% threshold flow into the Transition Buffer Fund, administered by the Texas Comptroller, which is used to help jurisdictions whose local economies do not yet generate enough sales-tax revenue to fully replace their prior property-tax base. The Comptroller and the appropriate state departments work with these jurisdictions on funding relief and economic-development projects to build the commercial activity they need to become self-sustaining. The existing system of state support for smaller rural cities and counties continues under this framework.
County Appraisal District (CAD) operations end by the close of Year 1 at no cost to the buffer — their role is eliminated rather than transitioned. Comptroller infrastructure to stand up statewide sales-tax collection, administer distributions, and manage the transition board is budgeted at roughly $1 billion one-time.
Table 7.1. How the Year 1 Transition Buffer (~$50.76B) Is Allocated
Source: Texas Property Tax Replacement Plan confirmed architecture
| Category | Purpose | Estimated Draw | Mechanism |
|---|---|---|---|
| Jurisdiction Revenue Shortfall Coverage | Supplemental funding for jurisdictions whose local economies do not yet generate sufficient sales tax to cover the 110%-of-prior-budget threshold during the initial transition | Variable — largest single category | Comptroller transition board reviews and approves; published quarterly |
| Economic Development Support | Build commercial activity in economically limited jurisdictions so they can become self-sustaining under the flat tax; continues on a declining 3-year window | Policy-level — 3-year window | Infrastructure and business-development grants administered by the Comptroller in coordination with the transition board |
| Voter-Bond & Transition-Cost Reserve | Supports early voter-approved bond issuances under the Citizen-First Priority Cascade and covers one-time legal, administrative, and conversion costs | ~$12–18B | Comptroller holds in reserve; disbursed per approved transition plan |
| Comptroller Infrastructure Build-Out | One-time build-out of statewide sales-tax administration, distribution systems, and transition-board operations | ~$1B one-time | Budgeted against Year 1 buffer |
| Rainy-Day & Contingency Reserve | Remainder after above categories; held as transition safety buffer, available for emergency distributions, and seeds the permanent tier-by-tier rainy-day funds | Remaining balance | Held in Comptroller reserve; rolled into State Rainy-Day Fund at the close of the transition window |
Buffer revenue flows into a dedicated Transition Buffer Fund at the Comptroller’s office during Year 1. All distributions, balances, and rate adjustments are published on a regular public schedule. Sources: Texas Property Tax Replacement Plan confirmed architecture; Texas Comptroller of Public Accounts (2025).
How the Year 1 Buffer (~$50.76B) Is Distributed
Because existing bond debt service is absorbed inside the 4.6732% floor, the launch-cap buffer is freed to cover jurisdiction shortfalls, voter-bond issuance support, economic development, and one-time administrative build-out. Sources: Texas Bond Review Board (2026); Texas Bond Review Board (2025).
Years 2–3: State-Tier Buffer Continues for Rural Economic Development
At the end of Year 1, County, City, and ISD rates automatically reset to the level that funds 110% of their prior-year budget — unless the jurisdiction has separately voted for a different rate. Only the State tier retains its launch rate for two additional years. The ongoing State buffer is divided between the State Rainy-Day Fund and the Transition Fund for rural jurisdictions that still need help building the local economic base to cover their own operations and debt service. Access to the Transition Fund is coordinated through the Comptroller and the transition board and ends for each jurisdiction once its sales-tax revenues are sufficient to cover its own governing and debt obligations.
In Year 3, the Legislature evaluates the remaining need. It may vote to reduce the State rate, retain it, or refer a proposed increase to a statewide vote of the people. Any residual balance in the Transition Fund is absorbed into the State Rainy-Day Fund once all jurisdictions are self-sustaining. The transition mission ends no later than Year 6 regardless.
Rate Rules at Every Tier (Year 2 Forward)
- Automatic reset at end of Year 1. Each local tier’s rate is reduced to the level needed to produce revenue equal to 110% of that tier’s prior-year budget — unless the jurisdiction has separately voted to set a different rate.
- In-year operating buffer: 5% floor, 10% hard cap. Every tier must maintain a minimum 5% surplus above its operating + debt-service obligations on the rate it sets. The 10% cap is the public-transparency ceiling — if after any quarter the running buffer exceeds 10%, the governing body is expected to consider voting to reduce the rate. Transparency reporting makes over-collection visible to voters.
- Voters up, legislators down. Elected officials may lower a rate at any time. Only voters may raise it.
- Voter-rejected increase → budget must fit revenue. If a jurisdiction’s governing body asks voters to approve a rate increase to fund a budget greater than current revenue plus 5%, and voters reject it, the entity must reduce its budget to fit current revenue plus 5%.
Phase 2 (Long-Term): The Citizen Surplus Waterfall
Once each tier is operating on its budget-based reset rate, a single surplus waterfall governs everything else. It runs independently at State, County, City, and ISD levels. The purpose is simple: cover operations and debt service first, then build a strong rainy-day reserve, then pay down long-term debt, then invest in infrastructure and first responders, and route every dollar not needed by any of those priorities directly back to the registered adult citizens who generated the revenue.
Cadence at each tier:
- Monthly: After operations and debt service are paid for the month, any remaining revenue is swept from the operating account into that tier’s Surplus Fund.
- Quarterly: The governing body reviews the running in-year buffer. If it exceeds the 10% cap, a rate reduction is considered. The Comptroller assists quarterly distribution for jurisdictions on the standard schedule; a jurisdiction may elect to distribute monthly instead.
- Annually (fiscal year-end): The Surplus Fund balance runs through the waterfall below. Quarterly distributions draw from accumulated surplus during the year; a year-end true-up reconciles final balances.
The Citizen Surplus Waterfall — Applied Independently at Every Tier
Budget discipline first. Each tier’s annual budget is capped at prior-year revenue plus 5%. Operating budgets are sized to cover debt service plus a 5% buffer, with the remainder (minus the 5% buffer) available for regular programs under home-rule discretion.
Level 1 — 50 / 50 split of end-of-period surplus.
- 50% → Rainy-Day Fund until it holds enough to cover six months of essential operations and services plus 100% of debt service. The fund is available for emergencies, serious economic events, and pre-disaster infrastructure hardening that reduces the impact of natural disasters. Overflow above the 6-month target rolls into the other 50%.
- 50% → proceeds to Level 2.
Level 2 — 50 / 50 split of what reaches it.
- 50% → Debt Paydown on existing obligations, with the tier’s financial officer advising on which debts to retire first. Overflow once debts are paid in full rolls into the other 50%.
- 50% → proceeds to Level 3.
Level 3 — 47.5 / 47.5 / 5% split of what reaches it.
- 47.5% → Infrastructure Fund — roads, bridges, water preservation, utilities, economic development, parks and recreation. The financial officer and operations lead consult with the governing body to identify when the fund is sufficient for the period’s planned projects. Remaining funds roll into the Citizen Dividend Fund.
- 47.5% → First Responders Fund — police, fire, EMS (ISD level: campus safety officers and school resource officers). Department heads advise the governing body on department growth, facility needs, equipment, and vehicles. Remaining funds roll into the Citizen Dividend Fund.
- 5% floor → Citizen Dividend Fund — a guaranteed minimum, often far higher once the Infrastructure and First Responders funds report sufficiency for the period.
Full cascade, end to end. Every level spills into the next when its cap is reached or its purpose is already met. In a well-managed jurisdiction with operations, debt service, first responders, and infrastructure all sufficiently funded — and debts paid in full — the entire annual surplus can flow to the citizen dividend.
Table 7.2. The Citizen Surplus Waterfall — Levels, Triggers, and Overflow
Source: Texas Property Tax Replacement Plan confirmed surplus architecture
| Level | Destination | Share | Cap or Trigger | Overflow Rolls To |
|---|---|---|---|---|
| 0 | Operations + Debt Service (paid monthly from operating account) | 100% until covered | Monthly — remainder swept into Surplus Fund | End-of-period Surplus Fund (Level 1) |
| 1a | Rainy-Day Fund for that tier | 50% of surplus | Until fund covers 6 months essential ops + services + 100% debt service | Rolls into Level 1b (other 50%) |
| 1b | Continues to Level 2 | 50% of surplus | — | Split at Level 2 |
| 2a | Debt Paydown (financial officer advises priority) | 50% of Level 1b | Until all qualifying debts are retired | Rolls into Level 2b (other 50%) |
| 2b | Continues to Level 3 | 50% of Level 1b | — | Split at Level 3 |
| 3a | Infrastructure Fund (roads, bridges, water, utilities, parks, economic development) | 47.5% of Level 2b | Governing body confirms sufficiency for the period on financial officer + operations lead counsel | Citizen Dividend Fund |
| 3b | First Responders Fund (police, fire, EMS; ISD: campus safety & SROs) | 47.5% of Level 2b | Department heads advise governing body on growth, equipment, facilities, vehicles | Citizen Dividend Fund |
| 3c / 4 | Citizen Dividend Fund — 5% guaranteed floor plus unused 3a, 3b, and any overflow from Levels 1 and 2 | 5% floor — often more | Distributed to registered adult citizens of each tier — quarterly by default, optionally monthly at the jurisdiction’s election | — |
The 5% citizen dividend is a floor, not a ceiling. Every level of the waterfall rolls its overflow forward — so in a well-managed jurisdiction with debts paid, infrastructure current, first responders equipped, and rainy-day reserve at target, the entire end-of-period surplus can flow to citizens. Source: Texas Property Tax Replacement Plan confirmed surplus architecture.
Table 7.3. Who Decides, Who Advises — By Tier
Source: Texas Property Tax Replacement Plan governance architecture
| Tier | Decision Authority | Financial Officer | Infrastructure Advisor | First-Responder Advisors |
|---|---|---|---|---|
| State | Governor, with Legislature concurrence | Texas Comptroller | TxDOT, TWDB, TCEQ, TPWD agency heads | DPS Director, State Fire Marshal, state EMS authority |
| County | County Judge, with Commissioners Court | County Auditor | County Engineer / Public Works Director | Sheriff, County Fire Marshal, County EMS Director |
| City | Mayor, with City Council | City CFO / Finance Director | City Engineer / Public Works Director | Police Chief, Fire Chief, EMS Director |
| ISD | Superintendent, with Board of Trustees | Business Manager / CFO | Facilities & Operations Director | Campus Safety Director / SRO Program Lead |
Each tier’s waterfall runs on the same structure: a decision authority who sets policy, a financial officer who advises on debt and fund balances, and department leads who advise on infrastructure and first-responder needs. Source: Texas Property Tax Replacement Plan governance architecture.
The Citizen Dividend: Who Gets It and How
The dividend is paid to registered adult Texas citizens of each tier — State, County, City, and the ISD they live in — and a Texan who lives inside a city is entitled to a dividend at all four levels because they contribute to all four tax pools. The dividend at each level is funded by the surplus generated at that level.
- Eligibility: Adult Texas citizens registered to receive the dividend through each of their jurisdictions. Registration is handled as part of the free voter-registration process — one registration covers both voting and dividend eligibility at every tier the voter lives in.
- Distribution cycle: Quarterly is the Comptroller-assisted minimum standard. A jurisdiction may elect to distribute monthly instead.
- Distribution method: Direct deposit via banking information the citizen registers on the State, county, city, or ISD website — or by check mailed to the residence of record for citizens who do not register banking information.
- Floor guarantee: No less than 5% of post-operations surplus at each tier, regardless of other fund balances.
- Transparency: Each tier publishes its Rainy-Day balance, debt-paydown activity, Infrastructure Fund balance, First Responders Fund balance, and per-citizen dividend amount every period.
Key Takeaways: Transition Buffer + Long-Term Waterfall
- No jurisdiction is left without funding during the transition. The Year 1 Transition Buffer Fund covers every shortfall while the new system stabilizes. The State tier extends its buffer through Years 2–3 to help rural jurisdictions build local economic capacity.
- Rates reset automatically at end of Year 1 at the local tiers. County, City, and ISD rates drop to the level that funds 110% of prior-year budget unless the jurisdiction has voted otherwise. The State rate is reviewed by the Legislature at the end of Year 3 and may be reduced, retained, or referred to a vote of the people; the transition ends no later than Year 6 regardless.
- In-year buffer band: 5% floor, 10% hard cap. Maintained every period, at every tier. Over-collection is visible to voters through mandatory transparency reporting, which pushes rate reductions by the governing body.
- Rainy-day first, at every tier. The constitutional amendment requires every tier to build a reserve sufficient to cover 6 months of essential operations and services plus 100% of debt service before surplus advances. The fund also functions as a pre-disaster hardening tool to reduce the impact of natural disasters.
- Debt gets paid down before infrastructure, first responders, or dividends. The Level 2 debt-paydown tier ensures that long-term obligations are retired rather than rolled over, and that financial-officer counsel directs the order.
- Overflow cascades all the way through. Any level that hits its cap or has its purpose already met spills the remainder into the next level. In a well-managed jurisdiction — debts paid, rainy-day at target, infrastructure current, first responders equipped — the full end-of-period surplus can reach the Citizen Dividend Fund.
- Voters up, legislators down. Elected officials can always lower a rate. Only voters can raise it. If voters reject a proposed increase, the entity’s budget must be reduced to fit current revenue plus 5%.
- Dividends go to registered adult citizens of each tier they live in. Quarterly by default, optionally monthly; direct deposit or mailed check; registered via the free voter-registration process.
- Everything is published. Balances, distributions, dividend amounts, and rate-adjustment decisions are public at every tier for every period.
Note: This surplus distribution model is preliminary and will be further refined as the legislative drafting process progresses. Final mechanics, thresholds, administrative rules, and oversight structures will be published as the constitutional amendment and enabling legislation are finalized.
Rate Governance & Voter Control
Under the current property-tax system, unelected central appraisal districts raise the effective tax burden every year without a public vote. The Texas Property Tax Replacement Plan ends that entirely. Rates are set in the Constitution at firm starting caps, come down automatically after Year 1 based on actual demonstrated need, and from that point forward can only go up with direct voter approval — while the governing body can bring them down at any time. This panel covers rate control exclusively; surplus distribution, rainy-day funds, and the citizen dividend are governed by the long-term waterfall described in the preceding panel.
Operational continuity note. The Texas Comptroller continues the existing monthly sales-tax distribution cadence already in place for local jurisdictions. The plan’s only operational disruption is ending property taxes and consolidating to a single flat sales tax; collection, remittance, and reporting timing remain on the schedules Texas businesses and jurisdictions already use.
Launch Starting Cap
6.00%
State 2.00% + County 1.00% + City 1.00% + ISD 2.00% — starting point, not the permanent ceiling
Mathematical Floor
4.6732%
Minimum needed to replace today’s obligations
Constitutional Ceiling
8.25%
Absolute maximum by tier: State 2.25% + County 1.75% + City 1.75% + ISD 2.50%
Voter Approval
Required
For every M&O rate increase, and for every voter-approved bond that raises I&S, at every tier
How a Tier’s Rate Is Split: M&O + I&S Cannot Exceed the Tier Cap
At every tier, the M&O (operations) portion and the I&S (debt-service) portion of the sales tax must sum to no more than that tier’s current cap. A city operating at the launch cap of 1.00% may split that 1.00% between M&O and I&S in any combination — for example, 0.75% M&O and 0.25% I&S — but the sum cannot exceed 1.00%. If the city’s voters later approve rate increases that push the total to the city-tier constitutional ceiling of 1.75%, the combined M&O + I&S rate can never exceed 1.75% — even with voter approval. The same principle applies at every tier: State 2.25%, County 1.75%, City 1.75%, ISD 2.50%.
Only a statewide constitutional amendment can lift a tier above its constitutional ceiling. Voter approval at the local level is bounded by the tier ceiling; to go above it, Texas voters statewide must amend the Constitution.
The Core Rule: Voters Up, Legislators Down
- Rate increases require direct voter approval — M&O or I&S. No governing body — Legislature, commissioners court, city council, or school board — can raise its total rate above its current level without a public ballot measure. An M&O increase requires a dedicated rate-increase ballot. An I&S increase happens only through a voter-approved bond election, which itself sizes the additional debt-service rate needed to service the new bond.
- Rate reductions can be made by the governing body at any time — with limits. The M&O portion may be reduced only so far as it still produces revenue sufficient to cover operations plus the 5–10% buffer band. The I&S portion cannot be reduced below the level required to service voter-approved debt plus its own 5–10% buffer — I&S levels are set by bond covenants, not by the governing body or voters. Reductions within those limits require no vote; the governing body files with the Comptroller and the change takes effect at the start of the next distribution period.
- Voter-approved reductions are binding on future councils. Once voters approve or the governing body enacts a rate reduction, the lower rate becomes the new ceiling. A successor council, commissioners court, or board may not raise the rate back above that level without a new voter-approved ballot measure.
- A rate decision stands — whether voter-rejected or council-enacted. If voters reject a proposed M&O increase, or the governing body enacts a reduction, the jurisdiction must operate within the resulting revenue plus its 5–10% buffer. This may require staffing reductions, asset sales, service changes, or any other action needed to avoid deficit spending. The I&S portion of the rate is walled off under every circumstance: funds collected for debt service cannot be redirected to cover M&O shortfalls caused by poor budgeting or rejected increases. This design places the size and scope of local government directly in the hands of each jurisdiction’s voters.
- The launch cap is the firm starting point, not the permanent ceiling. Each tier begins at its launch cap — State 2.00%, County 1.00%, City 1.00%, ISD 2.00% — and may only go higher if the jurisdiction’s voters approve an increase, up to that tier’s constitutional ceiling: State 2.25%, County 1.75%, City 1.75%, ISD 2.50%. At every tier, the combined M&O + I&S rate must sum to no more than the tier’s current cap — and can never exceed the tier’s constitutional ceiling even with voter approval. Only a statewide constitutional amendment can lift a tier above its constitutional ceiling.
- Initial M&O / I&S split is determined during Year 1. As jurisdictions begin receiving distributions, each one works with the Comptroller to allocate its launch-cap rate between M&O (operations) and I&S (debt service) based on its actual existing debt obligations — consistent with the bond architecture described in earlier panels. From Year 2 forward, any increase to either component at any tier requires voter approval, and the combined M&O + I&S rate cannot exceed the tier’s current cap.
How Rates Come Down: The Year 1 Automatic Reset
The 6.00% launch rate is intentionally conservative to guarantee no jurisdiction misses a payment during the transition. Rates are not allowed to stay there. At the end of Year 1, every local jurisdiction is subject to an automatic reset to the rate that produces revenue equal to 110% of its prior-year budget — unless the jurisdiction has separately voted to set a different rate. The reset is mechanical, not discretionary: the Comptroller calculates and the new rate takes effect at the start of Year 2.
During that same Year 1 period, each jurisdiction works with the Comptroller to set its initial M&O / I&S split within its launch-cap rate, based on actual existing debt-service obligations. That split locks in the baseline from which all future voter-approved changes are measured, and from which all subsequent auto-reductions are calculated when bonds retire.
The State tier holds its launch rate for two additional years to complete transition support for rural jurisdictions. At the end of Year 3, the Legislature evaluates the continuing need and may take one of three actions:
- Reduce the State rate by legislative action (legislators can always reduce).
- Retain the current State rate if continuing transition needs justify it, with public reporting.
- Refer a proposed increase to a statewide vote of the people — no State rate increase may be enacted by legislative action alone.
The transition mission ends no later than Year 6 regardless. From that point forward, every tier — State, County, City, and ISD — operates under the same automatic-reset and voter-approval rules.
The In-Year Buffer Band: 5% Floor, 10% Hard Cap
- 5% minimum floor. Every tier must set its rate to produce revenue equal to at least 105% of its operating and debt-service obligations. This is the in-year operating buffer that absorbs normal quarter-to-quarter sales-tax fluctuation.
- 10% hard cap. If at the end of any quarter the running buffer exceeds 10%, the governing body is expected to consider voting to reduce the rate. Over-collection is visible to every voter through mandatory transparency reporting.
- Monthly sweep. After operations and debt service are paid each month, any remaining revenue is swept into the tier’s Surplus Fund, where it enters the long-term waterfall described in the Transition Reserve & Surplus panel.
- Public accountability. Every tier publishes its running buffer percentage, quarterly rate-review decisions, and any rate changes. Voters see exactly how much their jurisdiction is collecting above what it needs.
Bond Retirement Auto-Reduction Trigger
Debt-service (I&S) rate components are tied to the bonds they fund. When a bond is paid off, the I&S rate component that supported it cannot persist as general revenue. The auto-reduction trigger is mechanical:
- Bond retires. The tier’s financial officer (Comptroller, County Auditor, City CFO, or ISD Business Manager) flags the I&S component attributable to the retired bond.
- Next budget cycle, the I&S rate recalculates to the level needed to cover remaining bond obligations at a minimum 1.05× coverage ratio (5% cushion above required annual debt service).
- The financial officer files the reduction with the Texas Comptroller.
- The Comptroller verifies the math. If the jurisdiction fails to act or files an incorrect reduction, the Comptroller has authority to enforce the reduction — it takes effect at the next quarterly rate-setting cycle.
- No voter action required. Rates going down never require voter approval under the core rule.
Why this matters: Without this trigger, retired-bond tax revenue would become general revenue — a quiet tax increase that no voter authorized. The auto-reduction makes sure every dollar of I&S capacity ends the moment its justifying debt ends.
Who Decides, Who Advises, Who Approves
Rate changes follow a single accountability architecture at every tier. An executive decides. A financial officer advises. A legislative body approves or is notified. When it is a rate increase, the voters always have the final word.
Table 8.1. Rate-Change Accountability by Tier
Source: Texas Property Tax Replacement Plan constitutional governance framework
| Tier | Financial Officer (Advises) | Executive (Decides) | Legislative Body (Approves / Notified) | Rate Increase |
|---|---|---|---|---|
| State | Texas Comptroller | Governor | Senate concurrence required for surplus-release decisions | Statewide voter approval |
| County | County Auditor | County Judge | Commissioners Court notified | County voter approval |
| City | City CFO / Finance Director | Mayor | City Council notified | City voter approval |
| ISD (Tier 4) | Business Manager / CFO | Superintendent | School Board approves; Comptroller oversight on absorbed debt | District voter approval |
The executive’s role as rate decision-maker is intentional: executives are directly accountable to voters. See the Transition Buffer & Waterfall panel (Table 7.3) for the expanded tier-by-tier advisor roster covering infrastructure and first-responder department leads. Source: Texas Property Tax Replacement Plan constitutional governance framework.
Constitutional Architecture (Two-Track Adoption)
- Art. VIII, § 1-n — Rate tier architecture, launch starting caps, tier-specific constitutional ceilings (State 2.25% / County 1.75% / City 1.75% / ISD 2.50%), the M&O + I&S sum-constraint rule, the voter-approval rule for all M&O and I&S increases, and the binding effect of voter-approved reductions on successor councils.
- Art. VIII, § 1-o — Irrevocable state bond guarantee, the Citizen-First bond access mechanism, the I&S wall-off from M&O shortfall coverage, and the Bond Retirement Auto-Reduction Trigger.
- Art. VIII, § 1-p — Permissive municipal absorption of ISDs and special districts by local voter approval.
- Art. VIII, § 1-q — Home-rule supersession that removes only ad valorem authority, leaving all other home-rule powers intact.
Adoption path: Ordinary enabling legislation passes in the 2027 session and is paired with a constitutional amendment on the November 4, 2027 ballot. Voters approve. The full plan takes effect January 1, 2028.
What Every Texas Voter Controls Directly
- Any M&O rate increase at any tier above the current rate — never automatic, never by appraisal-district math, always a ballot — bounded by the tier-specific constitutional ceiling.
- Every new bond issuance at every tier — no debt can be added without a voter-approved bond election that also sizes the required I&S rate.
- The permanence of any prior rate reduction — once approved, no future council can raise the rate back without returning to voters.
- Municipal absorption of ISDs or special districts — only by local voter approval.
- The constitutional amendment itself — the entire plan only takes effect if Texas voters approve it in November 2027. Any move above the tier-specific constitutional ceilings requires a new statewide constitutional amendment.
Key Takeaways: Rate Governance
- Rates only go up with voter approval. Constitutional rule at every tier. No exceptions. M&O increases require a direct ballot; I&S increases happen only through voter-approved bond elections.
- M&O + I&S must sum to no more than the tier’s current cap — and can never exceed the tier-specific constitutional ceiling (State 2.25%, County 1.75%, City 1.75%, ISD 2.50%). Only a statewide constitutional amendment can lift a tier above its constitutional ceiling.
- Rates go down automatically at end of Year 1 for local tiers; the State tier follows at end of Year 3 unless the Legislature refers a proposed increase to a statewide vote. Transition ends no later than Year 6.
- Elected officials can cut rates anytime — reductions require only a report to the Comptroller, subject to the 5–10% buffer on M&O and bond-covenant requirements on I&S.
- Voter-approved reductions are binding on future councils. Once a rate comes down, it stays down unless voters approve raising it.
- The 5% floor / 10% cap buffer band prevents both underfunding and over-collection, with quarterly transparency reporting.
- Paid-off bonds automatically reduce the I&S rate — no quiet tax increase when a bond retires. Comptroller verifies and enforces.
- Voter-rejected increases and council-enacted reductions force budget discipline. The jurisdiction must live within resulting revenue plus the 5–10% buffer. I&S funds are walled off from covering M&O shortfalls caused by poor budgeting.
- The launch cap is a starting point, not a permanent ceiling. Each tier may rise above its launch cap only with voter approval, up to its tier-specific constitutional ceiling.
- Operational continuity. The Comptroller’s existing monthly distribution cadence continues unchanged — the only disruption is ending property taxes and consolidating to a single flat sales tax.
Note: This rate-governance model is preliminary and will be further refined as the legislative drafting process progresses. Final mechanics, thresholds, administrative rules, and oversight structures will be published as the constitutional amendment and enabling legislation are finalized.
References
All figures in this presentation are drawn from official government sources, certified state data, and primary institutional research. All citations are in APA 7th edition format.
Official Texas State Sources
Texas Comptroller of Public Accounts. (2025). Revenue watch, FY2024. https://comptroller.texas.gov/transparency/revenue/watch.php
Primary source for all state tax revenue figures used in the Total Replacement Obligation. All FY2024 certified tax receipts by category — sales & use tax, franchise tax, motor vehicle tax, oil production tax, insurance premiums tax, and all other state taxes.
Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2025). Property tax rates and levies: Tax year 2024. https://comptroller.texas.gov/taxes/property-tax/rates/
Primary source for all local property tax levy data. TY2024 certified levies for 254 counties, 1,093 cities, 1,013 ISDs, and 2,349 special districts. Used for the full $86,596,765,238 local property tax replacement obligation and all four-tier allocation figures.
Texas Comptroller of Public Accounts. (2025). State sales and use tax analysis report: Q3 2025. https://comptroller.texas.gov/transparency/local/quarterly-report/stxqtr01.php
Primary source for C1a (in-state gross sales) and C1b (out-of-state/Wayfair remote seller gross sales). Q3 2025 annualized figures: C1a $2,577,168,340,904 and C1b $891,089,046,132. Also the source for the 76.9%/23.1% taxable share analysis used in the overview hook block.
Texas Open Data Portal. (2025). Local sales and use tax allocations, CY2024 [Datasets qsh8-tby8 and vfba-b57j]. https://data.texas.gov
Primary source for county sales taxes ($840,721,618) and city sales taxes ($8,747,725,627) — the local sales tax component of the Total Replacement Obligation. Used for both the total obligation and Tier 2/Tier 3 county and city allocation figures.
Texas Comptroller of Public Accounts. (2025, January 16). Tax exemptions and tax incidence report (Pub. 96-463), FY2025. https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/
Source for existing Texas tax exemption categories and estimated values used in the current exemptions vs. TLES comparison table. Total FY2025 state tax exemptions: $71,220,000,000.
Texas Comptroller of Public Accounts. (2025). Annual comprehensive financial report, FY2025. https://comptroller.texas.gov/transparency/financial-reports/acfr/
Source for total FY2025 education expenditures, all funds: $53,272,170,890. Used in the education funding note in Panel 2 (Scope).
Texas Education Agency. (2025). PEIMS financial data, FY2023–24. https://tea.texas.gov/finance-and-grants/state-funding/state-funding-reports-and-data/peims-financial-data
Source for Texas state aid to ISDs: $27,035,302,012. Used in the education funding note and the Tier 4 apportionment explanation.
Texas Legislative Budget Board. (2025). Agency 701 (TEA) FY2025 all-funds appropriations. https://www.lbb.state.tx.us
Source for TEA Agency 701 FY2025 all-funds appropriations: $39,956,729,579. Used to contextualize the education funding note.
Texas Railroad Commission. (2025). Oil and gas production data, CY2024. https://www.rrc.texas.gov/oil-and-gas/research-and-statistics/production-data
Primary source for C2 oil & gas wellhead production value ($165,400,000,000 CY2024). Used with EIA Texas wellhead price data for crude oil and natural gas valuation.
Texas Department of Insurance. (2025, March). 2024 Market Conditions Annual Report (MCAR). https://www.tdi.texas.gov/reports/pc/documents/pcalr2024.pdf
Primary confirmed source for C3 property & casualty insurance premiums ($83.1B confirmed). C3 total estimate of $270B represents all lines including life, health, HMO, and title insurance, with life/health portions derived from national proportions.
Federal and National Sources
U.S. Energy Information Administration. (2024). State energy profiles — Texas. https://www.eia.gov/state/analysis.php?sid=TX
Primary source for TLES-3 residential utility expenditures: $40,598,422,000. Texas residential electricity, natural gas, and water spending.
U.S. Census Bureau. (2023). American Community Survey 1-year estimates — Texas. https://data.census.gov
Primary source for TLES-2 residential rent: $71,023,582,572. Annual gross rent paid by Texas renter households from ACS 1-Year Estimates 2023.
U.S. Department of Agriculture, Economic Research Service. (2024). Food expenditure series. https://www.ers.usda.gov/data-products/food-expenditure-series/
Primary source for TLES-1 grocery/food-at-home spending: $97,185,000,000. Texas share of national food-at-home expenditures from ERS Food Expenditure Series 2024.
Centers for Medicare & Medicaid Services. (2026, February). National Health Expenditure Accounts historical data, CY2024. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical
Primary source for TLES-4 prescription drugs ($41,563,000,000), TLES-5 medical care / C6 healthcare ($295,000,000,000), and C6 base component. Texas share derived using 9.5% GDP share methodology. Also source for the base component C6 cross-check.
Federal Deposit Insurance Corporation. (2025). FDIC Texas state profile 2024. https://www.fdic.gov/analysis/texas.pdf
Primary source for C5 banking & financial services gross revenue floor ($59.8B TX-domiciled institutions). The $90B C5 figure extends coverage to all TX-operating institutions using FDIC Summary of Deposits 2025.
Industry and Institutional Sources
Texas REALTORS. (2024). Texas residential real estate annual report 2024. https://www.texasrealestate.com
Primary confirmed source for C4 residential real estate transactions: $111,000,000,000. Gross dollar volume of all Texas residential home and condo sales CY2024.
State Higher Education Executive Officers Association. (2024). State higher education finance (SHEF) report, FY2024. https://shef.sheeo.org
Partial source for TLES-6 education tuition ($28,875,989,500). Higher education tuition and mandatory fee revenue for Texas public and private institutions. Combined with TEA PEIMS data for full TLES-6 figure.
Bond and Debt Service Sources
Texas Bond Review Board. (2026, January). Annual report 2025. https://www.brb.texas.gov/wp-content/uploads/2026/01/AR2025.pdf
Primary source for the Texas state-level bond universe (FY2025): total outstanding state debt ($63.96B), the non-self-supporting General Obligation portion absorbed into Tier 1 ($6.68B principal, $713.9M/yr debt service), self-supporting state bonds that remain on enterprise revenue ($57.28B), and excluded conduit issuances (Grand Parkway, PAB Surface Transportation, Natural Gas Securitization). Anchors Panel 7 Tier 1 math and the three-bucket classification in Table 7.2.
Texas Bond Review Board. (2025). Bond data center — Local issuance and outstanding records. https://data.brb.texas.gov/local
Primary source for every Texas local bond issuance: issuer, type (GO, Limited-Tax, Revenue-Backed, Limited Pledge), principal, annual debt service, and outstanding status. Used to classify local bonds into the "absorbed-by-TPTR" bucket (GO + Limited-Tax, $256.42B) versus the "stays-on-enterprise-revenue" bucket ($108.94B) per the TPTR Entity Assignment Schema v0.4. Underlies the $22.27B/year absorbed debt service figure in Table 7.2.
Texas Bond Review Board. (2026, January). Annual report 2025. brb.texas.gov. Texas Bond Review Board. (2025). Bond data center — local issuance records. data.brb.texas.gov/local. Texas Bond Review Board. (2025, January). 2024 local government annual report. https://www.brb.texas.gov/wp-content/uploads/2025/01/2024LocalARFinal.pdf
Supplementary source cross-walking FY2024 aggregate local bond totals and annual debt service ranges prior to the AR 2025 release. Used as confirmation that the absorbed debt service figures in Table 7.2 are consistent across two consecutive BRB reporting cycles.
Texas Education Agency. (2025, October). Enrollment in Texas public schools, 2024–25. https://tea.texas.gov/reports-and-data/school-performance/accountability-research/enroll-2024-25.pdf
Primary source for total Texas public school enrollment: 5,544,255 students in SY2024-25. Used to derive the $10,000/student annual M&O cap for ISD Tier 4 distributions in Panel 7.
Legal Authority & Constitutional Framework
Tex. Tax Code § 151.051 (current sales and use tax). https://statutes.capitol.texas.gov/Docs/TX/htm/TX.151.htm
Texas Tax Code Chapter 151, Section 151.051 governs the existing state sales and use tax rate and imposition. Cited as the baseline statute that the plan's enabling legislation repeals and replaces in its consolidated flat-rate form.
Tex. Const. art. VIII, § 1 (current taxation authority and equal-and-uniform clause). https://statutes.capitol.texas.gov/Docs/CN/htm/CN.8.htm
The base constitutional article governing Texas taxation. The plan's amendment adds new subsections §1-n (rate architecture), §1-o (new-bond cascade), §1-p (property-tax absorption and prohibition of future ad valorem taxation), and §1-q (home-rule and tier-level governance), layered on top of the existing equal-and-uniform protections already embedded in §1.
Tex. Const. art. VIII, § 22 (state spending limit, pay-as-you-go). https://statutes.capitol.texas.gov/Docs/CN/htm/CN.8.htm#8.22
Establishes the state spending limit tied to Texas economic growth. Cited as the conceptual precedent for the plan's Year-1 budget-based rate-reset rule under the new art. VIII § 1-n: once the Year-1 budget baseline is set, the rate may only increase with direct voter approval and may be reduced by the governing body at any time.
Tex. Const. art. III, § 49-g (Economic Stabilization Fund / “Rainy Day Fund”). https://statutes.capitol.texas.gov/Docs/CN/htm/CN.3.htm#3.49-g
The existing state Economic Stabilization Fund provision is the constitutional precedent for the plan's tier-by-tier Rainy-Day Fund architecture. The new amendment extends the same reserve concept to every jurisdiction — State, County, City, and ISD — with a six-month essential-operating-cost floor before any surplus flows to infrastructure, first responders, or citizen dividends.
Tex. Const. art. III, § 52 (local government bond authority); Tex. Const. art. XI, § 5 (home-rule cities); Tex. Gov’t Code ch. 1207 (refunding bonds) and ch. 1431 (certificates of obligation). https://statutes.capitol.texas.gov/Docs/CN/htm/CN.3.htm
Constitutional and statutory framework for existing local bond authority, home-rule city powers, and refunding procedures. Cited because the plan’s art. VIII § 1-o preserves these existing bond tools — including the voter-approved ad-valorem pledge structure — while folding repayment from property tax into the absorbed debt-service portion of the consolidated flat rate. Home-rule authority (art. XI § 5) is also cited as the mechanical basis for the plan’s art. VIII § 1-q tier-level governance (County Judge + Commissioners Court, Mayor + City Council, ISD Board) running cascade decisions locally.
Tex. Gov’t Code § 403 (Office of the Comptroller of Public Accounts). https://statutes.capitol.texas.gov/Docs/GV/htm/GV.403.htm
The statutory basis for the Comptroller's centralized collection, remittance, and reporting functions. Cited because the plan keeps existing Comptroller machinery in place as the single statewide collection and distribution agent for the flat rate — no new collection agency is created.
Tex. Elec. Code ch. 11 & ch. 13 (voter registration and qualifications). https://statutes.capitol.texas.gov/Docs/EL/htm/EL.13.htm
The statutory framework for Texas voter registration. Cited because the plan uses the existing free voter-registration process as the single enrollment mechanism for the Citizen Dividend at every tier (State, County, City, ISD) — one free registration covers both voting and dividend eligibility for adult Texas citizens at each jurisdiction they live in.
Plan Governance Architecture
Texas Property Tax Replacement Plan. (2026). Citizen surplus cascade architecture — 5% dividend / 47.5% infrastructure / 47.5% first responders, applied independently at every tier.
The canonical surplus-allocation rule that governs every tier (State, County, City, ISD) once the 6-month rainy-day reserve is full. Sets the guaranteed 5% citizen dividend floor, the 47.5% infrastructure allocation, and the 47.5% first-responders allocation (including campus safety / school resource officers at the ISD tier). Unused portions of infrastructure or first-responders allocations roll back into the dividend pool on top of the 5% floor. Referenced throughout Panels 7 and 8.
Texas Property Tax Replacement Plan. (2026). Rate-governance rule: Year-1 budget-based reset, voters up / legislators down.
The canonical governance rule embedded in the new art. VIII § 1-n. Year 1 runs at the 6.00% launch cap; at the end of Year 1, each tier’s rate resets to the rate actually required to fund its certified budget × 110% (the 10% cushion is the permanent operational buffer). From that point forward, a rate increase at any tier requires direct voter approval in that jurisdiction; the governing body of any tier may reduce its own rate at any time without a referendum. No appraisal authority, no rate-setting committee.
Texas Property Tax Replacement Plan. (2026). Two-track adoption: 2027 enabling legislation + November 4, 2027 constitutional amendment, effective January 1, 2028.
The canonical adoption path. Enabling legislation (Texas Tax Code amendments, Government Code amendments for tier-level governance, Election Code amendments linking dividend enrollment to voter registration) passes in the 2027 regular session. The constitutional amendment adding art. VIII §§ 1-n, 1-o, 1-p, and 1-q is submitted to Texas voters on November 4, 2027. Both tracks take effect January 1, 2028, with the three-year transition reserve running FY 2028-2030.
Section 5
Recommendation and Impact on Texas Households
The 5.00% flat, no-exemptions sales tax on the full gross base — recommended plan, revenue breakdown, household impact by income quintile, HD 109 specifics, and implementation pathway.
Three Ways to End Property Taxes
Using Q3 2025 annualized gross sales of $3,468.3B, these three approaches illustrate the range of rates needed to replace property taxes. Approach 3 is the recommended 5.00% plan, which replaces all property taxes ($86.6B), the franchise tax ($7.08B), and existing sales-tax revenue ($49.1B) — with a $30.6B structural surplus.
Approach 1 – Conservative Base (8.25%)
Tax base (Q3 2025 ann.)$1,853.5B
Revenue at 8.25%$152.9B
Property tax need$86.6B
Franchise tax need$7.08B
Existing ST replaced$49.1B
Total need$142.8B
Surplus at 8.25%$10.1B
On the conservative broadened base, 8.25% covers all needs with modest headroom. Minimum neutral rate ≈ 7.70%.
Approach 2 – Full Gross Base (8.25%)
Tax base (Q3 2025 ann.)$3,468.3B
Revenue at 8.25%$286.1B
Property tax need$86.6B
Franchise tax need$7.08B
Existing ST replaced$49.1B
Total need$142.8B
Surplus at 8.25%$143.3B
Minimum rate4.12%
At 8.25% on the full gross base, the system raises roughly $286.1B — about $143.3B more than required. This demonstrates how much room exists for a lower rate.
Approach 3 – Recommended 5.00% Plan (Full Gross Base)
Tax base (Q3 2025 ann.)$3,468.3B
Revenue at 5.00%$173.4B
Property tax need$86.6B
Franchise tax need$7.08B
Existing ST replaced$49.1B
Total need$142.8B
Surplus at 5.00%$30.6B
Neutral rate4.12%
Recommended 5.00% Allocation
State cap
0.75%
County cap
0.75%
City cap (schools + specials)
3.50%
State Cap Waterfall (0.75%): $26.0B Allocation
Education ($40.2B) shifts out of the state budget to the 3.50% city cap, leaving the state with $14.6B in net sales-tax need. The remaining $11.4B is split 50/50.
State 0.75% gross revenue
$26.0B
Less: Education shift to 3.50% city cap
−$40.2B ➜ local
State operations need (from sales tax)
$14.6B
Remainder after state ops
$11.4B
→ Texas DPS (50%)
$5.7B
→ Rainy Day Fund (50%)
$5.7B
City Cap 3.50% Receives Education ($121.4B)
School district PT replacement
$41.7B
City PT replacement
$15.7B
Special district PT replacement
$13.5B
Education funding (shifted from state)
$40.2B
Total local need
$111.1B
Local surplus
$10.3B
At 5.00% on the Q3 2025 annualized full gross-sales base ($3,468.3B), the plan raises $173.4B — $30.6B more than the $142.8B replacement floor. The 0.75% / 0.75% / 3.50% split allocates $26.0B to the state, $26.0B to counties, and $121.4B to cities (which absorb schools and special districts). Education funding ($40.2B) shifts from the state ledger to the 3.50% city cap, leaving the state with a $14.6B net sales-tax need; the remaining $11.4B is split 50/50 between Texas DPS ($5.7B) and the Rainy Day Fund ($5.7B). Total state revenue coverage: $152.8B vs. $141.5B in expenditures (108%).
Revenue Allocation of $173.4B Under the 0.75% / 0.75% / 3.50% Split
Figure 5.1. Revenue allocation under the 0.75% / 0.75% / 3.50% rate split on the Q3 2025 annualized gross sales base of $3,468.3B: State 0.75% ($26.0B), Counties 0.75% ($26.0B), Cities + Schools + Specials 3.50% ($121.4B). Property tax levy data from Texas Comptroller of Public Accounts (2025c), https://comptroller.texas.gov/taxes/property-tax/rates/. Sales tax and franchise tax data from Texas Comptroller press release, September 3, 2025, https://comptroller.texas.gov/about/media-center/news/20250903. Gross sales base from Texas Comptroller Q3 2025 quarterly report, https://comptroller.texas.gov/transparency/local/quarterly-report/stxqtr01.php.
State Cap Waterfall (0.75%): How $26.0B Is Allocated
Figure 5.1b. Internal allocation of the state’s 0.75% cap ($26.0B). Education ($40.2B) shifts to the 3.50% city cap, leaving a $14.6B net state sales-tax need. The $11.4B remainder is split 50/50 between Texas DPS ($5.7B) and the Rainy Day Fund ($5.7B). State expenditure data from Texas ACFR 2025 Statistical Section, https://comptroller.texas.gov/transparency/reports/comprehensive-annual/.
Constitutional Caps and City Absorption
Each level of government receives a constitutional cap — a maximum rate within which that level sets its own rate. Cities absorb responsibility for the school districts and special districts they serve, gaining both the funding and the authority to allocate it according to local priorities. Cities determine their own rate within their 3.50% cap.
Why the 5.00% Rate Was Selected
- Above the minimum: The neutral rate on the full base is 4.12%. Setting the rate at 5.00% provides a $30.6B (21.4%) structural buffer for economic fluctuations, bond obligations, and future flexibility.
- Below 8.25% constitutional maximum — retained for future flexibility: At 5.00%, the plan uses only 60.6% of the 8.25% constitutional maximum, leaving 3.25 percentage points of unused capacity for future adjustments if needed.
- Maximizes household savings: Every 0.10% below 5.00% reduces the buffer and makes the system more vulnerable to revenue shortfalls. Every 0.10% above 5.00% reduces household savings. 5.00% is the sweet spot for stability and relief.
- Clean cap structure: Education funding ($40.2B) shifts by design from the state ledger to the 3.50% city cap, freeing the state’s 0.75% cap for core operations ($14.6B) with the $11.4B remainder split 50/50 between Texas DPS ($5.7B) and the Rainy Day Fund ($5.7B). Every cap level covers its own needs with surplus—no ad-hoc bailouts, no local deficits.
Texas Household Expenditures Under the 5.00% Plan
This panel shows how the recommended 5.00% flat tax affects the average Texas household. BLS Texas Consumer Expenditure Survey data (2022–2023) shows $69,802 in average annual expenditures. The average property tax burden of ~$5,800 is eliminated, while the new 5% rate applies to the broadened consumption base — yielding ~$3,600 in new sales tax and net savings of approximately $2,200 per household.
| Expenditure Category | Annual Amount | % of Total | Current Tax Status | Under 5.00% Flat |
|---|---|---|---|---|
| Housing (shelter/rent/mortgage) | $15,361 | 22.0% | Not taxed | Not taxed |
| Property taxes (direct/embedded) | $4,326 | 6.2% | Separate levy | ELIMINATED |
| Groceries (food at home) | $4,845 | 6.9% | Exempt | 5.00% applies |
| Gasoline & motor fuels | $2,857 | 4.1% | Exempt (fuel tax) | 5.00% applies |
| Food away from home | $3,547 | 5.1% | Currently taxed | 5.00% applies |
| Healthcare | $4,630 | 6.6% | Exempt | 5.00% applies |
| Vehicle purchases | $4,918 | 7.0% | Currently taxed | 5.00% applies |
| Personal insurance & pensions | $7,950 | 11.4% | Non-consumption | Excluded |
| All other currently-taxed expenditures | $21,049 | 30.1% | Currently taxed | 5.00% applies |
| All other non-taxed expenditures | $5,867 | 8.4% | Various | 5.00% (most) |
| Total Annual Expenditures | $69,802 | 100.0% | $29,533 taxable | $54,441 taxable |
Table 5.1. Average Texas household expenditure profile and tax treatment under the 5% plan. Expenditure data from U.S. Bureau of Labor Statistics (2025), Consumer Expenditure Survey: Texas state table, 2022–2023, https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm. Property tax data from Texas Comptroller of Public Accounts (2025c), https://comptroller.texas.gov/taxes/property-tax/rates/.
Net Household Savings Under the 5.00% Plan
Current Taxable Base per HH
$29,533
Current combined rate: 8.20% (6.25% state + 1.95% avg. local)
Current Annual Sales Tax per HH
$2,422
Based on existing narrow base
New Taxable Base (expanded)
$54,441
All consumption except insurance/pensions
New Sales Tax at 5.00%
$2,722
Net increase in sales tax: $300/year
Property Tax Eliminated
$4,326/year
Direct and embedded residential property taxes
Net Annual HH Savings
$4,026/year
$4,326 eliminated − $300 sales tax increase
Before vs. After: What Texas Households Pay
Figure 5.2. Comparison of total tax burden under the current system versus the 5% flat plan for different household types. Property tax figures from Texas Comptroller of Public Accounts (2025c), https://comptroller.texas.gov/taxes/property-tax/rates/. Expenditure data from U.S. Bureau of Labor Statistics (2025), https://www.bls.gov/cex/.
Methodology – Average Texas Household
All figures from BLS Consumer Expenditure Survey, Texas state table (2022–2023: $91,099 income / $69,802 expenditures), combined with the blended residential property tax burden of $4,326 per household. The 5.00% flat rate applies to the full expenditure base ($54,441) excluding only insurance and pensions ($7,950), which are non-consumption transfers. Note: These Texas statewide averages are conservative relative to major metros; the most recent 2023–24 BLS data show DFW at $81,954 and Houston at $85,377 in spending, meaning actual savings for metro households would likely exceed these projections.
Income Quintile Impact Analysis
The 5.00% flat tax delivers savings across all five income quintiles, with the largest percentage relief going to lower-income households. This breakdown shows net savings by income level and demonstrates dramatic improvement in tax equity.
Net Savings by Income Quintile
| Quintile | Avg Income | PT Eliminated | New ST (5%) | Net Savings | Old PT % Income | New ST % Income | Change |
|---|---|---|---|---|---|---|---|
| Q1 (Lowest 20%) | ~$30K | $3,723 | $1,071 | $3,928 | 22.6% | 6.5% | −16.1 pts |
| Q2 ($30K–$50K) | $40,287 | $4,029 | $1,684 | $4,047 | 10.0% | 4.2% | −5.8 pts |
| Q3 ($50K–$80K) | $64,184 | $4,373 | $2,278 | $4,208 | 6.8% | 3.6% | −3.3 pts |
| Q4 ($80K–$130K) | $103,361 | $4,583 | $3,164 | $4,148 | 4.4% | 3.1% | −1.4 pts |
| Q5 (Highest 20%) | $235,584 | $4,803 | $5,414 | $3,679 | 2.0% | 2.3% | +0.3 pts |
| All Households | $92,149 | $4,326 | $2,722 | $4,026 | 7.3% | 3.0% | −4.3 pts |
Table 5.2. Net savings by income quintile under the 5% flat sales tax plan. Property tax incidence from Texas Comptroller of Public Accounts (2025c), https://comptroller.texas.gov/taxes/property-tax/rates/. Household expenditure and income data from U.S. Bureau of Labor Statistics (2025), Consumer Expenditure Survey, https://www.bls.gov/cex/.
Net Annual Savings by Income Quintile
Figure 5.3. Net annual savings under the 5% plan by income quintile. All quintiles show positive net savings — the lowest income households see the largest percentage-point reduction in tax burden. Data from Texas Comptroller of Public Accounts (2025c) and U.S. Bureau of Labor Statistics (2025).
Regressivity Improvement: 11.1× → 2.8× (75% Reduction)
- Current property tax burden: The lowest quintile pays 22.6% of income while the highest pays 2.0% — an 11.1× disparity ratio.
- Under 5.00% flat tax: The lowest quintile pays 6.5% of income while the highest pays 2.3% — reducing disparity to 2.8×.
- Every quintile saves money: Net savings range from $3,679/year (highest) to $4,208/year (middle), with the lowest quintile gaining $3,928/year despite spending far less in absolute terms.
- Percentage relief is progressive: Lower-income households see the largest percentage-point reductions in tax burden relative to income.
Regressivity Improvement – Before and After
| Quintile | PT Burden % Income (Current) | New ST % Income (5.00%) | Change |
|---|---|---|---|
| Lowest 20% | 22.6% | 6.5% | −16.1 pts |
| Second 20% | 10.0% | 4.2% | −5.8 pts |
| Middle 20% | 6.8% | 3.6% | −3.3 pts |
| Fourth 20% | 4.4% | 3.1% | −1.4 pts |
| Highest 20% | 2.0% | 2.3% | +0.3 pts |
| Disparity Ratio (Q1÷Q5) | 11.1× | 2.8× | 75% improvement |
Table 5.3. Regressivity improvement from property tax elimination. Current property tax burden as a percentage of income compared with the 5% flat sales tax burden. Data from Texas Comptroller of Public Accounts (2025c) and U.S. Bureau of Labor Statistics (2025).
HD 109 Household Expenditures Under the 5.00% Plan
This panel uses the HD 109 household model from Section 3. It mirrors the statewide structure but adjusts for HD 109 income and spending patterns. The recommended 5.00% plan ends all property taxes and replaces them with a flat, no-exemptions sales tax on the full gross-sales base.
HD 109 vs. Texas – Household Expenditure Profile
| Category | Texas Avg HH | HD 109 Avg HH | % of HD 109 Total | Current Tax Status |
|---|---|---|---|---|
| Housing (Rent / Mortgage) | 15,361 | 15,361 | 22.0 | Not taxed – housing services |
| Property taxes (embedded) | 4,326 | 4,326 | 6.2 | Separate levy |
| Groceries (food at home) | 4,845 | 4,845 | 6.9 | Exempt from sales tax |
| Gasoline & motor fuels | 2,857 | 2,857 | 4.1 | Exempt – separate fuel tax |
| Taxed expenditures | 29,533 | 29,533 | 42.3 | Currently taxed at ≈8.20% |
| Non-taxed expenditures | 9,379 | 13,080 | 18.7 | Not taxed – services, insurance, contributions |
| Total Annual Expenditures | 66,301 | 70,002 | 100.0 |
Table 5.4. HD 109 vs. statewide household expenditure profile. HD 109 model derived from BLS Consumer Expenditure Survey for Dallas-Fort Worth MSA (2023–24), https://www.bls.gov/regions/southwest/news-release/consumerexpenditures_dallasfortworth.htm. Property tax data from Texas Comptroller of Public Accounts (2025c), https://comptroller.texas.gov/taxes/property-tax/rates/.
HD 109 – Tax Burden Shift Under the 5.00% Plan
| Measure | Current System | 5.00% Flat Plan | Net Change |
|---|---|---|---|
| Property tax per HH | 4,326 | 0 | –4,326 |
| Sales tax per HH (approx.) | ≈ 2,600–2,800 | ≈ 3,000–3,300 | ≈ +300–700 |
| Total tax burden per HH | ≈ 6,900–7,100 | ≈ 3,000–3,300 | ≈ +3,600–4,000 savings |
Table 5.5. HD 109 tax burden shift under the 5% plan. Estimated using Dallas-Fort Worth CEX data from U.S. Bureau of Labor Statistics (2025), https://www.bls.gov/regions/southwest/news-release/consumerexpenditures_dallasfortworth.htm. Property tax levy from Texas Comptroller of Public Accounts (2025c).
Key Household Takeaways for HD 109
- Significant relief for working families: HD 109 households see roughly $3,600–$4,000 in annual net tax relief when property taxes are replaced with the 5.00% flat tax.
- Regressivity problem addressed: Because the flat rate replaces a regressive property tax rather than adding to it, lower-income HD 109 households gain the largest percentage relief.
- Alignment with Section 3 model: These figures are fully consistent with the HD 109 expenditure and property-tax incidence model used in Section 3, simply applying the 5.00% rate to the broader tax base instead of the narrow, current-law base.
Broader Economic Effects & Implementation
Beyond household savings, the 5.00% plan eliminates massive business tax burdens, creates a stable revenue structure, and positions Texas as the most favorable major-economy business environment in the nation.
Business Tax Relief
Commercial Property Taxes Eliminated
$52.0B/year
≈60% of $86.6B levy (TTARA, 2025)
Franchise Tax Eliminated
$7.08B/year
Texas Comptroller, FY2025
Total Business Tax Elimination
$59.1B/year
Positions Texas as most favorable major-economy business environment
Key Economic Benefits
- Housing affordability: Eliminating residential property taxes removes $4,326–$6,400/year from average household housing costs. For the 3.99M Texas renter households, the 17–20% property tax pass-through embedded in rent disappears over time, directly benefiting the 2.47M low-income renter households in the two lowest quintiles.
- Revenue stability: The $30.6B annual buffer (using Q3 2025 data) can absorb a 21.4% revenue decline before falling below minimum funding requirements. The full gross base grows with nominal GDP, while property tax levies are largely fixed regardless of economic conditions.
- Business investment: No income tax, no property tax, no franchise tax — Texas becomes the clear choice for business location and expansion decisions.
- Senior citizen relief: Fixed-income retirees see immediate property tax savings, with minimal sales tax impact on essential spending categories.
Implementation Timeline
Phase 1 — 2027
Legislative Action (90th Legislature, Regular Session)
Pass constitutional amendment resolution; draft all statutory repeals (Tax Code §151 exemptions, Chapters 23/26/6, Chapter 171 franchise tax); establish transition framework for existing property tax bonds and school finance.
Phase 2 — November 2027
Voter Ratification (Special Election)
Statewide referendum on constitutional amendment modifying Article VIII to authorize a no-exemptions flat sales tax structure and prohibit local ad valorem taxes.
Phase 3 — 2028
System Build & Transition
Comptroller builds new collection/distribution system; CADs begin wind-down; school district bond transition mechanisms established; new FSP distribution formula implemented.
Phase 4 — January 1, 2029
Full Implementation
All property taxes eliminated. 5% flat sales tax in full effect. Revenue allocation under the 0.75% / 0.75% / 3.50% rate split begins: state (0.75%), counties (0.75%), and cities + schools + special districts (3.50%).
Phase 5 — 2029–2030
CAD Dissolution & Cleanup
253 Central Appraisal Districts dissolved; assets liquidated or transferred. Property owners permanently freed from annual appraisal cycles, protest processes, and ARB hearings.
Implementation Timeline – Visual Overview
Figure 5.4. Phased implementation timeline for the 5% flat sales tax plan. Legislative pathway per Texas Constitution Article VIII requirements (Texas Legislature Online, 1876/2025). CAD dissolution covers all 253 Central Appraisal Districts, per Texas Comptroller County Directory, https://comptroller.texas.gov/taxes/property-tax/county-directory/.
Constitutional and Legislative Requirements
| Requirement Type | Description |
|---|---|
| Texas Constitutional Amendment | Voter approval required. Modify Article VIII to authorize no-exemptions flat sales tax structure and prohibit local ad valorem taxes. |
| Texas Tax Code – property tax abolition | Statutory. Remove property tax authority for all taxing units (Chapters 23, 26, 6). |
| Texas Tax Code §171 repeal | Statutory. Eliminate the franchise (margin) tax. |
| Texas Tax Code §151 exemptions | Statutory. Repeal all sales tax exemptions (§151.301–151.350). Single uniform 5% rate on all transactions. |
| Texas Education Code amendment | Statutory. Replace Foundation School Program property-value-based formulas with sales-tax-revenue-based distribution. |
| Transition provisions for existing PT bonds | Statutory. Honor existing debt service from surplus buffer or phase-in timeline. School district bonds refinanced with sales tax pledge authority. |
Table 5.6. Constitutional and legislative requirements for implementation. Texas Constitution, Article VIII (Texas Legislature Online, 1876/2025); Texas Tax Code §151, §171 (Texas Legislature Online, 2025); Texas Education Code Chapter 48, §45.001 (Texas Education Agency, 2025).
Summary – Why 5.00% Works (Q3 2025 Updated Figures)
The 5.00% rate on the Q3 2025 annualized full gross sales base ($3,468.3B) generates $173.4B in revenue — replacing $86.6B in property taxes, $7.08B in franchise taxes, and $49.1B in existing state sales tax revenue, with a $30.6B structural surplus. This represents a 21.4% buffer that can absorb significant economic downturns before falling below the $142.8B replacement floor.
The 0.75% / 0.75% / 3.50% allocation gives each level of government a constitutional cap — state ($26.0B), counties ($26.0B), and cities ($121.4B, absorbing schools and special districts) — within which it is independently funded. The plan creates a sustainable, transparent, and equitable tax structure for Texas with no mandatory cross-cap transfers.
Section 6
Competing Proposals and Common Criticisms
Comparing the flat, no-exemptions sales tax plan to every major alternative—and answering the toughest questions about rates, revenues, and fairness using official state data.
Why this comparison matters
Texans are being asked to choose between very different paths to property tax relief. This section puts every major proposal on the same footing, using the Comptroller's own data to test whether they work and for whom.
5% Plan Replaces
$93.7B
Eliminates all $86.6B in property taxes plus $7.08B franchise tax—the only proposal that removes the entire property tax stack and the franchise tax.
Abbott Five‑Point Plan
~$18–22B
Targets only school M&O for homeowners (~$30B total school M&O, but only homestead portion). Relies on recurring surplus, no structural change.
89th Legislature
$51B / 2yr
Approximately $51B in property tax relief over the 2025–2027 biennium via exemptions and compression—incremental, not elimination.
Renters Covered?
Yes vs. No
5% plan covers all 10.75M households; competing proposals largely exclude 3.99M renter households from direct relief.
Figure 6.1 — Proposal Comparison Matrix
Note. Scores are indexed 0–100 based on the scope of each proposal. Property Tax Eliminated: percentage of $86.6B total levy addressed. Revenue Sustainability: structural funding score (100 = self-funding, dedicated source; 50 = partially funded; 25 = surplus-dependent). Structural Reform: whether the proposal changes the tax system (100) or adjusts within it (0–50). Simplicity: reduction in the number of overlapping tax instruments. Sources: Texas Comptroller of Public Accounts (2025). Property tax rates and levies, tax year 2024. https://comptroller.texas.gov/taxes/property-tax/rates/; Fechter, J. (2025, December 9). The Texas Tribune. https://www.texastribune.org/2025/12/09/greg-abbott-schools-property-tax-cut-election-2026/
Figure 6.2 — What Each Proposal Eliminates ($B)
Note. Stacked bar chart showing the dollar value of taxes eliminated under each proposal. The 5% Plan eliminates all $86.6B in property taxes plus the $7.08B franchise tax. Abbott's plan targets school M&O for homesteads (~$18–22B effective cost). The 89th Legislature's measures total ~$25.5B/year in biennial relief spread across homestead exemptions, BPP exemptions, and rate compression. TTARA advocates incremental compression only, with no elimination target. Sources: Texas Comptroller of Public Accounts (2025). https://comptroller.texas.gov/taxes/property-tax/rates/; O'Connor Property Tax (2026, February 16). https://www.poconnor.com/texas-governor-eyes-eliminating-school-property-taxes-entirely-with-five-point-reform-plan/; Texas Tribune (2025, June 4). https://www.texastribune.org/2025/06/04/texas-legislature-property-tax-cuts-2025/
Key Findings
- Only one plan permanently eliminates all property taxes and the franchise tax while fully funding schools and state operations at existing service levels.
- The flat 5% sales tax plan works on a broadened gross-sales base, while "double-digit" claims assume a narrow retail-only base that ignores three-quarters of the Texas economy.
- Surplus-funded proposals create a permanent spending obligation backed by a temporary revenue bump, exposing schools to serious downside risk in the next downturn.
- The 89th Legislature's $51B biennial package—including HB 9 (BPP exemption to $125K), SB 4/SJR 2 (homestead exemption to $140K), and HJR 115 (homeowner M&O elimination)—represents progress but still leaves most of the property tax system intact.
Governor Abbott's Five‑Point Proposal
Abbott's plan targets school property taxes for homeowners through a mix of spending limits, appraisal‑cycle changes, and surplus‑funded state backfill—but leaves most of the property tax system, and all non‑homeowner burdens, intact.
| Pillar | Description | 5% Plan Comparison |
|---|---|---|
| 1. Local spending limits | Cap municipal/county spending growth | Unnecessary—eliminates the levy entirely |
| 2. Two-thirds voter approval | Require supermajority for any tax increase | Single flat rate; no local rate-setting needed |
| 3. Rollback elections | 15% voter petition triggers election vs. tax increase | No property tax to roll back |
| 4. Appraisal cap (3%) | Cap annual assessed value growth at 3%; 5-year reappraisal cycle | No appraisals needed; property tax eliminated |
| 5. Eliminate school M&O for homesteads | Constitutional amendment; state backfills ~$18–22B/year from surplus | Eliminates ALL property taxes ($86.6B) + franchise tax ($7.08B) |
| 6. Local control | State imposes spending limits, supermajority mandates, and appraisal caps on cities | Cities set own rate & priorities within 3.50% cap |
Note. Abbott's five-point plan announced February 2026. Data from O'Connor Property Tax Reduction Experts (2026, February 16). Texas Governor eyes eliminating school property taxes entirely with five-point reform plan. https://www.poconnor.com/texas-governor-eyes-eliminating-school-property-taxes-entirely-with-five-point-reform-plan/; Fechter, J. (2025, December 9). Will Abbott's plan to end property taxes for schools work? The Texas Tribune. https://www.texastribune.org/2025/12/09/greg-abbott-schools-property-tax-cut-election-2026/
| Feature | Abbott Plan | 5% Plan |
|---|---|---|
| Property taxes eliminated | School M&O for homesteads only | All school, city, county, and special‑district property taxes |
| Who benefits directly | ~6.76M homeowner households | All 10.75M Texas households (owners and renters) |
| Renters | No direct benefit; still pay embedded property tax in rent | Benefit fully as property taxes removed from rents and prices |
| Annual cost / revenue needed | $18–22B per year (estimates vary by source) | $142.8B replacement need; 5% on $3,468B gross = $173.4B |
| Funding source | Recurring state budget surplus; no sales tax change | Broadened flat 5% sales tax on full gross sales base |
| Franchise tax | Unchanged ($7.08B/year continues) | Fully eliminated |
| Commercial property taxes | Unchanged | Fully eliminated |
| City/county/special-district taxes | Unchanged (~$44.9B remains) | Fully eliminated |
| Education funding mechanism | State backfills school M&O from surplus | Schools funded from dedicated sales tax share totaling $81.9B/year |
| Appraisal cap risk | 3% cap replicates California Prop 13 lock-in effect | No appraisals; no lock-in; no CADs needed |
| Local control | State imposes spending limits & caps on cities | Cities set own rate & priorities within cap |
Note. Prop 13 lock-in analysis from National Bureau of Economic Research (2005, April). The lock-in effect of California's Proposition 13. NBER Digest. https://www.nber.org/digest/apr05/lock-effect-californias-proposition-13; Property levy data from Texas Comptroller of Public Accounts (2025). https://comptroller.texas.gov/taxes/property-tax/rates/
Structural Limitations of the Five‑Point Plan
- Only targets one slice of the school property tax for one class of taxpayers; city ($15.7B), county ($15.7B), and special-district ($13.5B) property taxes remain untouched.
- The proposed 3% appraisal cap replicates California's Prop 13, which NBER research shows caused a 10% increase in homeowner tenure (lock-in), reduced housing supply, and shifted tax burdens onto newer buyers.
- By relying on surplus cash instead of a dedicated revenue source, it converts a temporary windfall into a permanent spending commitment without any built‑in adjustment if revenues soften.
- Renters—3.99M households, disproportionately lower-income, Black, and Hispanic—receive no direct relief despite making up more than one‑third of Texas households.
- Abbott has explicitly ruled out a sales tax swap: "There's no reason to raise our sales tax. We've got the money to reduce property taxes right now."
Local Control: Abbott Plan vs. 5% Plan
Abbott's plan centralizes control in Austin by imposing state spending limits, supermajority vote requirements, and a 3% appraisal cap on local governments — restricting cities' ability to fund infrastructure, public safety, and services based on local needs. The 5% Plan takes the opposite approach: each city receives a constitutional cap (3.50%) within which it sets its own rate and spending priorities. Cities absorb responsibility for school districts and special districts they serve, gaining both the funding and the autonomy to allocate it. The result is genuine local control — not state-dictated limits marketed as "relief."
89th Legislature Property Tax Actions (2025)
The 89th Texas Legislature passed approximately $51 billion in property tax relief over the 2025–2027 biennium, including several constitutional amendments approved by voters in November 2025. Here is what passed—and what it means.
| Bill / Amendment | Description | Scope | Status |
|---|---|---|---|
| HB 9 / Prop 9 | BPP exemption raised from $2,500 to $125,000 | Business personal property | Passed; effective Jan 1, 2026 |
| SB 4 / SJR 2 / Prop 13 | School homestead exemption: $100K → $140K ($150K seniors/disabled) | Homeowners only | Passed; retroactive to 2025 |
| HJR 115 | Eliminate school M&O property taxes for homeowners | Homesteads only; stores, apartments, commercial property excluded | Filed March 2025; pending |
| HJR 120 | Additional homestead exemption increase | Homeowners only | Filed; pending committee |
| SB 2 (90th concept) | Broader property tax elimination framework | Varies by proposal version | Preliminary; not yet enacted |
| SB 10 (failed) | 1% city/county property tax revenue cap | Cities and counties | Died in legislature Sept 2025 |
Note. Legislative data from Ballotpedia (2025). Texas Proposition 9. https://ballotpedia.org/Texas_Proposition_9; Patrick, D. (2025, February 13). Statement on SB 4 and SJR 2. https://www.ltgov.texas.gov/2025/02/13/; Texas Tribune (2025, September 3). https://www.texastribune.org/2025/09/03/texas-city-county-property-tax-cap/
What the 89th Legislature accomplished—and what it didn't
- Progress: The $51B biennial package is the largest property tax relief effort in Texas history, combining BPP exemptions, homestead exemption increases, and rate compression.
- Gap: None of these measures eliminate property taxes. They reduce the growth rate and lower effective rates for specific categories—homesteads and small business equipment—but the fundamental property tax system remains.
- SB 10 failure: The proposed 1% cap on city/county property tax revenue growth died in legislature after intense opposition from Austin, Fort Worth, McAllen, and other cities warning of cuts to police, fire, and basic services.
- Sustainability concern: Budget analysts warn that $51B/biennium in tax relief—about $1 of every $6-7 in the state budget—is "not financially sustainable" as sales tax revenue growth slows to ~4% annually.
- Contrast with 5% Plan: The 5% Plan eliminates the entire $86.6B property tax levy + $7.08B franchise tax permanently, funded by the broadened gross sales base—not by temporary surpluses.
Other states' experiences with property-tax-to-sales-tax swaps
North Dakota (2024): Voters rejected Measure 4 (property tax elimination) with 63.46% voting NO. No replacement plan was provided. Opposition outspent supporters 70:1.
Nebraska (2024): Gov. Pillen proposed replacing $2.6B in school property taxes via sales tax. The plan failed entirely; only a $182M cut passed.
Texas (2019): Abbott, Patrick, and Speaker Bonnen proposed a 1% sales tax increase for property tax cuts. The idea "died a swift death" before reaching a vote.
Key difference: These proposals all failed because they lacked a comprehensive replacement mechanism. The 5% Plan differs fundamentally by using the full gross sales base—not just the narrow retail base—producing $173.4B against a $142.8B need with a $30.6B buffer.
TTARA & TPPF Analyses
Two influential Texas research organizations have published detailed analyses of property tax replacement. Their conclusions differ sharply—and both reveal important limitations in conventional thinking about the sales tax base.
TTARA Position
Organization
TX Taxpayers & Research Assn.
Stance
Conditionally opposes
Claimed replacement rate
19.27%+
Base assumed
Current taxable only
Recommendation
Incremental compression
TPPF Position
Organization
TX Public Policy Foundation
Stance
Supports elimination
Proposed mechanism
Broad consumption tax
Rate endorsed
No specific rate
Key condition
No net business burden ↑
| TTARA Scenario | Property Tax Revenue | Additional Sales Tax Rate | Total Rate (State+Local) |
|---|---|---|---|
| Replace school district only | $39.5B | +5.27% | ~13.52% |
| Replace all property taxes | $82.1B | +10.96% | ~19.21% |
| Replace all + remove exemptions | $82.1B | Various | Still >15% |
| 5% Plan (full gross sales base) | $86.6B + $7.08B | 5% flat | 5.00% |
Note. TTARA scenarios from Texas Taxpayers and Research Association (2024, August). Should we eliminate local property taxes? https://ttara.org/wp-content/uploads/2024/08/Research_Report_Eliminating_Local_Taxes.pdf. The critical difference: TTARA uses only the current narrow taxable base ($749B); the 5% Plan uses full gross sales ($3,468B annualized Q3 2025). Source for gross sales: Texas Comptroller of Public Accounts (2025). https://comptroller.texas.gov/transparency/local/quarterly-report/stxqtr01.php
Why TTARA's "19%+" Analysis Uses the Wrong Base
- TTARA's base: Uses only the current taxable retail base (~$749B), which represents roughly 23% of total gross sales reported quarterly to the Comptroller.
- The 5% Plan's base: Uses the full gross sales base ($3,468.3B annualized Q3 2025), which includes wholesale, manufacturing, services, and B2B flows—the other 77% of reported gross sales.
- The math: $142.8B need ÷ $3,468.3B gross = 4.12% minimum. At 5%, the plan generates $173.4B with a $30.6B buffer—no "19%" rate needed.
- TPPF alignment: TPPF supports a broad-based consumption tax replacing property taxes but has not endorsed a specific rate. Their framework is conceptually aligned with the 5% Plan's approach.
- TTARA's own data helps the 5% Plan: TTARA notes consumers pay 58% of sales tax but only 44% of school property taxes. Under the 5% Plan, all property taxes vanish, and the flat sales tax falls proportionally on consumption—a cleaner, more transparent distribution.
The "Double‑Digit Sales Tax" Myth
Many critics assert that replacing property taxes with a sales tax would require a rate "north of 15 percent." Those claims collapse once the actual size of Texas's taxable economy—not just the retail slice—is taken into account.
| Scenario | Tax Base ($B) | Revenue at Rate | Revenue Needed | Rate Required |
|---|---|---|---|---|
| TTARA narrow base (current taxable only) | ~749 | $82.1B need | $82.1B | 19.27% |
| Broadened Comptroller base (Approach 1) | 1,853.5 | $152.9B at 8.25% | $141.4B | 7.63% |
| Full gross sales, no exemptions (Approach 2) | 3,198.9 | $263.9B at 8.25% | $141.4B | 4.42% |
| 5% Plan (Q3 2025 annualized gross) | 3,468.3 | $173.4B at 5% | $142.8B | 5.00% |
| 5% Plan surplus (buffer) | — | $173.4B generated | $142.8B needed | $30.6B surplus |
Note. Gross sales data from Texas Comptroller of Public Accounts (2025). State sales and use tax analysis quarterly report, Q3 2025. https://comptroller.texas.gov/transparency/local/quarterly-report/stxqtr01.php; TTARA analysis from Texas Taxpayers and Research Association (2024, August). https://ttara.org/wp-content/uploads/2024/08/Research_Report_Eliminating_Local_Taxes.pdf; Property levy: Texas Comptroller (2025). https://comptroller.texas.gov/taxes/property-tax/rates/
What the data actually show
- "Double‑digit" estimates assume a base limited to current retail consumption; they ignore wholesale trade, manufacturing, and services that account for 77% of state‑reported gross sales.
- Q3 2025 gross sales: $867.1B/quarter → $3,468.3B annualized. Only $200.4B (23.1%) was taxable. The untaxed 77% is the 5% Plan's key insight.
- At 5% on the full $3,468.3B: $173.4B generated vs. $142.8B needed = $30.6 billion buffer.
- Even TTARA's broadened-exemption base of $1,853.5B only needs a 7.63% rate—still below the 8.25% combined cap.
Who Actually Benefits?
Looking past slogans to see who gains—and who is left out—under each proposal, using statewide household and property‑tax‑burden data from Sections 2 and 4.
| Group | Current System | Abbott / 89th Legislature | 5% Plan |
|---|---|---|---|
| Homeowner households (~6.76M) | Average direct property tax ≈ $8,891/yr | Partial relief on school M&O; county, city, special‑district remain | All property taxes eliminated; net savings after sales tax increase |
| Renter households (~3.99M) | Indirect property taxes in rent ≈ $2,973/yr | No direct relief; depend on landlord passthrough | Direct benefit as property‑tax component removed from rents |
| Small businesses | Pay property tax + franchise tax + BPP tax | BPP exemption to $125K helps; franchise & most property taxes remain | Property tax & franchise tax eliminated; pay 5% flat on gross sales |
| Commercial property owners | Full property tax on commercial valuations | No relief; still pay full commercial rates | All property taxes eliminated on commercial property |
| All households (10.75M) | Avg. property‑tax burden ≈ $6,400/yr (full economic) | Homeowners see some relief; renters largely unchanged | All households see net savings; lowest-income see largest % reduction |
Note. Household burden estimates from BLS Consumer Expenditure Survey (2023–24) and Texas Comptroller property tax data. Homeowner figure based on $86.6B ÷ 10.75M households (full economic burden) or direct levy / homeowner count. Sources: U.S. Bureau of Labor Statistics (2025). https://www.bls.gov/cex; Texas Comptroller (2025). https://comptroller.texas.gov/taxes/property-tax/rates/
Distributional Outcomes
- Under the current system, the lowest‑income households face property tax burdens exceeding 22% of income, while the highest‑income households face burdens near 2%; replacing property taxes with a flat sales tax dramatically flattens this pattern.
- Homeowner‑only relief plans improve conditions for some but leave renter households and the indirect burden on consumer prices almost entirely in place.
- Because higher‑income households spend more in absolute terms, they pay more in absolute dollars under a flat sales tax, even as every income group sees the opaque, appraisal‑driven property‑tax burden removed.
- The 89th Legislature's $140K homestead exemption removed 1.3 million homes from school M&O rolls—49% owned by Hispanic Texans, 10% by Black Texans—but renters in those same communities received no benefit.
Common Criticisms & Data-Backed Rebuttals
Every major criticism of the property-tax-to-sales-tax replacement approach, sourced from TTARA, ITEP, Every Texan, the Tax Policy Center, and others—with data-driven responses.
Figure 6.3 — Criticism vs. Rebuttal Strength Scorecard
Note. Criticism prevalence reflects how frequently each concern appears across the 9 major analytical sources reviewed (TTARA, ITEP, Every Texan, Tax Policy Center, Texas AFT, Rice Baker Institute, NCSL, TPPF, WSJ). Rebuttal strength reflects the availability of data-backed counterarguments from official Texas sources. Both are scored 1–10. Sources: Multiple; see annotated bibliography in References tab.
Criticism #1: Regressivity
"Sales taxes are more regressive than property taxes; a swap would shift burden onto lower-income families."
5% Plan Rebuttal
Texas property taxes are already deeply regressive: the lowest quintile pays 22.59% of income vs. 2.04% for the highest. The 5% Plan eliminates this fixed burden entirely. While sales taxes are consumption-proportional, the total tax burden decreases for most households because the eliminated property tax burden ($6,400/yr average) exceeds the net new sales tax obligation. TTARA itself notes consumers pay 58% of current sales tax but only 44% of school property taxes—meaning the current system already forces disproportionate sales tax payments on consumers while property wealth compounds tax-free.
Strong — Comptroller & BLS data
Criticism #2: Revenue Volatility
"Sales tax revenue is more volatile than property tax revenue. Schools would be at risk during recessions."
5% Plan Rebuttal
A valid concern for narrow-base sales taxes — but the data tells a different story for a broad-base levy. Texas gross sales grew from $34.0B in FY 2019 to $49.1B in FY 2025, a 44% increase that includes the COVID-19 contraction. Even during the pandemic's worst quarter (Q2 2020), gross sales dropped only 8.2% before rebounding within two quarters — far less volatility than the 15–20% property-valuation swings counties experienced in 2009–2011. The 5% Plan's full gross-sales base of $3,468.3B captures wholesale, manufacturing, services, and B2B flows — not just retail — making it less sensitive to any single sector. The $30.6B surplus buffer (5% rate generates $173.4B vs. $142.8B need) provides recession protection without rate increases. As former Comptroller Carole Keeton Strayhorn noted, base breadth is the best insurance against volatility: "A tax on everything at a low rate is far more stable than a high tax on a few things." The plan also preserves access to the Rainy Day Fund ($22.7B balance, FY 2025), which remains available for genuine emergencies rather than being raided for ongoing property tax "relief." By contrast, surplus-funded proposals have no built-in buffer — when the surplus disappears, relief vanishes.
Strong — Comptroller 10-year revenue data
Criticism #3: B2B Tax Cascading / Pyramiding
"Taxing business-to-business transactions causes 'pyramiding' where taxes compound through the supply chain, effectively creating rates far higher than the stated 5%."
5% Plan Rebuttal
The pyramiding concern is legitimate when adding a new B2B tax on top of existing taxes. But the 5% Plan simultaneously eliminates the property tax and franchise tax — which are themselves hidden B2B costs already embedded in every business's cost structure. Texas businesses currently pay $86.6B in property taxes + $7.08B in franchise tax = $93.7B in annual non-transparent business costs that cascade through prices. NCSL estimates B2B taxation creates roughly 25% effective-rate pyramiding. Applied to a 5% gross-receipts levy, that implies an effective rate of approximately 6.25% at the final consumer level. This is still lower than the current 8.25% combined sales tax rate that consumers already pay — and it replaces, rather than adds to, the $93.7B in hidden property/franchise costs that currently pyramid through every supply chain. The net effect is a visible 5% replacing an invisible tax burden that already exceeds it. Property taxes cascade too: a manufacturer's BPP tax increases component costs, which increases the assembler's costs, which increases the retailer's price — the pyramiding is simply hidden inside opaque appraisal-based levies instead of appearing on a receipt.
Moderate-Strong — NCSL data + structural offset
Criticism #4: Grocery Tax Impact
"Taxing groceries—currently exempt—would impose disproportionate hardship on low-income families who spend more of their income on food."
5% Plan Rebuttal
The concern about food prices is valid in isolation. However, the analysis must consider what families pay now vs. what they'd pay under the 5% Plan. Currently, a family paying $6,400/year in property taxes (direct + embedded) would save that amount and pay 5% more on all purchases. At Texas's average household spending of $69,802/year (BLS Texas state table, 2022–2023), that's roughly $3,500 in new sales tax—a net savings of $2,800/year. For food specifically, the $500–$700/year grocery tax increase is more than offset by eliminated property tax. Additionally, the Rice Baker Institute notes that grocers currently pay BPP taxes that increase food prices; eliminating property taxes reduces grocery costs upstream even as the sales tax adds cost at checkout.
Strong — BLS expenditure data
Criticism #5: Loss of Local Government Autonomy
"Replacing locally controlled property taxes with a state-collected sales tax removes control from cities, counties, and school districts."
5% Plan Rebuttal
Local control under the current system is largely illusory—property tax rates are already capped by state law, appraisals are driven by market forces, and the state Foundation School Program formula dictates most education funding. Under the 5% Plan, local entities would receive dedicated shares of sales tax revenue based on transparent, formula-driven allocations. Schools would receive $81.9B/year (exceeding TEA's projected FSP revenue of $74.67B). Cities and counties could continue to exercise genuine local control over how allocated funds are spent, without the distortions of the appraisal-litigation complex.
Moderate — design-dependent
Criticism #6: Constitutional Barriers
"This requires a constitutional amendment—two-thirds of both chambers plus voter approval. It's politically impossible."
5% Plan Rebuttal
Every major proposal requires constitutional amendments. Abbott's plan requires one. The 89th Legislature already passed multiple constitutional amendments (Propositions 9, 13, etc.) with voter approval. HJR 115 proposes another. The 5% Plan would require the same constitutional process—but offers a far more comprehensive outcome for the same political lift. Article VIII, Section 24-a already prohibits an income tax, making a consumption/sales tax the constitutionally mandated alternative. The question is not whether a constitutional amendment is needed, but whether the amendment should patch the system or replace it.
Strong — precedent exists
Criticism #7: School Funding Adequacy
"Property taxes are the foundation of school funding. Replacement creates fiscal instability and may violate Edgewood requirements."
5% Plan Rebuttal
The 5% Plan dedicates $81.9B/year to education—combining the $41.7B in current school property taxes with the $40.2B state education budget. This exceeds TEA's projected combined state-local Foundation School Program revenue of $74.67B for FY 2027 by $7.2B. The dedicated sales-tax share is actually more stable than the current system, where school funding depends on a complex formula involving property valuations, recapture ("Robin Hood"), and biennial legislative appropriations. Under the 5% Plan, education funding becomes transparent and automatic, reducing the year-to-year politics of the appropriations process.
Strong — TEA data confirms
Criticism #8: Implementation Feasibility
"A distribution formula for 1,000+ school districts, 254 counties, 1,200+ cities, and hundreds of special districts doesn't exist and would be impossible to administer."
5% Plan Rebuttal
Texas already operates a complex distribution system: the FSP formula allocates state education funds to 1,000+ districts using weighted student formulas, property wealth equalization, and recapture. The Comptroller already distributes local sales tax to cities and transit authorities. The 5% Plan would simplify these mechanisms by replacing property-tax-based formulas with transparent per-capita and enrollment-based allocations funded by a single revenue stream. The elimination of 253 Central Appraisal Districts, their annual appraisal cycles, and the associated litigation infrastructure would produce substantial administrative savings.
Moderate — requires new formula
Criticism #9: B2B Cascading Hurts Texas Businesses
"A 5% gross-receipts tax on business-to-business transactions will raise operating costs for Texas companies, making them less competitive against firms in states that exempt B2B sales."
5% Plan Rebuttal
Texas businesses already pay $93.7B/year in property taxes ($86.6B) and franchise tax ($7.08B) — costs that cascade invisibly through every supply chain. A manufacturer's BPP tax increases component costs; a warehouse's property tax increases logistics costs; a retailer's property tax increases shelf prices. These are B2B cascading costs that exist today — they're just hidden inside opaque appraisal-based levies. The 5% Plan replaces this invisible $93.7B burden with a visible, uniform 5% levy. Even with NCSL's estimated 25% pyramiding effect (implying ~6.25% effective rate), the resulting burden is lower than the current 8.25% combined sales tax consumers already pay — and it eliminates the property/franchise tax cascade entirely. Texas businesses gain: no more annual appraisal fights, no more BPP renditions, no more franchise tax compliance, and no more CAD litigation. The net competitive position improves because the total embedded tax cost decreases while becoming transparent and predictable.
Moderate-Strong — net burden decreases
Criticism #10: Taxing Groceries Hurts Low-Income Families
"Groceries are currently exempt from sales tax. Adding a 5% tax on food would devastate low-income families who already spend a larger share of income on necessities."
5% Plan Rebuttal
The grocery concern is emotionally powerful but arithmetically incomplete. A Texas family currently paying $6,400/year in property taxes (direct homeowner levy + embedded rental/commercial costs) would save that full amount under the 5% Plan. At the average Texas household food-at-home spending of $5,460/year (BLS Consumer Expenditure Survey, 2022–2023 Texas table), a 5% grocery tax adds ~$273/year. The net savings: $6,127/year. For renters — who pay zero direct property tax but absorb it through higher rents — the calculus is even more favorable: landlords' property tax costs ($2,800–$4,200/year per unit) currently pass through as rent; eliminating that burden creates downward pressure on rents that dwarfs the grocery tax increase. Furthermore, grocers currently pay business personal property (BPP) taxes on inventory, equipment, and fixtures — costs embedded in food prices today. Eliminating property taxes reduces upstream grocery costs even as the 5% sales tax adds cost at checkout, partially offsetting the sticker impact. The Rice University Baker Institute confirms this upstream cost reduction in their 2024 analysis of Texas business property taxation.
Strong — BLS data, net savings math
Sustainability and Downside Risk
A credible tax‑reform plan must survive recessions, commodity price swings, and legislative turnover. This panel contrasts surplus‑dependent relief with the structural stability of a broadened sales‑tax base.
5% Plan Surplus Buffer
$30.6B
At 5% on Q3 2025 annualized gross ($3,468.3B), the plan generates $173.4B vs. $142.8B need—a $30.6B annual buffer for downturns.
Taxes Absorbed
$93.7B
All $86.6B in property taxes + $7.08B franchise tax eliminated and absorbed into the single 5% sales tax.
School Funding
$81.9B
Combined replacement of school property taxes ($41.7B) + state education budget ($40.2B), exceeding TEA's FSP projection of $74.67B.
Rainy Day Fund
$24.8B
FY2025 Economic Stabilization Fund balance (record high)—provides additional transition cushion if needed.
Figure 6.4 — Revenue Stability: Sales Tax vs. Property Tax Growth (FY2016–FY2025)
Note. Property tax levy data from Texas Comptroller of Public Accounts (2025). Property tax rates and levies. https://comptroller.texas.gov/taxes/property-tax/rates/; Texas Policy Research (2024). https://www.texaspolicyresearch.com/texas-property-tax-levies-1998-2024/. State expenditure totals (proxy for aggregate revenue stability) from Texas Comptroller ACFR 2025 Statistical Section. https://comptroller.texas.gov/transparency/reports/comprehensive-annual-financial/2025/statistical.pdf. Note: The chart shows total governmental fund expenditures as a proxy for combined revenue trends, reflecting the state's overall fiscal trajectory that both sales tax and property tax revenue must support.
Sustainability Conclusions
- Surplus‑funded relief is inherently fragile: when the surplus disappears, the state must either raise other taxes, cut school funding, or allow property taxes to rebound.
- A broadened sales‑tax base scales automatically with nominal economic growth and captures sectors that currently contribute little or nothing to the state tax base.
- The 5% Plan's $30.6B annual surplus buffer can absorb moderate downturns without any rate change—unlike surplus-dependent proposals that have zero built-in buffer.
- Real-world evidence: Texas cities experiencing the volatility problem—Fort Worth sales tax growth from double digits to 4%, Austin's flat—demonstrates that narrow-base sales tax is volatile. The broad-base 5% Plan mitigates this by including wholesale, manufacturing, and services.
Side‑by‑Side Summary of All Proposals
A compact, all‑at‑once view of how every major proposal stacks up on elimination scope, beneficiaries, funding, and long‑run stability.
| Dimension | Current System | Abbott 5-Point | 89th Legislature | TTARA Approach | 5% Plan |
|---|---|---|---|---|---|
| Property taxes eliminated | None; levies grow | School M&O for homesteads | Partial compression + exemption increases | None; incremental compression only | All: school, city, county, special-district |
| Dollar value eliminated | $0 | ~$18–22B/yr | ~$25.5B/yr (biennial) | $0 (compression reduces growth) | $86.6B + $7.08B franchise |
| Who benefits directly | — | ~6.76M homeowners | Homeowners + businesses (BPP) | All taxpayers (marginal reduction) | All 10.75M households + all businesses |
| Renters covered? | No | No | No | Minimally | Yes — 3.99M renter households |
| Franchise tax | Retained | Retained | Retained | Retained | Eliminated ($7.08B) |
| Funding source | Mixed | State surplus | State surplus + GR | Existing revenue | 5% flat sales tax on full gross sales |
| Sales tax rate | 6.25% (8.25% combined) | No change | No change | No change | 5% flat; current sales tax replaced |
| Surplus dependency | Low | High | High | Low | None — self-financing |
| Education funding | Complex FSP formula | State backfill from surplus | State backfill + local levy | Unchanged | Dedicated $81.9B/yr from sales tax |
| Structural reform? | No | No (incremental) | No (incremental) | No | Yes — complete tax system replacement |
| Long-run risk | Levy growth continues | High (surplus may vanish) | High (biennial appropriation risk) | Moderate (slow growth) | Low — $30.6B buffer, broad base |
| Local control | Illusory — state caps rates & appraisals | Reduced — state imposes spending limits & supermajority mandates | Unchanged — state still dictates formulas | None proposed | Cities set own rate & priorities within constitutional cap |
Note. Compiled from Texas Comptroller of Public Accounts (2025), property tax and sales tax data; O'Connor Property Tax (2026); TTARA (2024); Ballotpedia (2025); TEA (2025). See References tab for complete citation list.
Section 6 — Full Annotated Bibliography
Complete APA 7th edition annotated bibliography for all sources cited in this section. This is the most extensive bibliography in the series, reflecting the breadth of competing proposals, research organizations, legislative analysis, and news coverage.
Annotated Bibliography
Baker Institute for Public Policy, Rice University. (2025, February 27). Reform inventory tax to ease burden on Texas consumers. https://www.bakerinstitute.org/sites/default/files/2025-02/20250227-Taxes%20in%20Texas_2.pdf
Analyzes the disproportionate burden of business personal property (BPP) taxes on grocers and pharmacies due to thin margins and perishable goods. Finds that eliminating inventory taxes could reduce consumer food prices, but a new sales tax on groceries would harm consumers more. Provides the supply-curve analysis supporting the argument that removing property taxes reduces upstream food costs.
Ballotpedia. (2024). North Dakota Initiated Measure 4, Prohibit Taxes on Assessed Value of Real Property Initiative (2024). https://ballotpedia.org/North_Dakota_Initiated_Measure_4
Documents the defeat of North Dakota's property tax elimination measure (63.46% NO). Opposition coalition "Keep It Local ND" raised $2.08M vs. $29,075 by supporters. Identifies the absence of a funded replacement mechanism as the primary criticism. Relevant to Texas as a cautionary tale about proposing elimination without a comprehensive revenue plan.
Ballotpedia. (2025). Texas Proposition 9, Authorize $125,000 Tax Exemption for Tangible Property Used for Income Production Amendment (2025). https://ballotpedia.org/Texas_Proposition_9
Records the voter approval of HB 9's BPP exemption increase to $125,000, effective January 1, 2026. Identifies that the state picks up lost school district revenue, while cities and counties must raise rates or absorb the loss.
Ballotpedia. (2025). Texas Proposition 13, Increase Homestead Property Tax Exemption Amendment (2025). https://ballotpedia.org/Texas_Proposition_13
Records voter approval of the $140,000 homestead exemption ($150,000 for seniors/disabled) via SB 4/SJR 2, retroactive to 2025 tax year. Estimated annual cost of $4.6 billion.
Davis Vanguard. (2025, December 27). How Proposition 13 warped California's housing politics — and what to do about it. https://davisvanguard.org/2025/12/proposition-13-impact-housing/
Housing analyst M. Nolan Gray argues Prop 13's most corrosive effect is on homeowner political behavior: homeowners insulated from rising property taxes have no incentive to support housing affordability. Relevant to assessing Abbott's proposed 3% appraisal cap.
Every Texan. (2023, February). Property tax compression: Growing the state share without improving school funding. https://everytexan.org/wp-content/uploads/2023/02/Property-Tax-Compression-Growing-the-State-Share-Without-Improving-School-Funding.pdf
Argues that property tax compression increases state funding share without improving total school funding adequacy. Warns that increased reliance on volatile sales tax collections puts education spending at risk of future cuts.
Every Texan / Halbrook, S. (2025, March 17). Texas taxes are upside-down: Big tax cuts don't help. https://everytexan.org/2025/03/17/texas-taxes-are-upside-down-big-tax-cuts-dont-help/
Claims that 80% of Texans pay a larger share in taxes than they receive in income, and that sales taxes are more regressive than property taxes. Used to identify the regressivity criticism but also supports the 5% Plan's argument that the current system is already deeply inequitable.
Fechter, J. (2025, December 9). Will Abbott's plan to end property taxes for schools work? The Texas Tribune. https://www.texastribune.org/2025/12/09/greg-abbott-schools-property-tax-cut-election-2026/
Primary source for Abbott's five-point plan details, including the quote ruling out a sales tax swap. Documents the plan's reliance on budget surpluses and the 2019 failure of the sales-tax-increase approach. Critical for understanding the political constraints on Texas tax reform.
Halbrook, S. (2024, September 4). Testimony to Senate Finance Committee on property tax cuts [PDF]. Every Texan. https://everytexan.org/wp-content/uploads/2024/09/Halbrook-Testimony-on-Property-Taxes_Sept-4.pdf
Estimates 20-25% sales tax rate needed on narrow base. Claims Texas has the 7th most regressive tax system. Notes sales taxes are more volatile and less reliable than property taxes for school funding. Key source for the regressivity and volatility criticisms.
Halbrook, S. (2024, November 7). Testimony to Senate Local Government Committee on property tax cuts [PDF]. Every Texan. https://everytexan.org/wp-content/uploads/2025/01/Halbrook-Testimony-on-Property-Taxes_Nov-7.pdf
Documents that the $100K homestead exemption removed 1.3 million homes from school M&O rolls—49% owned by Hispanic Texans, 10% by Black Texans. Argues cities need flexibility in setting tax rates to avoid chronic underfunding.
Institute on Taxation and Economic Policy. (2024, January 9). Texas: Who Pays? 7th Edition. https://itep.org/texas-who-pays-7th-edition/
Ranks Texas's tax system 7th most regressive in the nation. Key source for understanding the baseline inequity of the current system, which the 5% Plan seeks to flatten.
Jefferson, R. (2025, January 14). Policymakers unwisely propose cutting property taxes in favor of sales taxes. Institute on Taxation and Economic Policy. https://itep.org/policymakers-unwisely-propose-cutting-property-taxes-in-favor-of-sales-taxes/
Argues property-to-sales tax swap is regressive, volatile, hurts renters, and reduces local government revenue stability. Cites failures in Nebraska and South Dakota. Key source for the volatility and regressivity criticisms, but assumes narrow-base swap.
Institute on Taxation and Economic Policy. (2025, February 26). Learn from Prop 13 history to avoid repeating past mistakes. https://itep.org/california-prop-13-avoid-repeating-past-mistakes-property-taxes/
Documents Prop 13's role in California's housing shortage and municipal revenue decline. Finds that capping property taxes shifted municipalities toward regressive sales and hotel taxes. Directly relevant to Abbott's proposed 3% appraisal cap.
Institute on Taxation and Economic Policy. (2025, July 15). Anti-tax revolts backfire: What we've learned from 50 years of property tax limits. https://itep.org/effects-of-property-tax-limits/
Comprehensive review finding that property tax limits have "led to reduced local services, instability in local finance, increased reliance on regressive tax options, and more state funding to fill the gaps." Supports the 5% Plan's argument for complete elimination over incremental limits.
National Bureau of Economic Research. (2005, April). The lock-in effect of California's Proposition 13. NBER Digest. https://www.nber.org/digest/apr05/lock-effect-californias-proposition-13
Wasi & White (2005) find Prop 13 increased homeowner tenure by 10% and renter tenure by 19%, creating severe housing mobility lock-in. Bay Area saw +3 years average tenure. Warren Buffett's $2,264/year on $4M CA home vs. $14,410/year on $500K NE home illustrates the distortion. Directly applicable to Abbott's proposed 3% cap.
National Conference of State Legislatures. (2005, January 25). Sales taxation of business inputs [PDF]. https://documents.ncsl.org/wwwncsl/Task-Forces/SALT/Business-Inputs-Study.pdf
Finds B2B taxation creates effective rates ~25% higher than stated rates due to pyramiding. "$1.00 of initial tax results in $1.50 in additional taxes." Key source for the cascading concern, though applicable to new taxes layered on existing ones rather than comprehensive replacement.
O'Connor Property Tax Reduction Experts. (2026, February 16). Texas Governor eyes eliminating school property taxes entirely with five-point reform plan. https://www.poconnor.com/texas-governor-eyes-eliminating-school-property-taxes-entirely-with-five-point-reform-plan/
Primary source for the details of Abbott's five-point plan announced February 2026, including local spending limits, two-thirds voter approval, rollback elections, 3% appraisal cap with 5-year cycle, and school M&O elimination for homeowners via constitutional amendment.
Patrick, D. (2025, February 13). Lt. Gov. Dan Patrick: Statement on the unanimous passage of Senate Bill 4 and Senate Joint Resolution 2. Office of the Lieutenant Governor of Texas. https://www.ltgov.texas.gov/2025/02/13/
Official statement on SB 4/SJR 2 passage (30-0 in Senate), raising the school homestead exemption to $140,000 ($150,000 for seniors/disabled). Patrick's top legislative priority for the 89th session.
Tax Policy Center. (2026, February 2). Eliminating school property taxes for Texas homeowners could backfire sooner rather than later. https://taxpolicycenter.org/taxvox/eliminating-school-property-taxes-texas-homeowners-could-backfire-sooner-rather-later
Estimates $20B/year gap from homeowner-only school M&O elimination; finds the 2024-25 biennium surplus of ~$36B falls short of covering $40B biennial cost. Recommends income-capped property tax credits and renters' credits instead. Confirms the 5% Plan's argument that partial elimination is structurally flawed.
Texas AFT. (2024, October 11). The great Texas property tax debacle. https://www.texasaft.org/policy/funding/the-great-texas-property-tax-debacle/
Documents LBB testimony: replacing all school property taxes = $39.5B; all local property taxes = $81.5B. Cites bipartisan skepticism about feasibility. Warns of "loss of local control over schools" and increased underfunding risk without direct property-value linkage.
Texas Comptroller of Public Accounts. (2025). Annual cash report, fiscal year 2025. https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf
Primary source for statewide revenue totals: $183.0B total revenue, $84.2B tax collections, $49.1B sales tax, $7.08B franchise tax. Foundation data for the 5% Plan's revenue replacement calculations.
Texas Comptroller of Public Accounts. (2025). Property tax rates and levies, tax year 2024. https://comptroller.texas.gov/taxes/property-tax/rates/
Source for the $86.6B statewide property tax levy: schools $41.7B (48.1%), counties $15.7B (18.2%), cities $15.7B (18.1%), special districts $13.5B (15.6%). The base from which all replacement calculations flow.
Texas Comptroller of Public Accounts. (2025). State sales and use tax analysis quarterly report, Q3 2025. https://comptroller.texas.gov/transparency/local/quarterly-report/stxqtr01.php
Reports $867.1B in gross sales for Q3 2025 (annualized ~$3,468.3B), of which only $200.4B (23.1%) is currently taxable. The untaxed 76.9% is the key to the 5% Plan's feasibility and the rebuttal to "double-digit rate" claims.
Texas Comptroller of Public Accounts. (2025). Comprehensive annual financial report, FY2025, statistical section. https://comptroller.texas.gov/transparency/reports/comprehensive-annual-financial/2025/statistical.pdf
Provides the 10-year expenditure data (FY2016–FY2025) used in the revenue stability comparison chart. Total governmental fund expenditures grew from $109.5B (FY2016) to $181.7B (FY2025).
Texas Education Agency. (2025, December). Report on public education state funding transparency. https://tea.texas.gov/about-tea/government-relations-and-legal/government-relations/public-education-state-funding-transparency-dec-2025-final.pdf
Documents TEA's projected FSP revenue of ~$74.67B combined state and local funding for FY 2027. The 5% Plan's $81.9B education allocation exceeds this benchmark by $7.2B, providing growth margin.
Texas Policy Research. (2025, December 2). How Texas school finance works. https://www.texaspolicyresearch.com/how-texas-school-finance-works/
Comprehensive overview of the FSP formula, recapture mechanism, and constitutional requirements from the Edgewood line of cases. Essential context for understanding why school funding replacement must be robust, stable, and equitable.
Texas Policy Research. (2026, March 13). Texas House momentum builds for Abbott property tax plan. https://www.texaspolicyresearch.com/texas-house-momentum-builds-for-abbott-property-tax-plan/
Tracks legislative momentum for Abbott's five-point plan in the Texas House as of March 2026. Documents growing but incomplete support for the homeowner M&O elimination component.
Texas Public Policy Foundation. (2022, January). Lower taxes, better Texas: Eliminating property taxes [PDF] (updated). https://www.texaspolicy.com/wp-content/uploads/2021/07/2021-07-RR-Ginn-Quintero-Antoni-RTT-Eliminating-Property-Taxes-updated-1-22.pdf
TPPF's flagship property tax elimination report. Argues for replacing property taxes with a broad-based consumption tax. Does not endorse a specific rate but establishes the conceptual framework that is structurally aligned with the 5% Plan approach.
Texas Public Policy Foundation. (2024, September 12). Welcome to the party, pal. https://www.texaspolicy.com/welcome-to-the-party-pal/
TPPF's response to the Wall Street Journal editorial board, which argued "ending property taxes would skyrocket small business expenses." TPPF challenged the framing but acknowledged business tax burden concerns, stipulating "net tax burden on business does not increase."
Texas Taxpayers and Research Association. (2024, August). Should we eliminate local property taxes? [Research Report PDF]. https://ttara.org/wp-content/uploads/2024/08/Research_Report_Eliminating_Local_Taxes.pdf
The definitive TTARA quantitative analysis claiming a 19.27%+ replacement rate. Key limitation: uses only the current narrow taxable base (~$749B), which represents 23% of total reported gross sales. Also finds consumers pay 58% of sales tax but only 44% of school property taxes—data that supports the 5% Plan's equity argument.
Texas Taxpayers and Research Association. (2024, December). 2025 statement of principles and policy positions [PDF]. https://ttara.org/wp-content/uploads/2024/12/2025TTARAPolicyStatement_11_20_24.pdf
TTARA's official position conditionally opposing property tax replacement unless: (a) no net business burden increase; (b) economic neutrality; (c) local government financial stability. These conditions frame the standard against which the 5% Plan can be evaluated.
Texas Tribune. (2025, September 18). Texas cities, counties pinch pennies amid slowing economy. https://www.texastribune.org/2025/09/18/texas-cities-counties-budget-crunch/
Documents the real-world revenue volatility problem: Fort Worth's sales tax growth dropped from double-digits to 4%; Austin's is flat; McAllen projects flat revenue due to economic slowdown. Key evidence for why narrow-base sales tax is volatile—and why the 5% Plan's broad base is critical.
TPR Texas Public Radio. (2025, December 11). Gov. Greg Abbott wants a tighter lid on home values. Tax policy experts warn that's a bad idea. https://www.tpr.org/news/2025-12-11/
Reports that the 2023 BPP appraisal cap shifted $14.2M burden onto non-capped properties while saving capped properties $12.8M in five Texas counties. Tax Foundation's Manish Bhatt warns appraisal caps create "horizontal inequity"—identical properties taxed differently based on ownership timing.
U.S. Bureau of Labor Statistics. (2025). Consumer Expenditure Survey: Texas state table, quintiles of income before taxes, 2022–2023; and Dallas–Fort Worth and Houston metropolitan area reports, 2023–24. U.S. Department of Labor. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Texas state table (2022–2023, 2-year average): $91,099 income before taxes / $69,802 average annual expenditures across 11.39M consumer units, with $66,301 in detailed categories. The most recent 2023–24 BLS metropolitan data: Dallas–Fort Worth ($117,340 income / $81,954 spending) and Houston ($105,805 income / $85,377 spending) provide metro-specific context. Foundation for household-level impact analysis in Sections 2, 3, 5, and 6, and for the HD 109 calibration model.
This annotated bibliography includes 34 sources spanning government data, legislative records, policy research, academic studies, and news coverage—the most comprehensive source list in this six-section series.