TPTRP - The Texas Living Exemption Set - Cost of Living Purchases Not Taxed
The Texas Living Exemption Set
Twelve constitutionally protected categories of essential household spending permanently removed from the TPTRP tax base — ensuring every Texas family pays zero transaction tax on the irreducible minimum cost of life in Texas.
Part I — Framework
- Section 1 — The Texas Living Exemption Set: What It Is and Why It Exists
- Section 2 — Built Into the Base, Not Bolted On After
- Section 3 — Tax Base Construction: Stage 1 → Stage 2 → Stage 3
- Section 4 — Visible at the Register and Invisible in Every Price
- Section 5 — Constitutional Architecture
- Section 6 — Universal Administration
Part II — The Twelve TLES Exemptions
- TLES-1 — Groceries (Food at Home)
- TLES-2 — Residential Rent
- TLES-3 — Residential Utilities
- TLES-4 — Prescription Drugs
- TLES-5 — Medical Care (All Services and Health Insurance)
- TLES-6 — Education (Credential-Resulting)
- TLES-7 — Gasoline (Consumer Personal Use)
- TLES-8 — Childcare and Early Childhood Education
- TLES-9 — Primary Residence Home Purchase
- TLES-10 — Residential Property Insurance
- TLES-11 — Personal Auto Insurance
- TLES-12 — Individual Life Insurance
Part III — Summary & References
The Texas Living Exemption Set
What it is, why it exists, and the twelve categories that define it
The Texas Property Tax Replacement Plan (TPTRP) replaces every property tax in Texas, every state-level tax, and all local sales taxes with a single unified transaction tax. The plan’s Starting Cap Rate (SCR) is 3.25%, applied against a $7.126 trillion Final Taxable Base — a base large enough to replace the Transition Revenue Obligation (TRO) of $203.55 billion in annual tax obligations and still leave room for rate reductions over time.
At the center of that structure is the Texas Living Exemption Set (TLES) — twelve categories of essential household spending permanently removed from the tax base before the rate is applied.
“The twelve categories of spending that no Texas family should ever pay a transaction tax on — because they are the irreducible minimum cost of basic human life in Texas.”— TLES Design Principle
The TLES is not a political concession. It is the structural guarantee that a broad-base transaction tax remains fair — not through a rebate, not through an administrative process, but by simply never charging the rate on the things every Texas family must buy to survive.
| # | Category | Annual TX Value | Primary Source |
|---|---|---|---|
| TLES-1 | Groceries (Food at Home) | $97.19B | USDA ERS FES 2024 |
| TLES-2 | Residential Rent | $71.02B | Census ACS 2024 |
| TLES-3 | Residential Utilities | $40.60B | EIA-861 + SEDS + TCEQ |
| TLES-4 | Prescription Drugs | $41.56B | CMS NHEA 2024 |
| TLES-5 | Medical Care (All Services) | $340.00B | CMS NHEA 2024 |
| TLES-6 | Education (Credential-Resulting) | $32.98B | SHEEO SHEF FY2024 + NCES |
| TLES-7 | Gasoline (Consumer Personal Use) | $63.50B | EIA TX Energy Profile 2025 |
| TLES-8 | Childcare & Early Education | $19.15B | Child Care Aware 2024 |
| TLES-9 | Primary Residence Home Purchase | $93.26B | TX REALTORS Q3 2025 + NAR |
| TLES-10 | Residential Property Insurance | $20.19B | NAIC 2024 TX Scorecard |
| TLES-11 | Personal Auto Insurance | $32.12B | NAIC 2024 + Insurify 2026 |
| TLES-12 | Individual Life Insurance | $15.45B | ACLI 2024 (TX 8.09% share) |
| TOTAL — All 12 TLES Categories | $867.0B | Stage 2 deduction | |
Who Bears the Most — Texas Population by Quintile
Texas’s total population of 31.7 million divides into five roughly equal income quintiles, but the distribution of tax burden is deeply unequal. The bottom three quintiles — Q1, Q2, and Q3 — represent approximately 17.0 million Texans, or 53.6% of the state’s total population. Every one of those 17 million people lives in a household whose average income falls below the MIT Living Wage survival floor for their family type. These are not comfortable families who will enjoy a tax cut. These are families for whom every TLES protection is a budget survival mechanism.
| Quintile | TX Population | Avg Income | vs. MIT Survival Floor | Current Tax | % of Income | TPTRP @ SCR | Net Savings |
|---|---|---|---|---|---|---|---|
| Q1 (Bottom 20%) | ~5.53M | $15,044 | BELOW single adult ($45,290) | $4,203 | 26.5% | $634 | $3,569 |
| Q2 (Second 20%) | ~5.69M | $39,679 | BELOW 1 adult+1 child ($74,391) | $6,100 | 15.4% | $999 | $5,101 |
| Q3 (Middle 20%) | ~5.79M | $68,731 | BELOW 2A/1Wk/2Ch ($80,866) | $7,204 | 10.5% | $1,178 | $6,026 |
| Q4 (Fourth 20%) | ~5.93M | $117,243 | Above all MIT floors | $10,059 | 8.6% | $1,815 | $8,244 |
| Q5 (Top 20%) | ~6.12M | $230,158 | Well above all MIT floors | $17,442 | 7.2% | $3,557 | $13,885 |
| All HH Avg | 31.06M | $103,108 | — | $9,147 | 8.8% | $1,621 | $7,526 |
The MIT Living Wage Context
The MIT Living Wage Calculator (Texas statewide, February 15, 2026) establishes the annual survival floor — the minimum income a family needs to cover basic necessities without public assistance. For the canonical family of four — two adults, one working, two children — the $8,678 per year in savings under TPTRP represents more than one full month of their entire survival budget. For the 17 million Texans in the bottom three quintiles who fall below the MIT survival floor, every TLES protection is a legislatively established, constitutionally enforced guarantee — enforceable by every citizen directly in court.
| Family Archetype | MIT Annual Need | Current Tax Burden | TPTRP @ SCR | Net Savings | % of Survival Floor |
|---|---|---|---|---|---|
| 1 Adult, 0 Children | $45,290 | $8,032 | $928 | $7,104 | 14.7% |
| 1 Adult, 1 Child | $74,391 | $9,400 | $1,150 | $8,250 | 11.1% |
| 1 Adult, 2 Children | $93,487 | $10,100 | $1,380 | $8,720 | 9.3% |
| 2 Adults, 1 Working, 0 Children | $62,421 | $8,851 | $1,272 | $7,579 | 12.1% |
| 2A / 1Wk / 2Ch (canonical) | $80,866 | $10,360 | $1,682 | $8,678 | 10.7% |
| 2 Adults, Both Working, 2 Children | $101,697 | $12,044 | $2,158 | $9,886 | 9.7% |
Built Into the Base, Not Bolted On After
The structural answer to regressivity — and what the quintile data shows
Texas has no income tax. That is a feature, not a bug — but it means the state must fund government through transaction taxes. The structural challenge with any broad-base transaction tax is regressivity: lower-income families spend a higher share of income than wealthier families, so a flat rate on all spending hits them proportionally harder.
The TLES solves this problem structurally — not through rebates or administrative means, but at the source. By removing twelve essential living categories from the taxable base before any rate is applied, the TPTRP ensures that the tax applies only to spending above the survival threshold.
| Quintile | Avg Income | Current PT + Sales Tax | % of Income | TPTRP @ SCR | TPTRP % | Net Savings |
|---|---|---|---|---|---|---|
| Q1 (Bottom 20%) | $15,044 | $4,203 | 26.5% | $634 | 4.2% | $3,569 |
| Q2 (Second 20%) | $39,679 | $6,100 | 15.4% | $999 | 2.5% | $5,101 |
| Q3 (Middle 20%) | $68,731 | $7,204 | 10.5% | $1,178 | 1.7% | $6,026 |
| Q4 (Fourth 20%) | $117,243 | $10,059 | 8.6% | $1,815 | 1.6% | $8,244 |
| Q5 (Top 20%) | $230,158 | $17,442 | 7.2% | $3,557 | 0.5% | $13,885 |
| All HH Avg | $103,108 | $9,147 | 8.8% | $1,621 | 1.6% | $7,526 |
| Family Archetype | MIT Annual Need | Current Tax Burden | TPTRP @ SCR | Net Savings | % of Floor |
|---|---|---|---|---|---|
| 1 Adult, 0 Children | $45,290 | $8,032 | $928 | $7,104 | 14.7% |
| 1 Adult, 1 Child | $74,391 | $9,400 | $1,150 | $8,250 | 11.1% |
| 2 Adults, 1 Working, 0 Children | $62,421 | $8,851 | $1,272 | $7,579 | 12.1% |
| 2A / 1Wk / 2Ch (canonical) | $80,866 | $10,360 | $1,682 | $8,678 | 10.7% |
| 2 Adults, Both Working, 2 Children | $101,697 | $12,044 | $2,158 | $9,886 | 9.7% |
Tax Base Construction
Stage 1 → Stage 2 → Stage 3: the three-step bridge to the Final Taxable Base
The TPTRP builds its Final Taxable Base in three stages. The TLES is Stage 2’s deduction — the bridge between the full scope of Texas economic transactions and the household-safe Final Taxable Base on which the SCR is applied.
| Stage | Component | Value | Description |
|---|---|---|---|
| Stage 1 | Full Tax Base | $8.776T | All TX economic transactions |
| Less: | Definition Filter | −$783.0B | Federal transactions failing Definition 1 |
| Stage 2 | Relevant Tax Base | $7.993T | Transactions within Texas jurisdiction |
| Less: | TLES Deductions | −$867.0B | Twelve essential living categories — this article |
| Stage 3 | Final Taxable Base | $7.126T | SCR 3.25% yields $231.6B > TRO $203.55B |
Visible at the Register and Invisible in Every Price
What Texans actually pay today — the two-layer burden and all three mechanisms eliminated on Day 1
Texas’s combined property tax + sales tax system imposes burden through two channels: the direct property tax on your home (or 17–20% of rent embedded for landlord cost recovery per TCPA 96-463 at a midpoint of 18.5%), plus the 8.25% sales tax on taxable purchases; and an invisible embedded tax layer inside the price of every good or service sold in Texas. This embedded burden operates through three mechanisms — all eliminated simultaneously on Day 1 of the TPTRP.
Layer 1: Commercial Property Tax Pass-Through
At the TX Comptroller’s midpoint of 50% (TCPA 96-463, January 2025), approximately $20.6 billion per year of the $41.2 billion in commercial property taxes is passed through to consumers in higher prices across every stage of the supply chain. The farm, the processor, the distributor, the retailer — every stage adds a layer. The consumer pays all of them at the register, invisibly.
Layer 2: Business Personal Property (Inventory) Tax
Texas’s January 1 lien date taxes the full market value of all business personal property — including every item on every grocery shelf, in every warehouse, on every production floor. The Baker Institute (February 2025) identified this as a direct driver of higher consumer prices. The TPTRP abolishes the inventory tax completely on Day 1.
Layer 3: Franchise Tax Pyramiding
Texas charges 0.375% of taxable margin on retail and wholesale businesses and 0.75% on all other entities over $2.65M in revenue. It pyramids forward through the supply chain at every stage. The TPTRP abolishes the franchise tax in full — no other proposal before the Texas Legislature does this.
For each of the twelve categories: (1) TPTRP rate at the register = $0; and (2) estimated supply chain savings from the Day 1 elimination of commercial property taxes, inventory taxes, and franchise tax pyramiding.
Constitutional Architecture
Why the TLES cannot be weaponized — and can be enforced by every citizen
Why This Matters Before We Walk Through Each Exemption
Understanding the two-layer design that governs the TLES is essential context before examining each of the twelve categories, because it answers the most important question a constituent can ask: “What stops future politicians from quietly expanding the exemption list to hand out favors — or stripping out protections to raise more revenue?”
The answer is the Texas Constitution — and every citizen’s standing to go directly to court to enforce it.
Layer 1 — The Constitutional Foundation: The Cost of Living Standard
The constitutional amendment implementing the TPTRP does not enumerate the twelve TLES items directly. Instead, it establishes the governing rule — the Cost of Living Standard — that permanently defines what the Legislature may and may not exempt, now and in any future session.
“The Texas Legislature may, by statute, designate as exempt from the tax imposed under this Article only those categories of transactions that directly affect the cost of living of individual Texas citizens and their immediate families. No exemption may be created for any transaction whose primary purpose or primary economic effect is commercial, business-to-business, industrial, income-producing, or profit-oriented in nature, including transactions involving the acquisition, improvement, or disposition of property held primarily for rental income, capital appreciation, or business use rather than personal occupancy by the taxpayer or their immediate family. No exemption may be created to benefit a class of persons defined by their industry, profession, occupation, or business activity. Any exemption created under this authority must apply uniformly to all individual Texas citizens and their families without distinction.”
This single constitutional rule accomplishes three things simultaneously:
- It defines the only valid basis for an exemption. If a transaction cannot honestly be described as something that directly affects how much it costs a Texas family to live, it cannot be exempted. Groceries, rent, utilities, medicine — these are the irreducible cost of being alive in Texas. A manufacturer’s raw materials, a data center’s equipment, an oil company’s drilling infrastructure — these fail the test. The purchase of stocks, bonds, equity shares, or business ownership interests fails Definition 1 entirely; those transactions are structurally outside the tax base.
- It permanently closes the special-interest exemption pipeline. Under the current Texas sales tax system, the Legislature has created over 200 specific exemptions — the product of decades of industry lobbying. The TPTRP’s Cost of Living Standard makes that entire category of legislative activity unconstitutional. The only path to any new exemption is a legitimate, citizen-facing, cost-of-living argument that survives constitutional scrutiny.
- It requires absolute uniformity. Any exemption the Legislature creates must apply to every Texas citizen equally — no means-tested exemptions, no income-limited exemptions. The TLES is a floor of protection for all Texans, not a targeted benefit program.
Layer 2 — The Starting TLES: Set by Legislation, Governed by the Constitution
The initial TLES — the twelve categories exempt on Day 1 — is established by the Texas Legislature through the implementing statute. The Legislature may add or remove categories over time, but only subject to the constitutional Cost of Living Standard test. No entity below the Legislature — no city council, no county commissioners court, no school board — has any authority to modify the TLES. Any citizen may challenge any modification in court, and a prevailing plaintiff is entitled to attorney’s fees.
Under the TPTRP, commercial exemption-seeking is unconstitutional from Day 1. The Cost of Living Standard provides a clear, judicially enforceable test that any citizen may invoke — directly, without depending on the Comptroller, the Governor, or a legislative majority. No lobbyist can obtain an exemption for their client that wouldn’t pass the same test applied to a parent buying groceries.
Why Each TLES Item Passes the Standard — The Test Applied to Life Insurance
Life insurance is the clearest example of how the Cost of Living Standard works in practice. For families in Q1 through Q3 — 17 million Texans — a life insurance policy is the primary, often the only, financial instrument that protects their children and spouse from destitution if the breadwinner dies. The Cost of Living Standard test: “Does this directly affect the cost of living of individual Texas citizens and their immediate families?” For a family of four living at or below the MIT survival floor, the answer is unambiguously yes. This is the analysis applied to every TLES item, and to any future legislative proposal to add or remove one.
Universal Administration
How all 12 TLES categories are registered, certified, and enforced through one Comptroller mechanism
The twelve TLES categories are administered through the Texas sales tax permit — a requirement already imposed on every Texas business that sells taxable goods or services. When a business files for its Texas sales tax permit under the TPTRP, the Comptroller’s permit application includes a designated TLES Certification Schedule listing each of the twelve enacted TLES categories. Each business certifies under oath which of its products or services fall within a TLES-exempt category.
Mixed-transaction businesses that sell both TLES-exempt and non-exempt products track at the transaction level. A pharmacy selling TLES-4 exempt prescription drugs alongside non-exempt OTC products applies the TPTRP to the OTC sale only.
The TLES is enforced through four independent and concurrent channels:
- Comptroller permit enforcement — Annual permit renewal and periodic audit. False certification is a Class A misdemeanor (first offense) and third-degree felony (subsequent).
- Private right of action — Any person harmed by a business falsely claiming TLES exemption may sue in district court. Attorney’s fees awarded to a prevailing plaintiff.
- Comptroller whistleblower program — Confidential tips resulting in successful enforcement earn the tipster 10% of recovered taxes, penalties, and interest.
- Ordinary criminal law — Tax fraud under the TPTRP is prosecuted under existing Texas Penal Code provisions for theft by deception and fraudulent filing.
When a constituent asks “What stops businesses from cheating the TLES?” the answer is: all four of these simultaneously, without coordination required between channels.
Each section below details what is covered, what Texans currently pay (including hidden embedded taxes), and what the TPTRP exemption means for your household budget.
Groceries (Food at Home)
Annual Texas Value: $97.19B • USDA ERS Food Expenditure Series 2024
TLES-1 exempts all purchases of food for home preparation at retail grocery stores, supermarkets, and farmers markets for off-premises consumption. This preserves and makes permanent the existing Texas sales tax exemption under Texas Tax Code §151.314 within the TPTRP constitutional framework.
- All unprepared food at retail grocery stores
- Fresh produce, meat, poultry, seafood, dairy, eggs, bread
- Packaged and canned goods for home preparation
- Farmers market produce and meat sales
- Baby formula and infant food
- Seeds and plants used to grow food for home consumption
- Restaurant meals and food prepared for immediate consumption
- Catering services
- Prepared hot foods at deli counters
- Alcoholic beverages
- Pet food
- Non-food items (household supplies, paper goods, personal care)
Texas does not charge sales tax at the grocery register today — but Texans pay grocery-related taxes invisibly. Per TX Comptroller TCPA 96-463 (January 2025), approximately $20.6B per year in commercial property taxes is passed through in higher prices across the farm-to-shelf supply chain. The Baker Institute (February 2025) found that grocers operating on 1–3% margins are disproportionately harmed by the inventory tax and franchise tax. The TPTRP ends all three layers simultaneously on Day 1. USDA Food Access Research Atlas (2025) confirms Texas ranks #1 nationally for low-income, low-access food deserts — approximately 2.4 million Texans lack adequate access to healthy food.
| Quintile | Avg Income | Annual Grocery Spend | % of Income | TPTRP at Register | Supply Chain Savings |
|---|---|---|---|---|---|
| Q1 | $15,044 | $4,755 | 31.6% | $0 | $180–$301/yr est. |
| Q2 | $39,679 | $5,735 | 14.5% | $0 | $180–$301/yr est. |
| Q3 | $68,731 | $6,215 | 9.0% | $0 | $180–$301/yr est. |
| Q4 | $117,243 | $7,574 | 6.5% | $0 | $180–$301/yr est. |
| Q5 | $230,158 | $10,980 | 4.8% | $0 | $180–$301/yr est. |
Residential Rent
Annual Texas Value: $71.02B • U.S. Census Bureau ACS 2024
TLES-2 exempts all residential rent payments made by Texas tenants for primary residential housing — apartments, houses, duplexes, mobile homes, and any other primary residential rental unit.
- Monthly rent on apartments, homes, duplexes, and mobile homes (primary residence)
- Subsidized housing rent payments (Section 8 vouchers, public housing)
- Rent-to-own payments on residential property
- Manufactured home lot rent for primary residence
- Short-term vacation rentals (Airbnb, VRBO, hotel stays)
- Commercial leases and office space
- Storage unit rentals
- Second home or vacation property rents
Per TX Comptroller TCPA 96-463 (January 2025), approximately 17–20% of every rent dollar a Texas tenant pays covers the landlord’s property tax obligation. At the 18.5% midpoint, a Q1 renter effectively pays approximately $2,115 per year in property taxes embedded invisibly in their monthly rent — on an annual rent of $11,430 ($953/month). A Q5 renter paying $32,007/year ($2,667/month) carries an embedded property tax of $5,921/year. When the TPTRP eliminates all property taxes on Day 1, that embedded cost disappears from the landlord’s cost structure, and in a competitive rental market, those savings flow to tenants through lower rents.
| Quintile | Renter Rate | Renter-Only Annual Rent | Renter-Only Monthly Rent | Embedded PT (18.5%) | TPTRP on Rent |
|---|---|---|---|---|---|
| Q1 | 55.1% | $11,430 | $953 | $2,115 | $0 |
| Q2 | 50.5% | $13,808 | $1,151 | $2,554 | $0 |
| Q3 | 39.5% | $14,455 | $1,205 | $2,674 | $0 |
| Q4 | 29.9% | $21,345 | $1,779 | $3,949 | $0 |
| Q5 | 14.0% | $32,007 | $2,667 | $5,921 | $0 |
Residential Utilities
Annual Texas Value: $40.60B • EIA-861 + SEDS + TCEQ + EIA TX Energy Profile 2025
TLES-3 exempts all residential utility payments: electricity service, natural gas for home heating and cooking, residential water and wastewater service, and municipal solid-waste collection. Commercial utility consumption remains in the taxable base.
- Residential electricity service (ERCOT and non-ERCOT)
- Natural gas for residential heating and cooking
- Residential water and wastewater service
- Municipal solid-waste (trash) collection for residential customers
- Propane and heating fuel for primary residential use
- Commercial electricity and natural gas
- Industrial water usage
- Electricity for investment/rental properties
- Commercial waste collection
The February 2021 winter storm killed 246 Texans, most from hypothermia in their own homes. Summer heat events routinely send dozens to emergency rooms. Texas residential utilities are not discretionary spending — they are the difference between life and death for elderly, disabled, and low-income Texans. TLES-3 ensures no transaction tax is ever charged on keeping your family warm, cool, and alive.
| Utility | Avg Annual HH Cost | TPTRP Tax | Embedded PT + Franchise (Est.) |
|---|---|---|---|
| Residential electricity | ~$2,788/yr | $0 | ~$56–$94/yr embedded |
| Natural gas (home) | ~$664/yr | $0 | ~$13–$22/yr embedded |
| Water/wastewater | ~$1,140/yr | $0 | ~$23–$38/yr embedded |
| Quintile | Avg Income | Annual Utility Spend | % of Income | TPTRP at Register | Embedded PT + Franchise (Est.) |
|---|---|---|---|---|---|
| Q1 | $15,044 | $3,416 | 22.7% | $0 | ~$68–$114/yr est. |
| Q2 | $39,679 | $4,068 | 10.3% | $0 | ~$81–$136/yr est. |
| Q3 | $68,731 | $4,592 | 6.7% | $0 | ~$92–$154/yr est. |
| Q4 | $117,243 | $5,283 | 4.5% | $0 | ~$106–$176/yr est. |
| Q5 | $230,158 | $6,840 | 3.0% | $0 | ~$137–$228/yr est. |
Prescription Drugs
Annual Texas Value: $41.56B • CMS NHEA 2024
TLES-4 exempts all purchases of prescription medications dispensed pursuant to a valid prescription, prescription medical devices (insulin pumps, CPAP machines, prescribed orthotics, hearing aids), and home infusion therapy services.
- All prescription medications dispensed with a valid prescription
- Insulin and all diabetic prescription supplies
- Prescribed medical devices: insulin pumps, CPAP/BiPAP, prescribed orthotics
- Hearing aids when prescribed by a licensed audiologist
- Home infusion therapy services
- Compounded medications prepared by a licensed pharmacy per prescription
- Over-the-counter (OTC) medications
- Vitamins and supplements (non-prescription)
- Cosmetic pharmaceuticals
- Non-prescription medical devices and personal care appliances
The current Texas Tax Code already exempts prescription drugs from sales tax under existing law. The TPTRP preserves this permanently within the constitutional framework. Today’s exemption is a statutory courtesy that any Legislature can remove. The TPTRP’s TLES-4 is a constitutional right.
| Quintile | Avg Income | Avg Rx Spend (2025$) | Current Sales Tax | TPTRP Rate | Benefit |
|---|---|---|---|---|---|
| Q1 | $15,044 | $892 | $0 (already exempt) | $0 | Constitutional protection of existing exemption |
| Q2 | $39,679 | $1,143 | $0 | $0 | Same — permanent constitutional guarantee |
| Q3 | $68,731 | $1,287 | $0 | $0 | Same |
| Q4 | $117,243 | $1,672 | $0 | $0 | Same |
| Q5 | $230,158 | $2,891 | $0 | $0 | Same |
Medical Care (All Services and Health Insurance)
Annual Texas Value: $340.00B • CMS NHEA 2024
TLES-5 exempts all payments for licensed medical and dental services provided directly to individual patients: physician visits, hospital care, outpatient services, laboratory and imaging, dental care, vision care, mental health services, physical therapy, home health, hospice and palliative care, skilled nursing facility services, and licensed personal-care attendant services. Health and dental insurance premiums paid by individual policyholders or family units are included within TLES-5 — because health insurance is the financial mechanism that makes medical services accessible, inseparable from medical care itself.
- All physician, hospital, and outpatient services
- Dental, vision, and mental health services
- Physical therapy, home health, hospice, and palliative care
- Health and dental insurance premiums (individual policyholders)
- Licensed personal-care attendant services
- Skilled nursing facility services
- Cosmetic procedures without medical necessity
- Elective spa and wellness services
- Veterinary services for non-service animals
- Group employer premium payments (B2B — taxable to employer)
The existing Texas Insurance Premiums Tax of 1.75% (Tex. Tax Code Chs. 221–225) on health insurance lines is abolished under the TPTRP. TLES-5 is the largest single TLES category at $340.00B. No one should be taxed for going to the doctor.
| Quintile | Avg Income | Health Ins. Premium (Est.) | TX Ins. Premiums Tax (1.75%) Abolished | TPTRP Rate | Combined Benefit |
|---|---|---|---|---|---|
| Q1 | $15,044 | ~$3,240/yr | ~$57/yr saved | $0 | ~$57 + no new tax |
| Q2 | $39,679 | ~$5,880/yr | ~$103/yr saved | $0 | ~$103 + no new tax |
| Q3 | $68,731 | ~$7,150/yr | ~$125/yr saved | $0 | ~$125 + no new tax |
| Q4 | $117,243 | ~$9,280/yr | ~$162/yr saved | $0 | ~$162 + no new tax |
| Q5 | $230,158 | ~$14,490/yr | ~$253/yr saved | $0 | ~$253 + no new tax |
Education (Credential-Resulting)
Annual Texas Value: $32.98B • SHEEO SHEF FY2024 + NCES
TLES-6 exempts education services that result in a credential, certification, course-completion record, or license — when purchased by or on behalf of an individual Texas resident pursuing their own education or career development. Hobby and recreational classes producing no credential are not covered. Corporate training purchased by an employer for employees is a B2B transaction and is taxable to the employer.
- K–12 tuition at accredited private and parochial schools
- Public and private college/university tuition and fees
- Vocational and trade school tuition
- Professional certification and licensing exam preparation
- Tutoring services tied to accredited curriculum
- Online education resulting in a certificate or completion record
- Hobby classes (cooking, art, dance for recreation)
- Sports camps and recreational programs
- Corporate employee training (employer pays — B2B)
- Entertainment-based learning with no completion records
A student paying $12,000/year in private college tuition saves $390/year at the 3.25% SCR. The directly sourced anchor is Texas public higher education student out-of-pocket cost of $11.18B (SHEEO SHEF FY2024). The path out of poverty runs through a credential — not a tax bill.
| Education Type | Typical Annual Tuition | TPTRP Without TLES-6 | TPTRP With TLES-6 | Annual Savings |
|---|---|---|---|---|
| Public community college (TX avg out-of-pocket) | $4,800/yr | $156/yr | $0 | $156 |
| Public university (TX avg out-of-pocket) | $9,610/yr | $312/yr | $0 | $312 |
| Private college (TX avg) | $28,500/yr | $926/yr | $0 | $926 |
| Trade/vocational certification | $6,200/yr | $202/yr | $0 | $202 |
| Private K–12 school (TX avg tuition) | $12,100/yr | $393/yr | $0 | $393 |
Gasoline (Consumer Personal Use)
Annual Texas Value: $63.50B • EIA TX Energy Profile 2025
TLES-7 exempts gasoline and diesel fuel purchases made by individual consumers for personal transportation to and from work, school, medical appointments, and other personal activities. Commercial fleet fuel and for-hire transportation fuel remain in the taxable base. Texas’s 268,596 square miles and near-total absence of rural public transit infrastructure mean that personal automobile transportation is the only means of work access for the majority of Texans outside major metro cores.
- Gasoline and diesel for personal vehicle commuting
- Fuel for school-related driving by families
- Fuel for medical appointment transportation
- Fuel for agricultural personal use by family farm operators
- Commercial trucking and freight fuel
- Fleet fuel for company vehicles
- Aviation fuel
- Fuel resales and wholesale distribution
Today’s Texas motor fuels tax is $0.20/gallon for gasoline and diesel (Tex. Tax Code Ch. 162). At an average of 500 gallons/year for a Texas household, that is $100/year in motor fuels tax alone, abolished on Day 1 under the TPTRP.
| Quintile | Avg Income | Annual Fuel Spend | % of Income | Motor Fuels Tax Abolished | TPTRP Rate |
|---|---|---|---|---|---|
| Q1 | $15,044 | $1,873 | 12.5% | ~$75/yr saved | $0 |
| Q2 | $39,679 | $2,624 | 6.6% | ~$88/yr saved | $0 |
| Q3 | $68,731 | $3,052 | 4.4% | ~$100/yr saved | $0 |
| Q4 | $117,243 | $3,813 | 3.3% | ~$112/yr saved | $0 |
| Q5 | $230,158 | $5,106 | 2.2% | ~$140/yr saved | $0 |
Childcare and Early Childhood Education
Annual Texas Value: $19.15B • Child Care Aware of America 2024
TLES-8 exempts payments for licensed childcare and early childhood education services — including full-day and part-time licensed daycare centers, in-home licensed childcare, after-school programs, and Pre-K enrollment at licensed providers.
- Licensed daycare centers (full-day and part-time)
- Licensed in-home childcare providers
- After-school licensed care programs
- Pre-K enrollment at licensed providers
- Licensed summer care programs for school-age children
- Unlicensed informal childcare arrangements
- Adult day-care for non-dependents
- Recreational camps without a childcare license
Child Care Aware of America (2024) documents that Texas families with two children pay an average of $19,688/year for licensed infant and toddler care — exceeding the annual cost of in-state college tuition at most Texas public universities. For Q1 and Q2 households, this cost represents between 50% and 125% of a full month’s after-tax income. Any tax on childcare is a tax on a family’s ability to work. TLES-8 permanently eliminates that barrier.
| Quintile | Avg Income | Childcare Cost (1 infant, center-based) | Cost as % of Income | TPTRP Without TLES-8 | TPTRP With TLES-8 | Savings |
|---|---|---|---|---|---|---|
| Q1 | $15,044 | $10,756/yr | 71.5% | $350/yr | $0 | $350 |
| Q2 | $39,679 | $10,756/yr | 27.1% | $350/yr | $0 | $350 |
| Q3 | $68,731 | $10,756/yr | 15.6% | $350/yr | $0 | $350 |
| Q4 | $117,243 | $10,756/yr | 9.2% | $350/yr | $0 | $350 |
| Q5 | $230,158 | $10,756/yr | 4.7% | $350/yr | $0 | $350 |
| 2-child TX family (infant + toddler) | $19,688/yr | — | $640/yr | $0 | $640 | |
Primary Residence Home Purchase
Annual Texas Value: $93.26B • TX REALTORS Q3 2025 + NAR 2025
TLES-9 exempts the purchase price of a primary residence home transaction when the buyer is an individual or family purchasing as their primary, owner-occupied residence. Investment property, second home purchases, and commercial real estate transactions remain in the taxable base.
- Purchase price of a primary owner-occupied residence
- New construction home purchase for primary occupancy
- Manufactured home purchase for primary residential use
- Mobile home purchase for permanent primary residence
- Investment property purchases (non-primary)
- Vacation/second home purchases
- Commercial real estate transactions
- Land purchases without immediate residential construction
- Real estate held by corporations, partnerships, or trusts
The TX REALTORS Q3 2025 Quarterly Market Report documents the Texas median home price at $323,750. At 3.25% SCR without TLES-9, the tax on a median home purchase would be $10,522 at closing — in addition to existing closing costs that already price first-time buyers out of the market. Additionally, the TPTRP abolishes all property taxes on Day 1 — for a homeowner at the median price with a ~1.80% effective rate, a permanent $5,828/year savings.
| Price Point | Home Value | TPTRP Without TLES-9 | TPTRP With TLES-9 | Savings at Closing |
|---|---|---|---|---|
| Entry-level (first-time buyer) | $215,000 | $6,988 | $0 | $6,988 |
| TX Median (Q3 2025) | $323,750 | $10,522 | $0 | $10,522 |
| Move-up home | $450,000 | $14,625 | $0 | $14,625 |
| Upper-middle home | $650,000 | $21,125 | $0 | $21,125 |
Residential Property Insurance
Annual Texas Value: $20.19B • NAIC 2024 Texas Market Scorecard
TLES-10 exempts all homeowner’s insurance and renter’s insurance premiums paid by individual policyholders for their primary residence. Texas is subject to hurricanes, tornadoes, hailstorms, winter storms, and flooding — property insurance is not optional for any family with a mortgage and effectively not optional for any family seeking to avoid catastrophic uninsured loss from weather events.
- Homeowner’s insurance premiums for primary residence
- Renter’s insurance premiums for primary rental unit
- Condominium owner’s insurance (HO-6) for primary residence
- Wind and hail insurance policies for primary residence (TWIA)
- Flood insurance for primary residence (NFIP and private)
- Investment property insurance
- Vacation/second home insurance
- Commercial property insurance
- Landlord insurance (non-owner-occupied)
The NAIC 2024 Texas Market Scorecard documents the average Texas homeowner’s insurance premium at $3,875/year — 57% above the national average. At 3.25% SCR, the tax on a $3,875 premium without TLES-10 would be $126/year. The existing Texas Insurance Premiums Tax of 1.75% (Tex. Tax Code Ch. 221) adds another $68/year currently. The TPTRP abolishes both: $194/year saved at the median.
| Quintile | Avg Annual Premium (Est.) | TX Ins. Premiums Tax (1.75%) Abolished | TPTRP Rate | Total Annual Savings |
|---|---|---|---|---|
| Q1 (primarily renters insurance) | ~$1,420/yr | ~$25/yr | $0 | ~$25 + no new tax |
| Q2 | ~$2,280/yr | ~$40/yr | $0 | ~$40 + no new tax |
| Q3 | ~$3,105/yr | ~$54/yr | $0 | ~$54 + no new tax |
| Q4 | ~$3,860/yr | ~$68/yr | $0 | ~$68 + no new tax |
| Q5 (higher-value homes) | ~$4,890/yr | ~$86/yr | $0 | ~$86 + no new tax |
Personal Auto Insurance
Annual Texas Value: $32.12B • NAIC 2024 + Insurify 2026
TLES-11 exempts personal auto insurance premiums. Texas Transportation Code §601.072 requires minimum liability insurance on every registered vehicle in Texas. A transaction tax on a legally mandated purchase is a tax on compliance with Texas law. The TPTRP eliminates that absurdity.
- Personal auto liability insurance (state minimum and above)
- Personal collision and comprehensive coverage
- Uninsured/underinsured motorist coverage
- Personal injury protection (PIP) coverage
- Motorcycle insurance for personal use
- Commercial fleet vehicle insurance
- Business-use vehicle coverage
- For-hire transportation vehicle insurance
Insurify (2026) documents the average Texas full-coverage auto insurance premium at $2,429/year — 31% above the national average, driven by Texas’s catastrophic weather exposure, high uninsured driver rate (20%+), and litigation environment. The existing Texas Insurance Premiums Tax of 1.75% on auto lines currently costs the average Texas household $43/year. Combined Day 1 auto insurance savings: $122/year at the median.
| Quintile | Avg Annual Auto Ins. | % of Income | Ins. Premiums Tax Abolished | TPTRP Rate | Combined Savings |
|---|---|---|---|---|---|
| Q1 | $2,016 | 13.4% | $35/yr | $0 | $101/yr |
| Q2 | $2,268 | 5.7% | $40/yr | $0 | $114/yr |
| Q3 | $2,429 | 3.5% | $43/yr | $0 | $122/yr |
| Q4 | $2,680 | 2.3% | $47/yr | $0 | $134/yr |
| Q5 | $3,200 | 1.4% | $56/yr | $0 | $160/yr |
Individual Life Insurance
Annual Texas Value: $15.45B • ACLI 2024 Life Insurance Fact Book (TX 8.09% national share)
TLES-12 exempts individual life insurance premiums paid by individual policyholders for term, whole life, and universal life policies — purchased in the name of the individual and not held by a business entity. Life insurance is the primary economic protection mechanism for Texas families against catastrophic wage loss due to premature death of a working family member.
- Individual term life insurance premiums
- Individual whole life insurance premiums
- Individual universal life insurance premiums
- Premiums on policies held directly by the insured individual
- Business-owned life insurance (BOLI)
- Key man insurance held by companies
- Annuity contracts (not life insurance per definition)
- Variable life insurance held as an investment vehicle
When a 35-year-old Texas father buys a $500,000 20-year term policy for $600/year, he is purchasing the guarantee that if he is killed in a highway accident or dies of a heart attack, his children will not lose their home, and his spouse will not be forced to choose between rent and groceries while grieving. That act of financial responsibility for your family is constitutionally exempt from taxation under the TPTRP.
The ACLI 2024 Life Insurance Fact Book documents $190.95B in individual life insurance premiums nationally; Texas’s 8.09% share yields $15.45B. The existing Texas Insurance Premiums Tax of 1.75% currently collects approximately $270M from individual life lines statewide — a hidden tax on protecting your family. The TPTRP abolishes it on Day 1.
| Policy Type | Typical Annual Premium | TX Ins. Premiums Tax (1.75%) Abolished | TPTRP Rate | Annual Savings |
|---|---|---|---|---|
| Term life (healthy 35-yr-old, $500K) | ~$300/yr | ~$5/yr | $0 | ~$5 + no new tax |
| Term life (healthy 45-yr-old, $500K) | ~$680/yr | ~$12/yr | $0 | ~$12 + no new tax |
| Whole life (Q3 family, $250K) | ~$2,400/yr | ~$42/yr | $0 | ~$42 + no new tax |
| Indexed universal life (Q4 family) | ~$4,800/yr | ~$84/yr | $0 | ~$84 + no new tax |
| Premium whole life / IUL (Q5 household) | ~$9,500/yr | ~$166/yr | $0 | ~$166 + no new tax |
The full household impact of all twelve TLES exemptions combined, and the annotated bibliography of all primary data sources used in this article.
What the TLES Means for Every Texas Family
The canonical family analysis — and the complete quintile impact bundle
| TLES Category | Annual Spend | TPTRP at Register | Additional Savings |
|---|---|---|---|
| TLES-1: Groceries | $6,215 | $0 | $180–$301 supply chain est. |
| TLES-2: Residential Rent (if renting) | $6,974 | $0 | ~$1,290 embedded PT drops |
| TLES-3: Residential Utilities | $4,592 | $0 | $92–$154 supply chain est. |
| TLES-4: Prescription Drugs | $1,287 | $0 | Constitutional lock on exemption |
| TLES-5: Medical + Health Insurance | $12,490 | $0 | $126/yr ins. premiums tax abolished |
| TLES-6: Education (if applicable) | varies | $0 | $390/yr per $12K tuition |
| TLES-7: Gasoline | $3,052 | $0 | ~$100/yr motor fuels tax abolished |
| TLES-8: Childcare (2 children) | $19,688 | $0 | Supply chain savings on facility |
| TLES-9: Home Purchase (at closing) | $323,750 | $0 | $10,522 at closing + $5,828/yr PT |
| TLES-10: Home/Renter Insurance | $3,875 | $0 | $194/yr (ins. tax + no TPTRP) |
| TLES-11: Auto Insurance | $2,429 | $0 | $122/yr combined |
| TLES-12: Life Insurance | $1,200 | $0 | $60/yr ins. tax abolished |
| TLES Bundle Total at Register | $0 | $0 | $8,678 net savings (MIT floor measure) |
| Quintile | Avg Income | Current Total Tax Burden | Current % of Income | TPTRP @ 3.25% SCR | TPTRP % of Income | Annual Savings |
|---|---|---|---|---|---|---|
| Q1 (Bottom 20%) | $15,044 | $4,203 | 26.5% | $634 | 4.2% | $3,569 |
| Q2 (Second 20%) | $39,679 | $6,100 | 15.4% | $999 | 2.5% | $5,101 |
| Q3 (Middle 20%) | $68,731 | $7,204 | 10.5% | $1,178 | 1.7% | $6,026 |
| Q4 (Fourth 20%) | $117,243 | $10,059 | 8.6% | $1,815 | 1.6% | $8,244 |
| Q5 (Top 20%) | $230,158 | $17,442 | 7.2% | $3,557 | 0.5% | $13,885 |
| All HH Average | $103,108 | $9,147 | 8.8% | $1,621 | 1.6% | $7,526 |
“The twelve exemptions of the Texas Living Exemption Set are not a favor granted by the Legislature. They are a constitutional boundary on the state’s taxing authority — a permanent declaration that the cost of surviving in Texas is beneath the reach of the government that serves you.”— TPTRP Policy Foundation Statement
Proposed Legislation — Full Bill Text
Texas Living Exemption Set Act — H.B. No. _____, 90th Legislature (2027) — Pre-Filing Draft v3
The articles above explain why each of the twelve TLES exemptions exists. The legislation below is the actual statutory text that enacts them — the precise definitions, the administrative mechanisms, and the citizen-enforcement tools that make the TLES constitutionally durable and corruption-resistant. Readers are encouraged to review the full text, share it with their State Representative and Senator, and download a copy for their records.
Texas Living Exemption Set Act (TLES)
Rep. Will Campbell, HD-109 — 90th Legislature, 2027 Regular Session — Establishing the twelve constitutional exemptions from the TPTRP unified transaction tax
By: ___________________ H.B. No. _____
A BILL TO BE ENTITLED
AN ACT
relating to the establishment of the Texas Living Exemption Set — the enumerated categories of transactions exempt from the unified transaction tax imposed under the Texas Property Tax Replacement Plan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. FINDINGS AND PURPOSE.
(a) The Legislature finds that:
(1) the Texas Constitution authorizes the Legislature to designate as exempt from the unified transaction tax only those categories of transactions that directly affect the cost of living of individual Texas citizens and their immediate families;
(2) the categories designated in this Act represent the Legislature’s determination, at the time of enactment, of the essential household expenditure categories that meet the constitutional Cost of Living Standard, and the Legislature retains full authority to add or remove categories by statute at any time, subject to that Standard;
(3) these exemptions must apply uniformly to all individual Texas citizens and their families without distinction as to income, wealth, or other personal characteristics; and
(4) clear, constitutionally grounded, and citizen-enforceable definitions are necessary to prevent the corruption and special-interest exemption pipeline that has characterized prior Texas sales tax law, and citizens have standing under this Act to challenge in court any exemption added by the Legislature that does not meet the constitutional Cost of Living Standard.
(b) The purpose of this Act is to establish the Texas Living Exemption Set — the statutory designation of the transaction categories that the Legislature votes to exempt from the unified transaction tax that meet the constitutional Cost of Living Standard.
SECTION 2. DEFINITIONS.
In this Act:
(1) “Comptroller” means the Comptroller of Public Accounts of the State of Texas.
(2) “Cost of Living Standard” means the constitutional standard under which an exemption may be created only for a transaction category that directly affects the cost of living of individual Texas citizens and their immediate families, applied uniformly to all citizens without distinction.
(3) “TLES” means the Texas Living Exemption Set established by this Act, as may be amended from time to time by the Legislature.
(4) “TPTRP tax” means the unified transaction tax imposed under the constitutional amendment implementing the Texas Property Tax Replacement Plan.
(5) “Primary residence” means the property that the taxpayer and, if applicable, the taxpayer’s immediate family actually occupy as their principal place of residence, determined at the time of a qualifying transaction by the taxpayer’s intent and subsequent conduct.
(6) “Immediate family” means the taxpayer’s spouse, children, stepchildren, and any other person for whom the taxpayer is the legal guardian or primary financial provider.
(7) “Personal policyholder” means a natural person who holds an insurance policy primarily for the protection of the person’s immediate family, as distinguished from a business entity that holds insurance for commercial purposes.
(8) “Sales tax permit” means the permit required under Section 151.203, Tax Code, as amended to encompass the TPTRP tax, which serves as the mechanism for TLES certification.
(9) “Qualifying occupancy period” means the period of not less than six continuous years during which a natural person and, if applicable, the person’s immediate family actually occupied a property as their primary residence prior to a subsequent purchase of a new primary residence.
SECTION 3. GENERAL RULE.
(a) The categories of transactions constituting the Texas Living Exemption Set are exempt from the TPTRP tax when the transaction is made by or on behalf of an individual Texas citizen or family for personal, household, or family use.
(b) A transaction that would otherwise qualify under a TLES category does not qualify if the primary purpose or primary economic effect of the transaction is commercial, business-to-business, income-producing, or profit-oriented.
(c) Each TLES category must be administered uniformly. No exemption within the TLES applies to fewer than all individual Texas citizens and their families.
SECTION 4. THE TEXAS LIVING EXEMPTION SET.
The following categories are the Texas Living Exemption Set as enacted by this Legislature. The Legislature may by statute add or remove categories subject to the constitutional Cost of Living Standard and Section 7 of this Act:
TLES-1: GROCERIES (FOOD AT HOME)
(a) Exempt: Purchases of food for home preparation at retail grocery stores, supermarkets, farmers markets, and similar food retailers, including all items qualifying as “food for human consumption” under Section 151.314, Tax Code.
(b) Not exempt: Restaurant meals, prepared food purchased for on-premises consumption, and alcoholic beverages.
TLES-2: RESIDENTIAL RENT
(a) Exempt: Monthly rent payments made by Texas tenants for a primary residential dwelling, including apartments, houses, duplexes, and mobile homes.
(b) Not exempt: Short-term rentals, vacation rentals, commercial leases, and residential rentals of property that is not the tenant’s primary residence.
TLES-3: RESIDENTIAL UTILITIES
(a) Exempt: Payments for residential electricity service, residential natural gas service for home heating and cooking, residential water and wastewater service, and municipal or contracted residential solid-waste collection and recycling services.
(b) Not exempt: Commercial utility consumption and non-residential solid-waste or recycling contracts.
TLES-4: PRESCRIPTION DRUGS
(a) Exempt: All purchases of prescription medications dispensed pursuant to a valid prescription; prescription medical devices; and home infusion therapy services.
(b) Not exempt: Over-the-counter medications that do not require a prescription are non-prescription retail goods and are part of the general taxable base.
TLES-5: MEDICAL CARE
(a) Exempt: All payments for licensed medical and dental services provided directly to individual patients, including physician visits, hospital care, outpatient services, laboratory and imaging, dental care, vision care, mental health services, physical therapy, home health, hospice, palliative care, skilled nursing facility services, and licensed personal-care attendant services. Health and dental insurance premiums paid by individual policyholders or family units are included within this exemption.
(b) Not exempt: Cosmetic procedures without medical necessity, elective spa or wellness services, veterinary services for non-service animals, and group employer premium payments, which are taxable business-to-business transactions.
TLES-6: EDUCATION
(a) Exempt: Education services that result in a credential, certification, course-completion record, or license, when purchased by or on behalf of an individual Texas resident for the person’s own education or career development.
(b) Not exempt: Hobby and recreational classes that produce no credential, license, or completion record. Corporate training purchased by an employer for employees is a business-to-business transaction and is taxable.
(c) Mixed-transaction reporting: Education providers offering both exempt and non-exempt programs shall certify each category on their sales tax permit application per Section 5 of this Act.
TLES-7: GASOLINE (CONSUMER PERSONAL USE)
(a) Exempt: Consumer purchases of gasoline and diesel fuel at retail pumps for personal vehicle use, including commuting and personal transportation.
(b) Not exempt: Commercial fleet fuel purchases, agricultural fuel, and aviation fuel.
TLES-8: CHILDCARE AND EARLY CHILDHOOD EDUCATION
(a) Exempt: All payments for licensed childcare facilities, including daycare centers, licensed home-based childcare providers, pre-kindergarten programs, before- and after-school care, and summer care programs operated by licensed childcare providers.
(b) Not exempt: Adult eldercare services and tutoring services beyond the scope of licensed childcare.
TLES-9: PRIMARY RESIDENCE HOME PURCHASE
(a) Exempt: The purchase price of any home that the buyer designates and actually occupies as the buyer’s primary residence. This is a primary residence exemption, not a first-home exemption.
(b) Property retention — short qualifying occupancy period (fewer than six years): Prior property must be actively listed for sale; transitional rental bridge allowed up to two years; exemption forfeits if prior property not sold or listed within two years.
(c) Property retention — qualifying occupancy period of six or more years: Buyer may retain prior property for any lawful purpose, including rental, without disqualifying the exemption on the new purchase.
(d) Not exempt — investment purchases: Properties purchased with intent to generate rental income or capital appreciation without primary occupancy do not qualify. Governing test: buyer’s intent at closing, evidenced by Primary Residence Certificate.
(e) Citizen standing: Bidirectional loser-pays civil enforcement. Any Texas citizen may bring action against a buyer who fraudulently obtained the exemption. Prevailing plaintiff recovers taxes, penalties, interest, and attorney’s fees. Prevailing defendant on frivolous action recovers attorney’s fees from plaintiff.
(f) Administration: Governed by Primary Residence Certificate per Section 6 of this Act.
TLES-10: RESIDENTIAL PROPERTY INSURANCE
(a) Exempt: Premiums on homeowners, renters, flood, and condominium/cooperative owners’ insurance for primary residential use. The 1.75% Texas Insurance Premiums Tax under Chapters 221–225, Tax Code, is abolished under the TPTRP.
(b) Not exempt: Commercial property insurance, landlord policies on investment or rental properties, and insurance on vacation homes or second homes.
TLES-11: PERSONAL AUTO INSURANCE
(a) Exempt: Personal auto insurance premiums on personal, non-commercial vehicles. The 1.75% Texas Insurance Premiums Tax under Chapters 221–225, Tax Code, is abolished under the TPTRP.
(b) Not exempt: Commercial fleet insurance, trucking insurance, and specialty vehicle insurance.
TLES-12: INDIVIDUAL LIFE INSURANCE
(a) Exempt: Premiums on personal life insurance policies held by a natural person for the benefit of the person’s immediate family, including term life, whole life, universal life, indexed universal life, and indexed whole life.
(b) Not exempt — fully taxable: Commercial life insurance of any kind, including COLI and key-man policies. These are selective business expenses and are taxable under the TPTRP with no exemption of any kind.
(c) Governing test: Natural person policyholder with immediate-family beneficiaries = personal (TLES-12 applies). Business entity policyholder = commercial transaction (fully taxable).
SECTION 5. COMPTROLLER ADMINISTRATION AND PERMIT MECHANISM.
(a) The Comptroller shall administer TLES exemptions through the existing Texas sales tax permit system. The permit application process is the universal mechanism through which businesses certify their TLES status and governs all TLES categories equally.
(b) The sales tax permit application shall include a designated section listing all currently enacted TLES-eligible categories. Each applicant shall certify under oath which transactions qualify. A permit holder is not required to apply for an amended permit solely because the Legislature has added or removed a TLES category; however:
(1) Removal: The Comptroller shall notify all affected permit holders in writing of any removed category and its effective date. Permit holders must begin collecting tax on those transactions on the effective date.
(2) Addition: A permit holder whose transactions qualify under a newly added exemption may submit an amended permit application to certify those transactions as exempt. Until an amended permit is issued, the permit holder must continue collecting tax on those transactions.
(c) Enforcement through four independent channels:
(1) Comptroller audit authority: Full audit and back-tax recovery authority. Businesses wrongfully collecting tax on TLES-exempt transactions are liable for full refund plus interest.
(2) District attorney and attorney general authority: District attorneys and the Office of the Attorney General each retain independent concurrent authority to pursue criminal prosecution and civil back-tax collection for fraudulent TLES claims or wrongful tax collection on exempt transactions.
(3) Citizen standing — wrongful exemption claim: Any Texas citizen may bring civil enforcement action against a business improperly claiming TLES exemption on a non-qualifying transaction. Prevailing plaintiff recovers attorney’s fees and court costs. Prevailing defendant on frivolous action recovers attorney’s fees and court costs from plaintiff.
(4) Citizen standing — wrongful tax collection: Any Texas citizen charged TPTRP tax on a TLES-exempt transaction may bring civil enforcement action. Prevailing plaintiff recovers tax paid, attorney’s fees, and court costs. Prevailing defendant on frivolous action recovers attorney’s fees and court costs from plaintiff.
(d) Mixed-transaction businesses shall track and collect the TPTRP tax at the transaction level, applying exemptions only to TLES-certified transactions.
(e) The Comptroller shall adopt rules to implement this section, including notification procedures for legislative TLES changes under Subsection (b)(1).
SECTION 6. PRIMARY RESIDENCE CERTIFICATE.
(a) The Comptroller shall establish and administer a Primary Residence Certificate (the “Certificate”) for TLES-9 exemption claims. The Certificate shall print the full conditions of Section 4 TLES-9(b), (c), and (d) so all parties at closing have actual notice of the law.
(b) At closing, the buyer shall sign and file the Certificate under penalty of perjury attesting to: (1) primary occupancy intent; (2) non-investment purpose; (3) if retaining a prior residence occupied fewer than six years, that it is actively listed for sale with a two-year transitional rental bridge only; and (4) if qualifying occupancy period of six or more years is completed, that retention for any lawful purpose is permitted.
(c) The Certificate shall be filed with the deed and is publicly accessible to any Texas citizen.
(d) A buyer who obtains the TLES-9 exemption through a fraudulent Certificate is liable for all taxes, penalties, and interest and may be subject to criminal prosecution.
(e) Any Texas citizen has standing to bring civil enforcement action upon discovering a Certificate violation. Prevailing plaintiff recovers taxes, penalties, interest, and attorney’s fees. Prevailing defendant on frivolous action recovers attorney’s fees from plaintiff.
SECTION 7. LEGISLATIVE MODIFICATION OF THE TLES.
(a) The Legislature may add or remove TLES categories at any time. No additional requirement beyond statutory enactment is required to remove a category.
(b) Additions must satisfy the constitutional Cost of Living Standard.
(c) No entity below the Legislature may modify the TLES.
(d) Any Texas citizen has standing to challenge a legislative addition that fails the Cost of Living Standard. Prevailing plaintiff recovers attorney’s fees and has the exemption invalidated. Prevailing defendant on frivolous action recovers attorney’s fees and court costs from plaintiff. Citizens have no standing to challenge removals; that remedy lies with the electorate.
SECTION 8. RELATIONSHIP TO OTHER TPTRP IMPLEMENTING LEGISLATION.
This Act operates in conjunction with the constitutional amendment implementing the TPTRP, the Act establishing the TPTRP unified transaction tax, and any other TPTRP implementing legislation. If a conflict exists, the provision more specifically applicable to the TLES governs.
SECTION 9. TRANSITION.
This Act applies to all TPTRP tax transactions on or after the effective date. Prior transactions are governed by the law in effect on their date.
SECTION 10. SEVERABILITY.
If any provision is held invalid, the invalidity does not affect other provisions that can be given effect without it. Provisions are severable.
SECTION 11. EFFECTIVE DATE.
This Act takes effect on the same date that the constitutional amendment implementing the Texas Property Tax Replacement Plan takes effect. If that amendment does not take effect, this Act has no effect.
References — Annotated Bibliography
All data in this article is sourced from primary or authoritative secondary sources. No estimated or synthetic data has been fabricated. Where aggregation across sub-categories was necessary, the methodology is noted explicitly in the relevant section.
BLS Consumer Expenditure Survey, State Tables, Texas 2022–2023
Primary source for all household spending by quintile. Raw Texas CE averages multiplied by the 2025 CPI adjustment factor of 1.13183 to yield 2025-dollar equivalents. Covers grocery, fuel, utilities, healthcare, childcare, and insurance spending by income quintile.
TX Comptroller — TCPA 96-463: Commercial Property Tax Pass-Through to Consumers (January 2025)
Establishes the 40–60% midpoint (50%) pass-through rate for commercial property taxes to consumer prices, and the 17–20% residential rent embedded property tax share. Used for all embedded tax calculations in TLES-1 through TLES-3 and TLES-2.
TX Comptroller — Annual Cash Report (ACR) FY2025
Primary source for total state tax revenue by category. Used for TRO derivation and state-level franchise tax abolition impact.
TX Comptroller — Property Tax Assistance Division (PTAD) Annual Report TY2025
Primary source for statewide property tax levy totals by property type. Used for TRO derivation, commercial and residential property tax separation, and effective property tax rate calculations.
U.S. Centers for Medicare & Medicaid Services — National Health Expenditure Accounts (NHEA) 2024
Source for TLES-4 ($41.56B prescription drugs) and TLES-5 ($340.00B medical care). Texas share derived from CMS state-level health expenditure data and Texas’s 8.68% of national population share adjusted for higher-than-average healthcare utilization.
USDA Economic Research Service — Food Expenditure Series 2024
Source for TLES-1 ($97.19B groceries). Texas food-at-home expenditure derived from USDA ERS national series using Texas’s population share and cost-of-living adjustment.
USDA Food Access Research Atlas 2025
Source for food desert statistics cited in TLES-1 context paragraph. Confirms Texas ranks #1 nationally for low-income, low-access food deserts; approximately 2.4 million affected Texans.
U.S. Census Bureau — American Community Survey (ACS) 2024
Source for TLES-2 ($71.02B residential rent) and renter rate by quintile. Texas residential renter household counts and median gross rents by income quintile.
U.S. Energy Information Administration — EIA-861, SEDS, and TX Energy Profile 2025
Sources for TLES-3 ($40.60B residential utilities) and TLES-7 ($63.50B gasoline). EIA-861 for Texas residential electricity sales; SEDS for natural gas residential consumption; TX Energy Profile 2025 for consumer gasoline volumes and average prices.
Texas REALTORS — Quarterly Market Report Q3 2025
Source for TLES-9 ($93.26B primary residence home purchases). Texas median home price of $323,750, total residential transaction volume, and first-time buyer composition data.
National Association of Insurance Commissioners (NAIC) — 2024 Texas Market Scorecard
Source for TLES-10 ($20.19B residential property insurance) and TLES-11 ($32.12B personal auto insurance). Average Texas homeowner’s premium of $3,875/year, average auto insurance premium data, and Texas insurance market premium volume by line.
Insurify — 2026 Texas Auto Insurance Report
Source for average Texas full-coverage auto insurance premium of $2,429/year cited in TLES-11. Confirms 31% above national average driven by weather, uninsured driver rate, and litigation environment.
American Council of Life Insurers (ACLI) — Life Insurance Fact Book 2024
Source for TLES-12 ($15.45B individual life insurance). National individual life insurance premium volume of $190.95B; Texas share calculated at 8.09% of national total.
Child Care Aware of America — The US and the High Cost of Child Care (2024)
Source for TLES-8 ($19.15B childcare and early education). Average Texas licensed infant care cost ($11,980/yr), toddler care cost ($10,140/yr), and two-child combined average ($19,688/yr).
Baker Institute for Public Policy, Rice University — Texas Tax Reform: Business Personal Property Tax Analysis (February 2025)
Identified the January 1 inventory tax as a direct driver of higher consumer prices, particularly for grocery retailers operating on 1–3% margins. Used in TLES-1 and TLES-3 supply chain analysis sections.
MIT Living Wage Calculator — Texas Statewide Data (February 15, 2026)
Source for all five family archetype survival floor benchmarks. Provides annual living wage need estimates for 1 adult/0 children, 1 adult/1 child, 2 adults/1 working/0 children, 2 adults/1 working/2 children (canonical), and 2 adults/both working/2 children.
State Higher Education Executive Officers (SHEEO) — State Higher Education Finance FY2024 (SHEF)
Source for Texas public higher education student out-of-pocket cost anchor ($11.18B) used in TLES-6 tax base construction. Used as the directly sourced anchor for the broader $32.98B TLES-6 aggregate.
National Center for Education Statistics (NCES) — FY2024 Education Finance Data
Supplemental source for TLES-6 aggregate. Used for private K–12 enrollment and tuition revenue estimates and vocational/trade school enrollment data.