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Critics warn that Texas’ proposed $51 billion in property tax cuts may not be sustainable, with some fearing it could strain the state’s future budget.
The High Cost of Property Tax Cuts in Texas
Texas lawmakers are considering a bold new budget proposal that would allocate $51 billion—15% of the state’s total two-year spending plan—toward maintaining and expanding property tax cuts. This massive spending could have far-reaching consequences for Texas’ financial stability, especially if the economy takes a downturn. While property tax relief has been a key priority for lawmakers, even some Republicans are beginning to express concerns about whether such an ambitious tax cut is financially sustainable in the long run.
Breakdown of Texas’ Proposed Property Tax Budget
The proposed $51 billion for property tax cuts is more than the state’s entire budget for transportation or higher education. In fact, if Texas’ property tax budget were considered its own agency, it would be the third-largest spender in the state, surpassing even the funding allocated to public safety and criminal justice.
Texas residents pay some of the highest property taxes in the U.S., largely due to the state’s reliance on property taxes to fund public services, especially public schools. In recent years, lawmakers have increasingly sought to reduce this burden by providing billions of dollars in property tax cuts, with $51 billion set aside in the upcoming budget to continue this trend.
How Property Tax Cuts Are Funded
Texas has relied heavily on its state budget surpluses to fund these cuts. The current budget surplus is about $24 billion, which will help cover both new and existing property tax reductions. However, experts are concerned that these surpluses, which were fueled by federal COVID-19 relief funds and higher-than-usual sales tax revenues, are temporary. Once the federal funds are depleted and the growth in sales tax collections slows, Texas may face budget shortfalls that could make it difficult to continue funding such extensive tax cuts.
Growing Concerns About Sustainability
Several budget analysts have warned that relying on one-time surplus funds to finance recurring tax cuts is risky. As Shannon Halbrook, a fiscal policy expert, put it, “We’re assuming that that money is permanent, or that we’re going to have that kind of money going forward to keep paying for these recurring tax cuts every budget, every session. And that’s just simply not the case.”
Additionally, the state’s economy, which had already been projected to slow in 2025, faces added uncertainty with tariffs and potential declines in oil demand, which would affect state revenue from the oil and gas industry.
Impact on Property Tax Relief Programs
Of the $51 billion proposed, approximately $44.5 billion is earmarked to maintain property tax relief measures that have been in place since 2019. This includes funds to replace property taxes for school districts and raise the homestead exemption for public schools—an initiative that voters approved to raise the exemption to $100,000 in 2023.
In addition, lawmakers have allocated $3 billion for new cuts, which could include further increases to the homestead exemption or additional tax breaks for businesses. However, given the size of the budget allocation, some lawmakers, including Lt. Gov. Dan Patrick, are advocating for measures that could lock these cuts in place for the long term—such as the constitutional enshrinement of the homestead exemption, which would make it harder for future legislatures to reverse.
Potential Long-Term Consequences
Despite the immediate relief that property tax cuts provide, there is growing concern about how sustainable these tax cuts are in the long term. Texas already faces budget constraints due to a variety of factors, including the decreasing federal funding and slowed economic growth. Additionally, the increasing cost of public services—such as healthcare and infrastructure—may require lawmakers to make difficult budget cuts elsewhere if they are to continue funding property tax relief.
Senator Charles Perry, R-Lubbock, expressed concern about the growing obligation created by these tax cuts, warning that the state could face difficult decisions in the future. “We’re building a large obligation, and it’s going to detract from things we absolutely can’t afford not to do, if we’re not careful.”
Public Perception and Political Pressure
While many homeowners have seen a reduction in their property tax bills, particularly after major tax cuts were passed in 2023, the increase in property values in 2024 has somewhat offset these gains. In some areas, the average homeowner’s bill has risen even as the legislature has implemented tax cuts. Lawmakers are facing increasing pressure from constituents who feel the property tax cuts are not providing as much relief as expected, especially as local tax increases and rising insurance costs continue to strain household budgets.
The Road Ahead: Balancing Tax Cuts with Fiscal Responsibility
As Texas lawmakers move forward with their budget proposal, they face the difficult challenge of balancing the desire for property tax relief with the need for fiscal responsibility. Lawmakers must ensure that the state can continue to afford these cuts without sacrificing essential services or risking future financial stability.
The state may need to find ways to reduce spending elsewhere or rethink how to fund ongoing tax relief, particularly if the economy does not improve as expected. Some experts fear that, without careful planning, the state could face a financial crisis in the future that could lead to cuts in programs that support low-income families or essential public services.
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