Texas cities, counties may face new limits on raising property taxes

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DALLAS — Texas Republicans want to make it harder for cities and counties to raise property taxes — a move that would put local governments in a tighter financial bind as the state grows.

Lawmakers on a key Texas Senate panel Friday advanced a proposal to put a tighter limit on how much more cities and counties can collect in property taxes each year without asking voters. The idea is to keep tax bills from exploding by forcing local governments to lower their tax rates if property values rise.

“The taxpayers are being pushed to the brink,” state Sen. Paul Bettencourt, a Houston Republican who authored the proposal, said during a committee meeting.

Cities and counties could face further financial pressure as they try to provide basic services to residents and keep up with growth, local officials told state lawmakers Friday.

The legislation is the latest effort by GOP lawmakers to rein in the state’s high property taxes. This year, legislators committed $51 billion over the next two years to enact a new round of cuts to school property taxes and maintain existing ones. Some Republican lawmakers, as well as conservative activists and policy analysts, have shown frustration as they’ve plugged billions of dollars into cutting school property tax bills only to see taxes from cities and counties outstrip those gains.

Gov. Greg Abbott called on lawmakers to pass bills “reducing the property tax burden on Texans” and “imposing spending limits on entities authorized to impose property taxes” during a 30-day legislative sprint.

Such limits would arrive at a tricky time for cities and counties, already facing financial headwinds.

Localities have seen their budgets squeezed in recent years under the state’s existing limits on property tax revenue. Further complicating their finances: weakening sales tax revenue owed to a slowing economy and uncertainty over future federal funding. Meanwhile, cities and counties face a litany of rising costs, including salaries for police officers and firefighters.

Major cities like Austin, San Antonio and Fort Worth project budget deficits in upcoming years — with local leaders eying spending cuts, voter-approved tax hikes or some combination of both to make up for the shortfall.

A tighter property tax cap would make it harder for Fort Worth, now home to more than 1 million people, to keep up with infrastructure needs brought on by the city’s robust population growth, Brady Kirk, a Fort Worth budget official, told lawmakers Friday. Such a cap “could force even deeper cuts, which, instead of maximizing value for residents, would lead to lower service levels.”

Under pressure to rein in rising property tax bills, state lawmakers in 2019 enacted a law that limits how much more in property taxes cities and counties can collect each year without voter approval to 3.5%.

Tax-cut proponents credit that law with keeping the growth of property tax bills in check. Though tax bills grew, they grew at a slower pace than they otherwise would have, thanks to lower city and county tax rates, they argue.

The owner of a typical home in Dallas, for example, saw the taxes they pay to Dallas Independent School District shrink by about $310 between 2018 and 2024, according to a Texas Tribune calculation. But they paid almost $1,200 more to the city, county and other taxing entities in 2024 than in 2018. Though tax rates fell, they didn’t fall enough to offset increases in the owner’s home value.

The total amount of property taxes collected statewide by cities and counties has remained relatively steady despite that change, figures presented by Bettencourt show. That’s at least in part because voters have signed off on higher tax rate increases at the ballot box, according to an analysis by the business-backed Texas Taxpayers and Research Association.

Senate Bill 9, by Bettencourt, would further tighten that cap to 2.5%, a provision that would only apply to localities with more than 75,000 residents. Cities like San Antonio, Arlington, El Paso and Corpus Christi would each have collected tens of millions of dollars less in property taxes from 2021 to 2024 had that measure been in place, according to Bettencourt’s estimate. Dallas would have lost more than $100 million in that span.

“We're asking you to tighten your belts,” Bettencourt said.

Lowering that limit would give voters a more direct say when cities and counties adopt tax rates, said Jennifer Rabb, who heads the Texas Taxpayers and Research Association. “I think that’s a step in the right direction.”

If localities need more money than what’s automatically allowed, they can ask the voters, the bill’s proponents said.

Enacting that tighter cap could complicate localities’ public safety efforts, others noted. State Sen. Royce West, a Dallas Democrat, noted that Dallas voters last year adopted a measure compelling the city to hire hundreds more police officers, which could prove difficult if they have to do so with greater revenue constraints. City and county officials asked lawmakers to consider some kind of carveout for spending on police protection and firefighting, which tend to make up the majority of a given locality’s budget, an idea Bettencourt appeared open to.

As Texans deal with the high cost of living, cutting property taxes may not be the best way to help them, state Sen. Molly Cook, a Houston Democrat, said.

“If you're driving down the road and the road's busted up and you pop a tire, well, that's because the government didn't spend money on roads, and now you're spending money on tires,” Cook said. “So how does this whole picture fit together to really address affordability?”

Disclosure: Texas Taxpayers and Research Association has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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