As the Texas gubernatorial race heats up, Gov. Greg Abbott last week introduced a new plan that calls for eliminating school property taxes and putting severe restrictions on cities’ ability to tax and provide basic services.
“Texans shouldn’t be taxed out of their homes,” the Republican governor said in a statement about his five-plank tax plan. “Working with Texas representatives and senators, we will overhaul the system to deliver lasting relief, creating a brighter, more prosperous future for all. It’s time for greater predictability and lower tax burdens. Next session, we will ensure that local governments cannot raise property taxes without people’s votes.”
Abbott’s proposal may sound appealing to voters struggling with property taxes. However, experts warn it could bankrupt the state, further defund already struggling public school districts and force cities to rely on meager state funding and grants to provide basic services.
“It’s purely ideological and wishful thinking,” said Jon Taylor, a political science professor at the University of Texas at San Antonio.
Mathematically speaking, Texas’ economy would have to sustain average to exceptional growth in perpetuity for Abbott’s numbers to work without implementing a state income tax, Taylor said. Complicating matters, a state constitutional amendment passed in 2019 made it illegal for lawmakers to institute a state income tax.
Southern Methodist University political scientist Cal Jillson told the Current the governor has a “zero-percent chance” of getting all his proposals passed — even though his own party controls both houses of the Texas Legislature.
Still, that doesn’t downplay the danger of Abbott’s plan, the professor said.
“[Abbott’s proposal] is just starving all of your state services,” Jillson said. “That’s fine for people in the upper middle class and beyond, but it is very difficult for the working poor, working class and lower middle class, because they’re barely making ends meet.”
Punishing city governments
Under Abbott’s plan, property tax appraisals would only occur every five years instead of annually, hurting cities’ and counties’ ability to raise revenue in a high-inflation environment. Additionally, the proposal would lower the annual homestead appraisal cap from 10% to 3% and expand that cap to all properties, including rental and commercial holdings.
At the same time, Abbott wants to cap local government spending growth to population plus inflation, or 3.5% — whichever is lowest.
“Greg Abbott seems to have it out for local governments, particularly for blue areas of the state,” UTSA’s Taylor said.
The governor’s proposed cap would make it nearly impossible for local governments to keep up with rapid population growth, essentially defunding essential services, the professor added. That’s especially dangerous with inflation running at around 4.2%, according to the latest Federal Reserve figures.
What’s more, federal budget cuts outlined in President Trump’s Big Beautiful Bill, which went into effect last July, have already left local municipalities nationwide scrambling to make up for lost revenue.
To that point, much of San Antonio’s looming $156 million budget deficit stems from federal funding cuts and the end of COVID relief funds, which the city used to pay for expanded social services and other programs, City Manager Erik Walsh told City Council last month.
Due to that deficit, council is weighing whether to implement a 3.5% property tax increase — the maximum allowed without going to a citywide vote.
However, under Abbott’s plan, two-thirds of a city’s population would have to approve a property tax rate hike such as the one being proposed in San Antonio. At the same time, only 15% of registered voters would need to sign a petition to hold a referendum on a property tax rollback under Abbott’s tax plan.
In other words, if the governor gets his way, it could be damn near impossible for a city to raise property taxes, even if facing dire financial straits.
Economic stagnation
SMU’s Jillson told the Current that Abbott’s tax plan would also hinder cities’ ability to grow, locking cities into a cycle of economic stagnation.
“The logic of local governments, particularly in fast-growing suburbs and exurbs, is you’ve got to build out to get ahead of population growth,” Jillson said. “You can’t build out after people are there. You have to plan and anticipate population growth … . So, you would be limiting [municipalities’] ability to anticipate and facilitate that growth.”
Most concerning, though, according to both Taylor and Jillson, is Abbott’s proposed constitutional referendum rule, which would let Texas voters decide whether to pass an amendment eliminating school district property taxes.
Abbott maintains state coffers would make up the difference in places where residents vote to do away with school district property taxes. But Jillson said economic realities show that’s simply not the case.
“It only works as long as Texas has a surplus and a steady, rapidly growing economy,” Jillson said. “The next downturn — and Texas always faces downturns — it’s going to be a mess.”
During Abbott’s 12 years in office, Texas has never faced a deficit. Since he took office after the Great Recession of 2007 to 2009, he’s never led the state during a recession or deep economic crisis. That’s given the governor a false sense of economic security, according to Taylor.
“It’s an ideologically rigid view of taxes, the idea that all taxes are bad, that all government spending is bad,” Taylor said.
In the unlikely event the Texas Legislature approves all aspects of Abbott’s tax proposal, the drastic effects would eventually force the state to scramble to create other revenue sources to keep paying for basic services or face a stagnant economy, Jillson cautioned.
“It’s just common sense to think that if your working population lacks health insurance, it’s less healthy and productive than the working population of another state might be,” Jillson said. “Similarly, if you’re underfunding your schools, it means the productivity of your future workforce is less than it might be. So, there are costs to being too stingy with your money.”
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