Eliminate Property Tax: By the Numbers

September 6, 2022
TFR Staff
Property Tax

Recently, the 22,000-member Facebook group Eliminate the Property Tax featured a write-up by group admin Russell Bennett that supports House Bill 3742 (from the 83rd legislative session) and explains why their group is still in support of the bill, which they are currently looking for an author on.

Although their group’s solution to the property tax problem is slightly different from that of Texans for Fiscal Responsibility’s Texas Prosperity Plan, it is still a viable and strong solution to the problem of the immoral property tax. We have the same goal of allowing taxpayers to actually own their homes; therefore, we have a duty to help one another.

I wanted to submit this well-thought-out write-up for consideration to TFR readers, as I know many have voiced support for it. We encourage you to join the Eliminate the Property Tax Facebook group and engage in discussion with others who support the elimination of the property tax in Texas.

Our movement is gaining steam, and it’s the perfect time to put the pedal to the metal and advocate for real change in our tax system.

(This article was last updated in June 2022; some information might be dated.)

We have a comprehensive legislative solution to Eliminate Property Tax. It’s our Texas Legislature bill HB3742 (83R).
In its simplest distillation, here is what it will do.
“Abolish 60+ taxes (including Sales, Franchise, and Property Tax) and replace them all with a 7% consumption tax.”
This is NOT adding “another new tax.” Nor is it attempting a small, incremental step to get us there that, like every past relief or reform bill since the Great Depression, has failed. Instead, it restructures the Texas tax system into a simple, fair, and efficient consumption-based tax.
On the simplest, macro-level, here’s what we told legislators in the last session about how it would work.
    • We need $86B to replace all revenue that HB3742 would abolish.
    • The Texas GDP is $1.9T.
    • A tax rate of 7% on the whole economy would capture $133B.
    • If we assume up to 35% would be exempt, the net is $86B.
This is our updated macro-level analysis. It now uses the latest data from the Texas Comptroller from 2011 to 2019. (Complete Property Tax data for 2020 and 2021 is still pending.) You can find that analysis in the attached file. Here are also some simple answers to common questions:
What specific taxes does HB3742 propose to eliminate?
In 2019, total State tax revenue amounted to about $147B. The list of major tax revenues that we propose to be eliminated equals $86B. Other major sources of revenue (Federal Income, Licenses, Fees, and Investments) which provided $61B, will remain.
    1. Sales Tax (State & Local)
    2. Vehicle Sales/Rental
    3. Franchise
    4. Motor Fuels
    5. Cigarette & Tobacco
    6. Alcoholic Beverages
    7. Hotel
    8. Property Tax
What goods and services will still be tax-exempt?
Today, basic needs are exempt by law from the Texas Sales Tax. HB3742 maintains all of those current exemptions. Since it’s the disproportionate percentage of families’ incomes spent on these items that could make a consumption tax regressive, HB3742 makes sure that these individuals and families are not disproportionately impacted by it. That’s why HB3742 will benefit the low and middle-income Texans the most. (Governmental, public, and not-for-profit organizations are exempt, as well.)
    1. Groceries (Unprepared Food)
    2. Prescription & Over-the-Counter Drugs
    3. Medical Devices & Services
    4. Motor Vehicles Leases & Rentals
    5. Machinery
    6. Raw Materials
    7. Utilities & Fuel
    8. Transportation Services
What current tax-excluded goods and services could be included?
The Texas Public Policy Foundation (TPPF) released an updated study in 2012 showing we could replace property tax by simply expanding our consumption tax base to include categories of goods and services not currently taxed in Texas but taxed in other states. A complete list of those goods and services, too long to include here, is available for review in the attached file. However, here are those major categories which, like other states, could be included in an expanded tax base.
    1. Agricultural Services
    2. Business Services
    3. Industrial and Mining Services
    4. Construction
    5. Transportation Services
    6. Storage
    7. Utility Service – Industrial Use
    8. Utility Service – Residential Use
    9. Finance, Insurance, and Real Estate
    10. Automotive Services
    11. Admissions & Amusements
    12. Personal Services
    13. Professional Services
    14. Leases and Rentals
    15. Fabrication, Installation, and Repair Services
Challenges to the Analysis
The Comptroller doesn’t provide the complete data needed for each fiscal year at the same time. Those updates may lag as much as two years. Currently, the latest data for Revenue only goes back to 2013. For Property Tax, only to 2017. For periods beyond those years, some data is available in archived reports and spreadsheets. Some are not. The same data in each source will also differ. Therefore, analysis for periods later than 2019 may be underestimated and optimistic. When complete data comes out, these can be trued up.
Other Notes
Property Tax is collected for any number of local jurisdictions. The school “Maintenance & Operations” (M&O) is a portion of the total. Only the M&O amount was included in revenue that HB3742 would need to replace with a State Consumption Tax. Property Tax is also collected for a variety of local jurisdictions. The replacement of that revenue for those other jurisdictions would be provided by an increased local rate (subject to taxpayer approval) of up to 3%.
This file and content are a work-in-progress subject to change as new information becomes available. Last update: 23 JUN 2022
For more answers to common questions, check out the FAQ Section on our Website:
No Relief. No Reform. #EliminatePropertyTax
Read the companion article, “Not a Hallucination” here:

TFR wants its subscribers to remember that the way we accomplish policy goals is by connecting with like-minded folks and taking action. TFR differs in proposed solutions to the property tax problem, but we will not tear down others who are working toward the same goal. On the contrary, we will lock arms with them and march toward our goal together. This is the most fearful thing imaginable to lawmakers set on maintaining the status quo. The next legislative session is only a few months away, and the time for action is now!

Texans for Fiscal Responsibility maintains that the levying of a property tax is immoral and that the state Legislature should focus on putting Texas on a path to its elimination.

How can you help? Go read the Texas Prosperity Plan for yourself and voice your support for REAL property tax relief by signing up to support the TPP. You can also sign up for The Fiscal Note to stay updated on all fiscal issues that affect Texans, especially our broken property tax system. We CAN get real tax relief if we amplify our voices loudly enough.