The (Long, Long) History Of The Texas Property Tax

Texas has had property taxes as long as it’s been, well, Texas. In fact, the Mexican government’s elimination of a generous property tax exemption for settlers, as part of anti-immigrant laws put into place in 1830, helped spur the fight for Texas independence.

The property tax has seen many changes over time. And nearly two centuries later, it remains an essential revenue source for local governments in Texas, from cities and counties to mosquito control districts.

For the first century after Texas’ independence, the property tax supported not just local governments but the state as well, supplying 50 to 75 percent of all state tax receipts.

While the state relied heavily on property tax revenue, however, the tax itself was notorious for chaotic and disorganized administration, particularly during Reconstruction. This has often been attributed to Texas’ uniquely decentralized system, in which local officials were responsible for much of the state tax’s administration with little guidance or oversight.

Shortly after the Civil War, nearly a third of Texas’ counties didn’t even have a tax assessor-collector, the official charged with valuing property and collecting the tax for the state. An 1868 Comptroller report found that many local tax assessor-collectors were corrupt or incompetent. Other reports from the period cited widespread underreporting of property values; the 1880 U.S. Census estimated the value of all taxable property in Texas at $725 million, more than twice the total on the state’s tax rolls.

Texas lawmakers began tightening tax policies and improving collections at the end of the 19th century. Much of this progress, however, was undone by the Great Depression. In 1933, more than 20 percent of the state’s property tax levy was marked as delinquent. Delinquency rates didn’t return to pre-Depression levels of around 6 percent until the mid-1940s.

The problem of property undervaluation would prove to be a lasting one, as it was built into the decentralized structure of the property tax at the time. A 1945 report from the Texas state auditor found that only seven counties were complying with the statutory requirement that property be assessed at 100 percent of its market value. On average, assessed value only accounted for 47 percent of the true value of real property in the state. Uneven assessments sapped a considerable portion of the tax’s potential returns.

Throughout the early 20th century, moreover, the Legislature approved numerous laws permitting the remission of portions of the state’s general revenue property tax collections to various local governments. At the time, the state levied three property taxes, one dedicated to general revenue, one for the Available School Fund (ASF) and another to pay the pensions of Confederate veterans. Due to large wartime revenue surpluses and restrictions on state spending in the mid-1940s, the state didn’t even collect the property tax supporting general revenue in 1946.

Two years later, voters approved a repeal of the general revenue portion of the tax altogether. The notoriously difficult-to-administer property tax, in short, had become more trouble than it was worth, at least so far as the health of the state’s General Revenue Fund was concerned. Voters at the time were embracing more fiscally conservative policies, approving the well-known “pay-as-you-go” constitutional spending limit just a few years earlier in 1942.

The school portion of the state’s property tax saw a similar development a few decades later. Revenue from other taxes supporting the ASF began to increase, eventually overtaking the state property tax. Texas voters subsequently nixed that tax in 1968.

In the 1950s, Texas voters approved a constitutional amendment allowing the Confederate veterans’ portion of the tax to be used to finance the construction of new state buildings, as the number of beneficiaries had fallen significantly. It was finally repealed in 1979.

In 1982, Texas abolished all forms of state property taxation.

Local property taxes have a long history in Texas, and are levied by local governments such as school districts, cities and counties, as well as special-purpose districts providing a wide variety of public services.

In 1979, Texas lawmakers approved some long-needed reforms that did much to standardize the administration of local property taxes. These reforms were largely the project of one particularly persistent legislator, Rep. Wayne Peveto from Orange, who described the problem in the August 1995 issue of Fiscal Notes:

Some districts had not reappraised their property since their inception; others had reappraised more recently, and thus appeared richer than they actually were when compared with districts that had not reappraised. There was no uniformity in how appraisals were carried out [or] in the appraisers’ qualifications. There was not even uniformity as to what types of property were placed on the tax roll[s]. Some school districts taxed chickens; others taxed cars; others taxed only real property ….

The “Peveto bill,” passed in 1979 after several failed attempts in previous sessions, essentially formed the basis of the property tax system in place today. First, in an attempt to professionalize and depoliticize the appraisal process, it separated appraisals from tax collection by creating a system of countywide central appraisal districts (CADs). Additionally, property now had to be assessed at full market value and reassessed at least once every three years.

To improve state oversight and provide guidance to local CADs, the legislation created the State Property Tax Board (subsequently eliminated in 1991, with its functions folded into the Comptroller’s office) and required counties to establish appraisal review boards to allow taxpayers to contest their appraisals.

These reforms have done much to make the property tax system more consistent across the state. In 1979, most homesteads were being appraised at about 60 percent of their market value. According to the most recent Property Value Study — an annual report from the Comptroller’s office — statewide appraisals of single-family homes were very consistent and near full market value, with an overall statewide residential appraised ratio of 98 percent of market value.