The Complete History of Texas Property Taxes: 1836 to Today

The Complete History of Texas Property Taxes: 1836 to Today

Texas property taxes have a complex history spanning nearly 200 years. From the Republic of Texas through Reconstruction, school finance battles, and the landmark reforms of 2023, understanding this history helps explain why the system works the way it does today.

This comprehensive guide traces the evolution of property taxation in Texas and the key events that shaped the modern system.

Timeline: Major Milestones in Texas Property Tax History

The Republic and Early Statehood (1836-1865)

Spanish and Mexican Rule

Before Texas independence, property taxation was virtually nonexistent. Under Spanish colonial rule and later Mexican governance, land was typically granted for settlement and defense purposes with minimal or no taxation requirements. The vast territory and sparse population made systematic property taxation impractical.

The Republic of Texas (1836-1845)

After winning independence from Mexico in 1836, the fledgling Republic of Texas faced immediate financial challenges. The new government needed revenue to fund military defense, establish courts, and build basic infrastructure.

The Constitution of the Republic of Texas included provisions for a general property tax on land. This marked the beginning of property taxation as a primary revenue source in Texas — a role it maintains to this day.

Early Statehood Challenges

When Texas joined the United States in 1845, property taxes continued funding both local and state government operations. However, the system faced significant challenges:

• Rapid population growth made assessment difficult
• Poor record-keeping led to inconsistent valuations
• Limited enforcement allowed widespread tax evasion
• Frontier conditions made collection nearly impossible in many areas

Reconstruction and the 1876 Constitution (1865-1900)

The Reconstruction Era

Following the Civil War, the Reconstruction government in Texas imposed significantly higher taxes, including property taxes, to fund:

• Public education for all children (including formerly enslaved people)
• Infrastructure rebuilding
• Expanded government services
• Debt from the war

The Constitution of 1869 permitted relatively high property taxation, which generated resentment among many Texans who viewed the increases as punitive measures imposed by outsiders.

The Constitution of 1876

In reaction to Reconstruction-era taxation and governance, Texas adopted a new constitution in 1876 — which remains in effect today. This document fundamentally shaped Texas property tax law by:

• Limiting state taxation power — Strict constraints on what the state could tax
• Requiring equal and uniform taxation — All property must be taxed at the same rate within a jurisdiction
• Mandating taxation based on value — Taxes must be proportional to property value
• Establishing homestead protections — Special treatment for primary residences

The 1876 Constitution's distrust of centralized power and taxation continues to influence Texas policy nearly 150 years later.

The Problem of Undervaluation

Despite constitutional requirements for fair valuation, enforcement remained weak. Data from the 1880 U.S. Census revealed that the actual value of taxable property in Texas was more than double what appeared on state tax rolls.

This widespread underreporting meant:

• Some property owners paid far less than their fair share
• Tax rates had to be higher to compensate for undervaluation
• Those who reported honestly were effectively penalized

The Early 20th Century and Great Depression (1900-1945)

Slow Progress on Reform

The early 1900s saw gradual improvements in property tax administration, but the system remained fragmented. Each county operated independently, using different methods and standards for assessment. Some areas conducted regular reappraisals; others went decades without updating values.

The Great Depression's Impact

The Great Depression devastated Texas property tax collections. By 1933, more than 20% of Texas property taxes were delinquent — homeowners and farmers simply couldn't pay.

This crisis didn't fully resolve until the economic recovery of the 1940s, driven by World War II military spending and the Texas oil boom.

Post-War Assessment Problems

A 1945 Texas state auditor's report found that only seven counties in the entire state were complying with the requirement to assess property at 100% of market value. The gap between legal requirements and actual practice was enormous.

The End of State Property Taxes (1950-1982)

Gradual Elimination

Between the 1950s and 1980s, Texas progressively eliminated state-level property taxes:

• State property taxes for general revenue were phased out
• The statewide school property tax was repealed
• State government shifted to other revenue sources (primarily sales tax and oil/gas severance taxes)

1982: Complete Abolition

In 1982, Texas abolished all forms of state property taxation. From that point forward, property taxes became exclusively a local government function.

This is why Texas is sometimes said to have "no property tax" — the state doesn't levy one. However, local governments (school districts, cities, counties, and special districts) continue to rely heavily on property taxes.

The Peveto Reforms of 1979: Creating the Modern System

The most significant reforms in Texas property tax history came in 1979, largely through the efforts of Representative Wayne Peveto.

The Problem Peveto Addressed

By the late 1970s, Texas property tax administration was in disarray:

• Some districts hadn't reappraised property since their creation
• No uniformity existed in appraisal methods
• Different types of property were treated inconsistently
• Taxpayers had limited recourse to challenge unfair assessments

The Catalyst: San Antonio ISD v. Rodriguez

The U.S. Supreme Court case San Antonio Independent School District v. Rodriguez (1973) exposed serious inequities in Texas school finance. While the Court ultimately ruled the system didn't violate the U.S. Constitution, the case highlighted how unequal property valuations created vast disparities in school funding.

This pressure helped build support for comprehensive reform.

What the Peveto Reforms Created

The landmark legislation established the modern property tax system:

County Appraisal Districts (CADs)

• Created centralized appraisal districts in each county
• Required professional standards for property valuation
• Mandated regular reappraisals
• Established one appraised value for all taxing entities

Appraisal Review Boards (ARBs)

• Created independent citizen boards to hear taxpayer protests
• Gave property owners a formal process to challenge valuations
• Required due process in property tax disputes

State Property Tax Board

• Established state-level oversight of local appraisal practices
• Created standards and training requirements
• This function was later folded into the Texas Comptroller's office in 1991

The CAD and ARB system created by the Peveto reforms remains the foundation of Texas property taxation today.

School Finance Battles and 2006 Reforms

The Robin Hood Era

Through the 1990s and early 2000s, Texas struggled with school finance equity. The "Robin Hood" system required wealthy school districts to share property tax revenue with poorer districts — a source of constant political conflict.

Skyrocketing Property Taxes

Local property tax levies rose dramatically in the early 2000s:

• 2000: Total levy approximately $20 billion
• 2006: Total levy reached $35.6 billion

According to U.S. Census data, Texas per capita property tax collections as a share of personal income peaked around 4.4% in 2005 — among the highest in the nation.

Texas Supreme Court Intervention

In 2005, the Texas Supreme Court ruled the school finance system unconstitutional — not because of equity issues, but because the state had effectively created a statewide property tax by capping local rates while mandating spending levels.

The 2006 Reforms

The Legislature responded with significant reforms:

• School district maintenance and operations (M&O) tax rates were reduced by one-third over two years
• The state increased its share of school funding
• New business taxes (margins tax) were created to replace lost property tax revenue

These reforms provided temporary relief, but property tax complaints continued growing.

Modern Reform Era (2019-Present)

2019: Senate Bill 2 and House Bill 3

The 2019 legislative session produced major changes:

Senate Bill 2 limited local government tax revenue growth:

• Cities and counties cannot increase property tax revenue by more than 3.5% without voter approval
• Excludes revenue from new construction
• Created "voter-approval tax rate" terminology

House Bill 3 reformed school finance:

• Increased state funding for schools
• Compressed school district tax rates
• Restructured the "recapture" (Robin Hood) system

2023: Proposition 4 — The Largest Property Tax Cut in Texas History

Unprecedented state revenues in 2023 allowed Texas to enact its most significant property tax relief ever. After two special sessions, lawmakers and voters approved Proposition 4:

• Homestead exemption increased from $40,000 to $100,000
• School tax rates compressed by approximately 18%
• 20% appraisal cap created for non-homestead properties under $5 million
• Senior tax freeze benefits expanded

The $18 billion package passed with 83% voter approval and delivered estimated savings of $1,200+ per year for the average homeowner.

Read more about recent Texas property tax law changes

2025: The 89th Legislature Continues Reform

Building on 2023's success, the 89th Texas Legislature passed additional relief:

• Homestead exemption increased to $140,000 (pending voter approval)
• Senior exemption increased to $60,000 (combined $200,000 for seniors)
• ARB process reforms for greater transparency
• Tax refund protections with enforcement mechanisms

Key Constitutional Principles That Endure

Several principles from the 1876 Constitution continue shaping Texas property taxes:

Equal and Uniform Taxation

All property within a taxing jurisdiction must be taxed at the same rate. This prevents discrimination based on who owns the property.

Taxation Based on Value

Property taxes must be proportional to property value. Higher-value properties pay more in absolute terms, even though the rate is the same.

Homestead Protection

The Texas Constitution provides special protections for primary residences, including:

• Mandatory homestead exemptions
• The 10% appraisal cap for homesteads
• Protection from forced sale for property taxes in most circumstances

Right to Protest

Property owners have a constitutional right to challenge their property's valuation — a right that led to the creation of the ARB system.

What History Teaches Us

Looking at nearly 200 years of Texas property tax history reveals consistent themes:

1. Tension Between Local Control and Fairness Texas has always struggled to balance local autonomy with uniform standards. The Peveto reforms tried to address this, but challenges remain.

2. Property Taxes Fund Essential Services Despite constant complaints, property taxes remain the primary funding source for schools, police, fire departments, and local infrastructure.

3. Reform Requires Political Will Major changes like the Peveto reforms and Proposition 4 only happened when political pressure built to a breaking point.

4. Taxpayer Rights Matter The ARB system, protest rights, and homestead protections all exist because Texans demanded accountability in the property tax system.

5. The System Continues Evolving From Republic-era land taxes to modern exemption increases, Texas property taxes have never stopped changing.

Protecting Your Rights Today

Understanding the history of Texas property taxes helps you appreciate the rights you have as a property owner:

• The right to fair valuation — Your property should be assessed at market value, not more
• The right to protest — The ARB system exists specifically so you can challenge unfair assessments
• The right to exemptions — Homestead and other exemptions are constitutionally protected
• The right to transparency — Taxing entities must follow public processes when setting rates

If your property's appraised value seems too high, exercising your right to protest continues a tradition that dates back to the constitutional reforms of the 1870s.

Learn how to protest your property taxes

Sources

• The (Long, Long) History of the Texas Property Tax — Texas Comptroller
• Property Tax Cuts as Large as Texas — Texas Comptroller
• San Antonio Independent School District v. Rodriguez, 411 U.S. 1 (1973)
• Texas Constitution, Article VIII — Taxation and Revenue
• Texas Legislature Online