Texas Conservative Coalition Research Institute
Testimony to the Senate Committee on Finance
December 3, 2019
Regarding the Committee’s Charge: Study the economic dynamics of the current business personal property tax. Consider the economic and fiscal effects of increased exemptions to the business personal property tax, versus its elimination. Following such study, make recommended changes to law.
Background
While Texas is a low-tax state overall, its property taxes- which are imposed by local governments rather than by the state- are quite high relative to most of the country. Texas had the sixth-highest property tax burden in the nation in 2016, according to the Tax Foundation. Other measurements place Texas behind only New Jersey, Illinois, and Vermont in terms of effective property tax rates.
Over the years, Texas has made efforts to lower the property tax burden its residents face through such measures as a 10 percent cap on annual increases in the appraised value of homestead residences and, in the 86th Session, Senate Bill 2 and House Bill 3. SB 2 lowers the “rollback” rate for cities and counties and school districts to 3.5 percent and HB 3 will generally cap the annual growth in a school district’s taxes at 2.5 percent starting in 2021.
Part of the state’s heavy property tax burden is reflected in its broad general rule that tangible personal property used for the production of income, such as a business’s machinery, furniture, supplies, and inventory- is subject to local property taxes. This tax on tangible personal property tax used for the production of income is sometimes informally referred to as the “business personal property tax (“BPPT”).