Chapter 325A · Texas Property Tax Reform Bill · Non-Partisan InitiativeA citizen's guide · 2025 data
Texas Property TaxReform Plan

Chapter 325A

Texas Property Tax Reform Bill

Replacing property taxes with economic growth.

New state sales & use tax

2.75%

Dedicated by statute to M&O property tax replacement.

Inside a city

2.00 / 0.75

City / county. Unincorporated areas: all 2.75 to the county.

How it works

  1. 01Economic activity occurs. Consumers spend money at businesses across Texas. Taxable sales and services generate state sales and use tax revenue.
  2. 02The state collects sales tax. The State of Texas collects sales and use tax and deposits it into the Replacement Revenue Fund established by Chapter 325A.
  3. 03Formula distribution by the Comptroller. The Texas Comptroller calculates each municipality's and county's share using a uniform, formula-based method based on local taxable economic activity.
  4. 04Funds returned locally. Revenue is returned to the municipality or county where the economic activity occurred.
  5. 05Property tax reductions. Local governments reduce their M&O property tax rate as replacement revenue is certified. Over time, M&O property taxes can be eliminated.

Key protections

  • Establishes an additional 2.75% statewide sales and use tax dedicated by statute to the property-tax replacement system.
  • Allocates 2.00 percentage points to municipalities and 0.75 percentage points to counties for taxable transactions occurring inside a municipality.
  • Allocates the full 2.75 percentage points to counties for taxable transactions occurring in unincorporated areas.
  • Requires replacement revenue to reduce M&O property taxes rather than becoming unrestricted additional local-government revenue.
  • Caps total eligible M&O replacement at 100% of CRA, preventing replacement revenue from exceeding the applicable M&O requirement.
  • Protects debt-service taxes, keeping bonded indebtedness and other non-M&O obligations outside the primary replacement program.
  • Caps stabilization reserves at 10% of the succeeding fiscal year's aggregate CRA, preventing unlimited reserve accumulation.
  • Provides a refundable low-income sales-tax credit for qualifying Texas households at or below 130% of the federal poverty guidelines, funded through a separate legislative appropriation.
  • Requires excess revenue to trigger a tax-rate sufficiency review, allowing the Comptroller to recommend whether the 2.75% rate could be reduced once replacement, stabilization, reconciliation, and equalization obligations are satisfied.

More growth.Less tax.

See your own numbers at www.tptr.org.