Any proposed change in Texas' tax system needs to be judged by whether it would solve these two major problems in the current structure of state and local taxes. The largest tax paid by most Texans is the local property tax, which accounts for more than 40 percent of our total state and local tax load. State and local sales taxes account for another one-third of taxes paid by Texans. The bulk of state taxes goes to pay for public and higher education, and health and human services, which together account for three quarters of the state budget. Local taxes are divided about evenly between supporting public education and funding services of cities, counties and special districts.
Schools receive about equal amounts of funding from state and local taxes.
The federal government has played an increasingly important role in supporting state services, but future federal funding is very uncertain, placing great pressure on state revenue sources. Texans' total tax load is light compared to other states, although our property tax burden is heavier than in the average state. Our property and sales tax rates are among the highest in the country, since most Texas government revenue comes from just these two taxes. Other states avoid high property and sales tax rates by spreading the tax burden onto a third major tax, the personal income tax, which is not levied in Texas. Another reason for high property tax rates is the shrinkage in the value of taxable property.