Texas reimbursed Bell County governments for roughly 12 cents of every dollar requested after granting a statewide disabled-veteran exemption. As Gov. Greg Abbott proposes eliminating school property taxes for homeowners, the county offers a warning: a tax can be economically efficient, ethically troubling and politically popular to eliminate—all at the same time.
Property-tax relief may be the easiest promise to make in Texas.
Homeowners receive an appraisal showing that the value of their house increased—often without their permission, without any improvement they made and without another dollar appearing in their bank account. Months later, the tax bill arrives.
Politicians respond with larger exemptions, lower appraisal caps and promises to eliminate property taxes altogether.
The appeal is easy to understand.
A person can purchase a home, pay off the mortgage and live there for decades, yet never fully escape the possibility of losing it for failing to make an annual payment to the government. The obligation can increase because the surrounding market became more expensive, even though the owner did not sell the house or receive the increased value in cash.
Property taxes are constitutional. The Texas Constitution expressly authorizes property taxation in proportion to value and requires it to be equal and uniform.
But legal does not always mean just.
Nor does economically efficient always mean ethically acceptable.
That tension is at the center of Texas’ property-tax debate, and Bell County is already living with the consequences of what happens when the state grants relief without fully replacing the revenue.
A statewide promise with a local bill
Texas grants a complete residence-homestead property-tax exemption to veterans who receive 100% disability compensation for a service-connected disability and have either a 100% disability rating or a determination of individual unemployability.
The exemption applies to the entire appraised value of the veteran’s primary residence. A qualifying surviving spouse may also retain the exemption under state law.
The policy honors men and women whose military service left them totally disabled.
It should remain.
But Texas has not fully paid for the promise it made.
The state does not impose a general property tax of its own. Cities, counties, school districts and special districts depend upon locally taxable property to pay for public services.
That creates an unusual arrangement:
The Legislature establishes the exemption. Local governments lose the property-tax revenue. The Legislature then decides how much of that loss the state will reimburse.
Texas created an assistance program for cities and counties disproportionately affected by the disabled-veteran exemption. But payments are limited to the amount appropriated by the Legislature. When eligible requests exceed that amount, the comptroller reduces each payment proportionally.
For fiscal year 2026, qualifying local governments requested approximately $78.29 million.
The Legislature provided $9.5 million.
That covered approximately 12.13% of the requested amount—roughly 12 cents for every dollar.
The remaining cost did not disappear.
It stayed with the local communities.
Bell County’s $31 million gap
Few parts of Texas are more affected than the communities surrounding Fort Hood.
The installation has helped create a large and permanent military and veteran population across Killeen, Harker Heights, Nolanville, Temple and the rest of Bell County. As more qualifying veterans settle in the area and property values increase, the amount removed from local tax rolls also grows.
For fiscal year 2026:
| Local government | Amount requested | State payment | Unreimbursed |
|---|---|---|---|
| Bell County | $16.01 million | $1.94 million | $14.06 million |
| Killeen | $12.15 million | $1.47 million | $10.68 million |
| Harker Heights | $4.19 million | $508,878 | $3.68 million |
| Temple | $2.12 million | $256,837 | $1.86 million |
| Nolanville | $960,995 | $116,612 | $844,383 |
Together, Bell County and those four cities requested approximately $35.43 million and received about $4.30 million.
That left approximately $31.13 million unreimbursed through the state program.
Copperas Cove requested another $2.8 million and received approximately $339,000, although the city spans Bell and Coryell counties and should not be counted entirely as a Bell County jurisdiction.
The larger research record shows that this is not a temporary budget anomaly. State reimbursements have failed to keep pace as qualifying exemptions and lost taxable value have grown around Fort Hood.
Killeen has reported that more than $2.4 billion of property value is now removed from its tax base through the disabled-veteran exemption. In its fiscal year 2026 budget discussion, the city projected that state reimbursement would decline by another $1.2 million.
That does not mean every unreimbursed dollar automatically becomes a corresponding tax increase.
Cities and counties can absorb the gap through some combination of sales-tax receipts, fees, reserves, delayed projects, reduced services, slower hiring or taxes collected from the remaining taxable properties.
But there is no version in which the expense simply ceases to exist.
The jail still needs officers. Firefighters still respond. Roads still deteriorate. Courts still operate. Dispatchers still answer 911 calls.
The exemption changes how those services are financed. It does not eliminate their cost.
This is not the veterans’ fault
That distinction matters.
Disabled veterans should not be treated as the cause of Bell County’s fiscal problem.
Veterans work, own businesses, shop locally, volunteer, raise families and form a central part of the county’s identity. Their households contribute to the economy in ways that cannot be measured solely through a property-tax bill.
The problem is the structure created by the state.
Texas made the exemption mandatory but made reimbursement dependent upon a fixed legislative appropriation that has fallen increasingly short of the verified local impact.
State leaders receive the political credit for granting the benefit. Communities near military installations absorb most of the cost.
The Legislature itself has recognized the burden. Analyses of proposed reforms have stated that growth in disabled-veteran exemptions can shift taxes toward other property owners and strain communities with high concentrations of veterans.
The answer is not to repeal the exemption.
The answer is to fund it honestly.
The exemption also benefits the local economy
Lost property-tax revenue is only one side of the ledger.
A veteran who no longer owes several thousand dollars annually in property taxes has more disposable income. That money may be used to pay down debt, make home repairs, support children, purchase a vehicle, eat at a local restaurant or shop at a Bell County business.
When the money is spent locally, it supports private employers and may generate additional sales-tax revenue.
That economic benefit is real.
It is also different from replacing the lost property-tax revenue.
Texas imposes a 6.25% state sales tax. Cities, counties, transit authorities and special-purpose districts may impose a combined local rate of no more than 2%. Even if every dollar saved on property taxes were spent on taxable purchases within the same community, only a small portion would return to local government through sales taxes.
Some of the money will be saved. Some will be used for debt. Some will be spent outside the city. Some will purchase goods that are not subject to sales tax.
The broader economy may gain more than the local treasury recovers.
Both things can be true:
The exemption can strengthen household finances and local businesses while weakening the predictable tax base used to finance municipal services.
A Bell County-specific study isolating the exemption’s total economic multiplier was not identified for this analysis. That means the benefit should be recognized without pretending it has been measured precisely.
The exemption is not a pure economic loss.
But neither is additional consumer activity a dollar-for-dollar reimbursement.
The volatility problem
Property taxes are unpopular partly because they are persistent.
That persistence also makes them relatively predictable for local governments.
Land and buildings do not disappear when consumer confidence falls. Sales-tax revenue, by contrast, depends on how much people buy and where they buy it. It can rise sharply during strong economic periods and slow during recessions, inflationary pressure, emergencies or changes in shopping behavior.
Killeen’s recent budgets illustrate that movement.
For fiscal year 2025, the city projected approximately $527,000 less in sales-tax revenue than the previous budget, along with a reduction of roughly $628,000 in state reimbursement for the disabled-veteran exemption.
For fiscal year 2026, Killeen projected sales-tax revenue would rise by approximately $881,000—but also projected another $1.2 million decline in disabled-veteran reimbursement.
The sales-tax outlook improved from one budget year to the next. The underlying services did not become optional during the weaker year.
The economic disruption beginning with COVID-19 demonstrated how quickly consumer activity, government aid and local revenue assumptions can change. The years since have not produced a straight line of uninterrupted growth.
Sales-tax activity can soften the impact of property-tax relief.
It cannot be assumed to provide the same stability as a broad property-tax base or a guaranteed state reimbursement formula.
Not all tax cuts produce the same economic result
Property taxes may be among the most disliked taxes Texans pay.
That does not necessarily mean eliminating them produces the greatest amount of economic growth.
Research from the Organisation for Economic Co-operation and Development has ranked corporate income taxes as the most harmful major tax to long-term growth, followed by personal income taxes and consumption taxes. Recurrent taxes on immovable property generally have the least negative effect because land and buildings cannot relocate in response to a tax change.
Put more simply:
Cutting the tax people resent most is not necessarily the same as cutting the tax that most restrains investment and growth.
Reducing corporate taxes can increase the incentive to invest, expand and locate business activity in a jurisdiction. Property-tax relief gives more immediate and visible help to homeowners.
Those are different benefits.
The OECD findings concern aggregate economic growth. They do not prove that corporate-tax reductions always provide the largest direct benefit to an average household. Nor do they establish that every property-tax system is equitable.
Tax policy must weigh more than gross domestic product.
It must also consider who pays, who benefits, whether a tax threatens housing security and whether the replacement system is fair.
A tax can be efficient in an economist’s model and still feel profoundly unjust to the person writing the check.
Efficient does not necessarily mean ethical
Property taxation presents a moral problem that growth rankings do not resolve.
A home may have been purchased with income on which taxes were already paid. The mortgage may be gone. The owner may be retired, disabled or living on a fixed income.
The house may produce no revenue.
Yet the owner continues receiving an annual bill simply for continuing to own it.
That bill may rise because the home’s estimated market value increased—even if the owner did not ask for that increase, cannot access it without borrowing and has no desire to sell.
That leads to a reasonable philosophical question:
Can a person truly own a home if the right to remain there depends forever on making annual payments to the government?
Legally, property taxes are constitutional and deeply embedded in Texas’ system of local government.
Ethically, many Texans see them as inconsistent with the promise of secure private ownership.
It is possible to believe both of the following:
- Property taxes are comparatively stable and less damaging to economic growth than several alternatives.
- Taxing someone indefinitely on a home they already own—and increasing the bill based on unrealized value—can still be morally wrong.
That position is not contradictory.
It is the difference between asking what raises revenue efficiently and asking what government has the right to demand from an owner.
Texans are allowed to conclude that the current system is economically defensible but ethically unacceptable.
They are also entitled to search seriously for something better.
The challenge is creating an alternative that is more just without being less honest.
Abbott’s plan to eliminate school property taxes
That debate is no longer theoretical.
Gov. Greg Abbott has proposed a five-point property-tax plan that would:
- Limit local spending growth to the lesser of population growth plus inflation or 3.5%;
- Require two-thirds voter approval for local property-tax increases;
- Allow 15% of registered voters to force a rollback election;
- Move property appraisals to once every five years, reduce the annual homestead appraisal cap from 10% to 3% and extend the cap to other properties; and
- Ask voters to approve a constitutional amendment eliminating school-district property taxes for homeowners.
Abbott’s campaign says the overall plan would save the average homeowner approximately $3,000 each year.
The proposal should be described precisely.
Abbott is not currently proposing to eliminate every property tax in Texas. His published plan would eliminate school-district property taxes on homeowners.
Cities, counties and special districts would continue imposing property taxes unless additional laws changed their funding.
School taxes, however, are often the largest portion of a homeowner’s bill. Eliminating them would provide substantial relief.
It would not eliminate the cost of public education.
Teachers, buses, buildings, utilities, school police, special education and classroom materials would still require funding.
The published proposal does not yet provide a complete public answer to several essential questions:
- Would the elimination include both school operations taxes and debt-service taxes?
- What permanent revenue source would replace the money?
- Would commercial properties, apartment complexes and rental homes continue paying school taxes?
- How would existing school bonds be repaid?
- Would the state increase sales taxes or another levy?
- How would school funding be protected during a recession?
- Would increased state funding bring increased state control?
Those questions do not make the idea unworkable.
They are what separate a serious tax reform from an appealing slogan.
Elimination or relocation?
No major tax disappears in isolation.
It is eliminated, replaced, shifted or accompanied by reduced spending.
Texas could replace homeowner school-property taxes using general revenue, future budget surpluses, sales taxes, business taxes, spending reductions or some combination of those options.
Each has consequences.
Relying on surpluses creates risk because schools operate every year, including years when state revenue declines.
Increasing sales taxes would place more of the burden on consumption. That may feel more voluntary than taxing ownership, but it would also affect renters and lower-income households that spend a larger share of what they earn.
Leaving school property taxes on commercial and rental properties could shift more of the remaining burden toward businesses and tenants. Owners may respond through higher rents, prices, reduced investment or lower returns.
Replacing local school revenue with state funding could also concentrate more authority in Austin. The government providing the money will inevitably seek a larger role in deciding how it is used.
Again, these are not arguments for preserving the existing system forever.
They are arguments for candor.
Texas can choose a different tax structure. It cannot choose to fund government with nothing.
Bell County has already seen the warning
The disabled-veteran reimbursement program provides a smaller-scale example of what can happen when Texas removes taxable value without creating an automatic and fully funded replacement.
The state promises relief.
The local tax base contracts.
The Legislature appropriates less than the documented cost.
The remaining burden stays with the community.
Bell County and four of its cities requested $35.43 million through a state program specifically created to address this problem.
They received $4.30 million.
That history should matter before Texas assumes responsibility for replacing school-property taxes on millions of homes.
If the state eliminates school property taxes, the replacement cannot depend on local governments returning to Austin each budget cycle and asking lawmakers to cover a loss the state itself created.
Funding must be permanent, formula-driven and tied to the actual cost.
The state cannot repeat the disabled-veteran model on a vastly larger scale: granting popular relief, limiting reimbursement and leaving local institutions to explain the consequences.
Relief must be honest
Texas should continue exempting the homes of totally disabled veterans.
It should also fully reimburse the communities carrying a disproportionate share of that statewide commitment.
The exemption leaves veterans with more financial security, supports consumer activity and reflects a moral obligation to those whose service came at an extraordinary personal cost.
Those benefits do not excuse the state from financing its own policy.
Abbott is also right to ask whether Texans should continue owing taxes indefinitely on homes they supposedly own.
The ethical objection is real.
So is the economic warning.
Property taxes are stable and relatively growth-friendly. Corporate taxes may do more to discourage investment. Sales taxes are more responsive to consumer activity but more volatile and can burden households differently.
There is no painless tax.
The goal should not be to preserve property taxes merely because economists find them efficient. Nor should Texas abolish them without explaining what comes next.
A better system must protect ownership, provide dependable local funding, avoid quietly shifting the burden onto renters and businesses, and remain sustainable when economic growth slows.
Texans are capable of holding two ideas at once:
Property taxes may be economically rational.
They may also be ethically wrong.
That tension is not a reason to stop searching for an alternative.
It is the reason the search must be serious.
Bell County’s experience leaves Texas with a simple warning:
Tax relief can put money back into people’s pockets and strengthen the private economy. But when Austin removes local revenue without fully replacing it, the bill does not disappear. It simply changes hands.