Property Tax Reforms Threaten School Funding Across US States [US]

Property taxes fund over a third of K-12 education in the United States. That revenue is now under serious threat.

More than a dozen states are considering property tax reforms this year, ranging from modest caps to outright elimination. Wyoming legislators killed a full elimination bill this week, but voters in Tennessee and Wyoming will face ballot measures in November 2026. Tennessee could become the first state to preemptively ban a statewide property tax. Wyoming voters will decide whether to exempt 50% of assessed property values from taxation.

The revenue replacement maths is brutal. Ohio Governor Mike DeWine warned that eliminating property taxes would require raising the state sales tax to 17-20%. A proposed homestead exemption elsewhere carries a $4-5 billion price tag with no clear funding plan.

Four Reform Approaches

States are pursuing different tactics. Florida, Georgia, Kansas, South Dakota, Texas, and Wisconsin are considering replacing property taxes with higher sales or income taxes. Kansas senators passed a 3% annual appraisal cap and rolled property values back to 2022 assessments.

Other states want constitutional amendments. Iowa's Governor Kim Reynolds cited 10% increases over two years as justification for reform. Florida advanced a proposal capping annual rate increases at 3% or inflation, whichever is lower.

Experts say alternative taxes will fall short of funding schools and fire departments adequately. Communities will either find new revenue or cut services.

Precedent Suggests Caution

North Dakota voters rejected property tax elimination in 2024 by nearly two-thirds. States with existing caps (Indiana, Missouri, New York, Wyoming) restrict increases to 2-4% annually, a middle ground between the status quo and elimination.

Local governments across multiple states oppose these measures, citing concerns about funding vital services. For CFOs advising school districts or local authorities, the uncertainty around future revenue streams is substantial. Even modest reforms in Indiana and Ohio have caused significant strife for school finance officials.

The political momentum is real, particularly in Florida, Iowa, Kansas, and Wyoming. But voters historically reject massive cuts to local services when they understand the consequences.