Property taxes have taken center stage in many states’ discussions on tax reform. While Oklahoma benefits from relatively low housing costs and low property-tax rates, the state has not been immune to the impact that runaway property valuations have had on tax bills.

Across the country, policymakers are considering a range of reforms—from adding new exemptions to eliminating property taxes altogether. Before major changes are made, it’s important to understand Oklahoma’s current property-tax landscape and which reforms make the most sense.

Oklahoma already has several constitutional and statutory restrictions on property taxes. Property-tax rates are capped by the state constitution. The only way for a city, county, or school district to raise rates above those limits is through a vote of the people, such as during a school-bond election. In addition, annual increases in assessed valuation are capped at 3 percent for a primary residence and 5 percent for other properties.

The state provides a homestead exemption of $1,000 off the assessed valuation of a homeowner’s primary residence. That may not sound like much, but Oklahoma assesses homes at between 11 and 13.5 percent of market value, with the state average around 11.7 percent.

For example, a $200,000 home assessed at 11 percent would have a taxable value of $22,000. The homestead exemption reduces that to $21,000. By comparison, Texas has a $100,000 homestead exemption—but Texas taxes 100 percent of a home’s market value. Thus, a $200,000 home in Texas would have a taxable value of $100,000 after the exemption.

Low-income Oklahomans with annual incomes below $30,000 qualify for a double homestead exemption, and 100-percent disabled veterans are fully exempt from property taxes.

Oklahoma also offers a valuation freeze for homeowners aged 65 or older whose household income is below the median for their county, as determined by HUD. In Oklahoma County, that income threshold is $99,000. The statewide average is $86,900.

As lawmakers weigh property tax reform, it’s important to keep in mind the recent tax changes they made. Property taxes fund roughly half of public-school budgets. Major changes that reduce local revenue would almost certainly prompt calls for the state to “backfill” the difference—jeopardizing Oklahoma’s historic income-tax reforms and its path toward zero income tax. Any property tax adjustments should protect the long-term viability of the state’s income tax plan.

Fortunately, several reform options could deliver real relief without disrupting the state’s overall tax strategy.

One promising idea would be to adopt a system similar to Utah’s certified tax-rate law. Under this approach, when property valuations rise, the local tax rate automatically adjusts downward to keep total revenue from existing properties flat. Local governments can still raise rates through a vote of the people, and they can keep additional revenue generated by new development. This reform directly targets runaway valuations without distorting the tax base.

Another straightforward reform would be to increase Oklahoma’s homestead exemption, providing immediate relief to all homeowners. Both Florida and Texas are pursuing similar increases—Florida’s plan would tie the exemption to inflation, while Texas would raise its exemption from $100,000 to $140,000. An increase in Oklahoma’s exemption would be simple to implement and would help homeowners right away, though it would not address the underlying rise in property valuations.

To directly address those valuations, Oklahoma could also consider lowering its annual valuation-growth cap below the current 3 percent limit. Because a property’s taxable fair-cash value cannot currently increase more than 3 percent per year, reducing that cap could further protect homeowners in fast-growing markets. The drawback is that when a property is sold, the valuation resets to full market value—shifting more of the tax burden onto new homebuyers.