The Tax Foundation

Texas

The Facts on Texas’s Tax Climate

Here are some basic facts on Texas’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 12 in Texas
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Texas taxpayers had to work until April 12 to pay their total tax bill, ranking it 40th highest in the nation. That's 11 days before national Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states are: New Mexico, April 12 (ranked 42nd nationally); Oklahoma, April 11 (ranked 43rd nationally); Arkansas, April 17 (ranked 30th nationally); and Louisiana, April 13 (ranked 38th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Texas' State/Local Tax Burden Among Nation's Lowest
During the past three decades Texas' state and local tax burden has been consistently below the national average. Estimated at 8.4% of income, Texas's state and local tax burden percentage ranks 43rd highest nationally, well below the national average of 9.7%. Texans pay $3,580 per capita in state and local taxes.
Texas's State-Local Tax Burden, 1977-Present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008

Texas' 2008 Business Tax Climate Ranks 8th
Texas ranks 8th nationally in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: New Mexico (23rd), Oklahoma (19th), Arkansas (35th) and Louisiana (32nd).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Texas Levies No Personal Income Taxes
Texas levies no individual income taxes, joining six other states with the same policy.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Texas Levies a Gross Receipts Tax
The state of Texas, in addition to collecting no personal income taxes, collects no corporate income taxes. However, Texas recently instituted a gross receipts tax called the Texas Margins tax. It went into effect January 1, 2007. Texas joins Washington, Delaware, Michigan and Ohio as the only states that levy an economy-wide gross receipts tax.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Texas Levies Sales Tax above National Median
Texas levies a 6.25% general sales or use tax on consumers, above the national median of 5.4%. State and local governments combined collected $1,362 per capita in general sales taxes in 2005, which ranks 15th highest nationally. Texas' gasoline tax stands at 20 cents per gallon, ranking 36th highest nationally. Texas' cigarette tax stands at $1.41 per pack of twenty and ranks 18th highest nationally. The sales tax was adopted in 1961, the gasoline tax in 1923 and the cigarette tax in 1931.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Texas Property Taxes: Comparatively High
Texas's local governments collected $28,176,329,000 in property taxes during fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. Texas is one of the 13 states that collect no state-level property taxes, meaning its per capita property tax collections equaled $1,254 for all levels of government in FY2004, ranking it 13th nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Texas is a Donor State
Texas taxpayers receive less federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, Texas citizens received approximately $0.94 in the way of federal spending. This ranks the state 35th nationally and represents a slight decrease from 1995, when Texas received $0.95 per dollar of federal taxes paid (ranking them 37th nationally). Neighboring states and the amount of federal spending they received per dollar of federal taxation paid were as follows: New Mexico ($2.03), Oklahoma ($1.36), Arkansas ($1.41), and Louisiana ($1.78).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

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