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Texas

The Facts on Texas’s Tax Climate

Last updated July 1, 2009

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

Tax Freedom Day Arrives on April 6 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 2009, Texas taxpayers had to work until April 6 to pay their total tax bill, ranking it 32nd highest in the nation. That's one week before national Tax Freedom Day (April 13). The Tax Freedom Days of neighboring states are: New Mexico, April 2 (ranked 43rd nationally); Oklahoma, April 4 (ranked 40th nationally); Arkansas, April 4 (ranked 37th nationally); and Louisiana, March 28 (ranked 49th nationally).
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' 2010 Business Tax Climate Ranks 11th
Texas ranks 11th 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 (31st), Arkansas (40th) and Louisiana (35th).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth 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
Texas, in addition to collecting no personal income taxes, collects no corporate income taxes. However, the state 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, 2000-2009
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, slightly above the national median of 6%. State and local governments combined collected $974 per capita in general sales taxes in 2006, which ranks 18th 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 19th 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 $1,404.76 per capita in property taxes during fiscal year 2006, 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. Its per capita property tax collections in FY2006 rank 13th highest 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

Tax Data from The Tax Foundation