How does Texas’s tax code compare? Texas does not have an individual income tax. Texas does not have corporate income tax but does levy a state gross receipts tax. Texas has a 6.25 percent state sales tax rate and an average combined state and local sales tax rate of 8.20 percent. Texas has a 1.47 percent effective property tax rate on owner-occupied housing value.
Texas does not have an estate tax or inheritance tax. Texas has a 20 cents per gallon gas tax rate and a $1.41 cigarette excise tax rate. The State of Texas collects $4,822 in state and local tax collections per capita. Texas has $10,906 in state and local debt per capita and has a 77 percent funded ratio of public pension plans. Texas’s tax system ranks 7th overall on the 2025 State Tax Competitiveness Index.
Each state’s tax code is a multifaceted system with many moving parts, and Texas is no exception. The first step towards understanding Texas’s tax code is knowing the basics. How does Texas collect tax revenue? Click the tabs below to learn more! You can also explore our state tax maps, which are compiled from our annual publication, Facts & Figures 2024: How Does Your State Compare?
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
115 min read
Facts & Figures serves as a one-stop state tax data resource that compares all 50 states on over 40 measures of tax rates, collections, burdens, and more.
2 min read
Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
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Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections. How do income taxes compare in your state?
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Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32 percent of state tax collections and 13 percent of local tax collections (24 percent of combined collections).
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Graduated corporate rates are inequitable—that is, the size of a corporation bears no necessary relation to the income levels of the owners.
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The FDA’s expected announcement of a national ban on menthol-flavored cigarettes and cigars with a characterizing flavor would carry significant revenue implications for both the federal government and state governments, with likely limited benefits in smoking cessation.
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Unlike other studies that look solely at tax burdens, the State Business Tax Climate Index measures how well or poorly each state structures its tax system. It is concerned with the how, not the how much, of state revenue, because there are better and worse ways to levy taxes.
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Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections:
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While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.
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Well-designed Net Operating Loss (NOL) provisions benefit the economy by smoothing business income, which mitigates entrepreneurial risk and helps firms survive economic downturns.
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States are unprepared for the ongoing shift to remote and flexible work arrangements, or for the industries and activities of today, to say nothing of tomorrow. In some states, moreover, existing tax provisions exacerbate the impact of high inflation and contribute to the supply chain crisis.
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The pandemic has accelerated changes in the way we live and work, making it far easier for people to move—and they have. As states work to maintain their competitive advantage, they should pay attention to where people are moving, and try to understand why.
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While there are many ways to show how much is collected in taxes by state governments, our State Business Tax Climate Index is designed to show how well states structure their tax systems and provides a road map for improvement.
169 min read