Texas‘s tax system ranks 7th overall on the 2025 State Tax Competitiveness Index. Texas boasts a regionally and nationally competitive tax code. The state does not impose an individual income tax. However, unlike most others without an individual income tax, Texas (like Washington) applies the corporate gross receipts tax (also known as the “margin tax”) to S corporation and LLC income when others accord them pass-through status.
The margin tax is complex and burdensome. As a modified gross receipts tax, it applies to a firm’s total sales with limited deductions, rather than being imposed on profits.
In 2023, Texas voted to increase the homestead exemption on residential property from $40,000 to $100,000 ($110,000 for the elderly, disabled, and disabled veterans). While seemingly beneficial for taxpayers, homestead exemptions are nonneutral and tend to shift the tax burden to commercial property and renters. Moreover, a significantly increased homestead exemption could deny local governments the funding needed to properly resource public services, including education.
Texas treats remote sellers and marketplace facilitators competitively. Unlike most other states that require such sellers to collect and remit sales taxes if either a transaction or dollar threshold is surpassed, Texas only imposes a dollar threshold. Additionally, the dollar threshold is $500,000, greater than most other states, which better aligns the threshold with the size of the state’s economy.
| Category | Rank | Rank Change | Score |
|---|---|---|---|
| Overall | 7 | 0 | 6.00 |
| Corporate Taxes | 46 | 0 | 3.94 |
| Individual Income Taxes | 1 | 0 | 10.00 |
| Sales Taxes | 36 | 0 | 4.21 |
| Property Taxes | 40 | -2 | 4.29 |
| Unemployment Insurance Taxes | 30 | -1 | 4.76 |
Get facts about taxes in your state and around the U.S.
The vaping industry has grown rapidly in recent decades, becoming a well-established product category and a viable alternative to cigarettes for those trying to quit smoking. US states levy a variety of tax structures on vaping products.
7 min read
In the United States, taxes are the single most expensive ingredient in beer. The tax burden accounts for more of the final price of beer than labor and materials combined—the many different layers of applicable taxes combining to total as much as 40.8 percent of the retail price.
6 min read
The significant disparity in tax rates across states underscores the complex tax and regulatory environment governing distilled spirits.
6 min read