The lack of a personal income tax makes Texas an attractive place to live and do business for many reasons. It saves the average family of three close to $4,000 a year. Owners of Small businesses can reinvest their individual tax savings and help their businesses grow. For larger businesses, Texas is an attractive headquarters location, as senior corporate staff may enjoy the personal tax savings.


But the trade-off for no personal income tax is higher property and sales taxes. Those taxes fall heavily on businesses and their operations, particularly capital-intensive ones, who often find that Texas is one of the higher taxing states in which they operate.


The story is very different for businesses, though. Texas is actually a high tax state for business; 36 states have lower overall tax burdens on business. The average Texas business sees 5.4% of their gross product go to paying state and local taxes. While that’s only ten percent higher than the average state, Texas is tied with Oklahoma at 14th highest. Overall, Texas business account for 59.3% of all state and local taxes paid in Texas, well above the national average of 43.6%.


TTARA’s study draws from information provided in the Council on State Taxation’s recent report, Total State and Local Business Taxes, State-by-state Estimates for FY21.


Texas fares even worse when zeroing in on property taxes. Citing from the Lincoln Institute of Land Policy’s 50-State Property Tax Comparison Study, property taxes on an industrial property are 6th highest in the nation, 62% above the average state. Homeowner property taxes are high, too, 10th highest, but only 27% above the national average. Texas’ generous homestead exemptions help alleviate the burden of property taxes in Texas.



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