Is Texas Going to Have a State Income Tax?
Texas is well known for its lack of a state income tax, making it one of the most tax-friendly states in the U.S. For residents and businesses, this policy is a major financial advantage, allowing them to keep more of their earnings. But will Texas ever implement a state income tax?
No State Income Tax in Texas
As of 2025, Texas does not have a state income tax, and there are no plans to introduce one. This has been a long-standing policy in the state, and Texas lawmakers have consistently opposed any efforts to implement a personal income tax.
Why Doesn’t Texas Have a State Income Tax?
Texas has historically relied on alternative revenue sources to fund state operations. Instead of an income tax, the state generates revenue through:
Sales Tax – Texas imposes a 6.25% state sales tax, with local jurisdictions adding up to 2%, making the maximum possible rate 8.25%.
Property Taxes – Texas has some of the highest property tax rates in the U.S., which help fund schools and local services.
Franchise Tax – Businesses pay a franchise tax based on their revenue, rather than profits.
By relying on these revenue streams, Texas has been able to operate without imposing a personal income tax.
Constitutional Protection Against Income Tax
In 2019, Texas voters approved Proposition 4, which amended the state constitution to make it more difficult to introduce a state income tax. Under this amendment, any attempt to implement an income tax would require voter approval through a statewide referendum. This makes it unlikely that Texas will adopt an income tax in the foreseeable future.
How Texas’ Tax Policy Affects Residents and Businesses
For individuals – The lack of a state income tax means Texas residents can keep more of their earnings. However, higher property taxes and sales taxes help offset the lost revenue for the state.
For businesses – Companies benefit from a lower overall tax burden, making Texas an attractive place for entrepreneurs and corporations.
Conclusion
Texas has no state income tax and is unlikely to implement one due to constitutional protections and strong public opposition. Instead, the state relies on sales tax, property tax, and business taxes to generate revenue. This tax-friendly environment continues to make Texas a popular choice for individuals and businesses alike.