In Fiscal Year (FY) 2011, Texas collected $90.8 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Texas taxpayer can afford this level of taxation.
As shown in the charts below, Texas’s state and local tax burden (tax collections divided by personal income) was the tenth lowest in the nation for FY 2011 at 9 percent—or 13.8 percent below the national average of 10.5 percent. Texas’s tax burden has increased modestly over time by 38.2 percent to 9 percent in FY 2011 from 6.5 percent in FY 1950.
Texas’s low state and local tax burden can be first attributed to not having an individual or corporate income tax since they tend to be progressive (higher tax rates on higher levels of income) which increases the tax burden over time.
However, Texas’s lack of an income tax is diminished by other higher than average taxes such as the property tax (4 percent, 12th highest), the sales tax (2.7 percent, 17th highest), and all other taxes (2.4 percent, 14th highest). All other taxes, of course, being driven by severance taxes on the extraction of oil and gas.
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.