STORY ARCHIVESSTORY ARCHIVES
VIEW OUR APPSVIEW OUR APPS

Texas has the Seventh Lowest State and Local Tax Burden in the Nation for FY 2016

Apr 24, 2018

Print Friendly and PDF


In Fiscal Year (FY) 2016, Texas collected $112.7 billion in state and local taxes—or $4,039 for every man, woman, and child. 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?

 

To better answer this question, this analysis will calculate Texas’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.

 

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

Fortunately for taxpayers, as shown in Chart 1, Texas’s state and local tax burden (tax collections divided by private sector personal income) was the seventh lowest in the nation for FY 2016 at 11.8 percent—or -17 percent below the national average of 14.3 percent.

 

Chart 1 Texas State and Local Tax Burden FY 2016.jpg

 

#Texas state and local #taxburden in FY 2016 was the 7th lowest in the nation at 11.8%— -17% below US average of 14.3% http://bit.ly/2FX9C8F @keypolicydata #TXpolitics #TXpol #TXlege #TXsen #TXgov #PolicyData (click to tweet)

 

As shown in Chart 2, Texas’s tax burden has increased over time by 52 percent to 11.8 percent in FY 2016 from 7.8 percent in FY 1950.

 

Chart 2 Texas State and Local Tax Burden by Type of Tax FY 1950 to 2016.JPG

 

#Texas state and local #taxburden has increased 52% between FY 1950 (7.8%) to 2016 (11.8%) http://bit.ly/2FX9C8F @keypolicydata #TXpolitics #TXpol #TXlege #TXsen #TXgov #PolicyData (click to tweet)

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

 

To put Texas’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, Texas’s 11.8 percent tax burden is greater than these combined industries: manufacturing (9 percent), educational services (1 percent), and utilities (0.8 percent).

 

Chart 3 Texas State and Local Tax Burden vs. Major Industry FY 2016.JPG

 

#Texas state and local #taxburden > combined industries: manufacturing, educational services, and utilities http://bit.ly/2FX9C8F @keypolicydata #TXpolitics #TXpol #TXlege #TXsen #TXgov #PolicyData (click to tweet)

 

Texas’s low state and local tax burden can, obviously, be 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 (5.2 percent, 13th highest), and the sales tax (4.2 percent, 12th highest).

 

Texas’s high sales tax is due to their margin tax that was first introduced in 2008 (see this Tax Foundation study for more historical information on the margin tax). The margin tax is a gross receipts tax which means that it is levied on a very broad-based number of goods and services and that leads to tax pyramiding. 

 

Tax pyramiding creates all kinds of very bad economic distortions (pdf) by imposing higher effective tax burdens on some industries, but not others—especially industries that are near the end of the value-added chain. Texas needs to ditch the margins tax, but at the same time increasing other taxes is not the answer either. The solution is to adopt my proposed Business Flat Tax (a modified version of New Hampshire’s successful Business Enterprise Tax) (pdf) in place of the margins tax.

 

Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Texas—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.

 

The 20 Texas counties with the highest local government tax burden include:

 

  • Loving County, TX (141.5 percent)
  • King County, TX (101.8 percent)
  • Kenedy County, TX (85.8 percent)
  • Terrell County, TX (71.9 percent)
  • Borden County, TX (61.5 percent)
  • Kent County, TX (57.1 percent)
  • Upton County, TX (49.6 percent)
  • Crockett County, TX (47.7 percent)
  • Jim Hogg County, TX (38.5 percent)
  • Yoakum County, TX (35.0 percent)
  • Roberts County, TX (34.3 percent)
  • Brooks County, TX (34.3 percent)
  • Freestone County, TX (34.2 percent)
  • Pecos County, TX (33.9 percent)
  • Zapata County, TX (31.7 percent)
  • Reagan County, TX (30.6 percent)
  • Wheeler County, TX (29.3 percent)
  • Crane County, TX (28.5 percent)
  • Hardeman County, TX (26.6 percent)
  • Somervell County, TX (25.1 percent)

 

Note: These counties tend to be rural with limited private sector activity combined with significant oil and gas infrastructure leads to seemingly high local tax burdens.

 

The 20 Texas counties with the lowest local government tax burden include:

 

  • Archer County, TX (4.9 percent)
  • Eastland County, TX (4.9 percent)
  • Hamilton County, TX (4.9 percent)
  • Medina County, TX (4.8 percent)
  • Smith County, TX (4.8 percent)
  • Guadalupe County, TX (4.6 percent)
  • Denton County, TX (4.6 percent)
  • Kendall County, TX (4.5 percent)
  • Hardin County, TX (4.5 percent)
  • DeWitt County, TX (4.4 percent)
  • Coryell County, TX (4.3 percent)
  • Swisher County, TX (4.2 percent)
  • Montgomery County, TX (4.1 percent)
  • Wilson County, TX (4.0 percent)
  • Fort Bend County, TX (3.7 percent)
  • Castro County, TX (3.5 percent)
  • Hartley County, TX (3.4 percent)
  • Midland County, TX (2.5 percent)
  • Randall County, TX (1.9 percent)
  • Shackelford County, TX (1.9 percent)

 

Chart 4 Texas Local Tax Burden by County FY 2016.JPG

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?

 

 

 

 


Category: Tax Burdens

J. Scott Moody

Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.


blog comments powered by Disqus

Stay Up-To-Date on Your State's Key Policy Data - Economics, Politics, Demographics - by Joining Our Mailing List Today!

Check Out Our Unique Apps:

U.S. Capitol.jpg

Government Workforce

Tax Squeeze.jpg

Tax Burden

Strings Attached to Federal Dollars.jpg

Federal Tax and Spend

Hundred Dollar Bill.jpg

Cost of Living (COLI)

Baby.JPG

Demographic

Measuring a Dollar.jpg

Federal Tax & COLI

Retired.jpg

Federal Pension

United States Office of Personnel Management Seal.jpg

Federal Payroll

Check out more

Stories from our

Media Partner: 

Watchdog.org

Check Out All Posts For Your State:

Alabama.jpg  Alabama

Alaska.jpg  Alaska   

Arizona.jpg   Arizona 

Arkansas.jpg  Arkansas

California.jpg  California

Colorado.jpg  Colorado

Connecticut.jpg  Connecticut

 Delaware.jpg  Delaware

Florida.jpg  Florida

 Georgia.jpg  Georgia

Hawaii.jpg  Hawaii

  Idaho.jpg  Idaho

   Illinois.jpg  Illinois

   Indiana.jpg  Indiana

  Iowa.jpg  Iowa

  Kansas.jpg  Kansas

  Kentucky.jpg  Kentucky

   Louisiana.jpg  Louisiana

   Maine.jpg  Maine

  Maryland.jpg  Maryland

Massachusetts.jpg  Massachusetts

Michigan.jpg  Michigan

Minnesota.jpg  Minnesota

  Mississippi.jpg  Mississippi

Missouri.jpg  Missouri

Montana.jpg  Montana

Nebraska.jpg  Nebraska

Nevada.jpg  Nevada

New Hampshire.jpg  New Hampshire

New Jersey.jpg  New Jersey

New Mexico.jpg  New Mexico

New York.jpg  New York

North Carolina.jpg  North Carolina

North Dakota.jpg  North Dakota

Ohio.jpg  Ohio

Oklahoma.jpg  Oklahoma

Oregon.jpg  Oregon

Pennsylvania.jpg  Pennsylvania

Rhode Island.jpg  Rhode Island

South Carolina.jpg  South Carolina

South Dakota.jpg  South Dakota

Tennessee.jpg  Tennessee

Texas.jpg  Texas

Utah.jpg  Utah

Vermont.jpg  Vermont

Virginia.jpg  Virginia

Washington.jpg  Washington

West Virginia.jpg  West Virginia

Wisconsin.jpg  Wisconsin

Wyoming.jpg  Wyoming