Policy Documents

Texas Margin Tax Experiment Failing Due to Collection Shortfalls, Perceived Unfairness for Taxing Unprofitable and Small Businesses, and Confusing Rules

Joseph Henchman –
August 17, 2011

Texas’s tax system has many notable aspects. The state imposes no individual income tax and no corporate income tax. Texans pay just 7.9 percent of their income in state-local taxes, 45th highest nationally and below the national average of 9.78percent. Their tax structure is the 13th most business-friendly in the country, according to our most recent State Business Tax Climate Index. Texas’s Tax Freedom Day—the day of the year when Texans have paid all their federal, state, and local taxes—came on April 7, five days before the national Tax Freedom Day. Between 2000 and 2008 (the last year data is available); Texas faced a net inbound migration4 of 586,000 individuals representing $12 billion worth of income.