Texans like to brag about being a low-tax state, but a new report from the Tax Foundation shows the Lone Star State is not even in the top 10. The Tax Foundation’s 2023 State Business Tax Climate Index puts Texas at #13 on their list.
The top 10 best states for tax climate are—in order—Wyoming, South Dakota, Alaska, Florida, Montana, New Hampshire, Nevada, Utah, Indiana, and North Carolina. What do they have in common?
The Wall Street Journal‘s editorial board noticed one commonality: “None of the best four tax states levy a personal state income tax: Wyoming, South Dakota, Alaska and Florida. Foregoing an income levy is a hedge against the upward tax-rate rachet that typically happens.”
But the lack of an income tax wasn’t enough to help Texas make the top 10, as the WSJ explains, because “property taxes are high and the average burden for state and local sales tax is 8.2%.”
The rising burden of property taxes has long simmered among Texas voters. Earlier this year, Republican gubernatorial candidate Don Huffines proposed eliminating the state’s school “maintenance and operation” tax (levied by local school districts). His plan was to offset that revenue with surplus state dollars over a period of several years. His newly formed Huffines Liberty Foundation is focused on pushing that plan in 2023.
“The foundation of property rights is actually owning your property and not renting it from the government,” said Huffines. “Eliminating the school taxes will create over 100 billion in net worth for Texans, unimaginable and unprecedented prosperity which equates to more liberty.”
The pressure to finally address the property tax burden has bubbled up enough that Texas Gov. Greg Abbott pledged this summer to use at least half of the state’s $27 billion budget surplus toward property tax relief. This fall, he committed to eliminating the school property tax.
The president of Texans for Fiscal Responsibility, Tim Hardin, explains that local spending—and debt—is weighing the state down.
“Our most pressing problem in Texas is local debt and local spending. We have a local outstanding debt on par with New York, with each Texan carrying about $12,500 per capita,” said Hardin. “For Texas to once again lead the nation and create an unmatched business climate, we have to deal with the out-of-control spending from local governments. A much-needed reform would be a spending cap similar to the one we have placed on the state placed on all local governments. Unless Texas lawmakers get serious about reducing the size and scope of the government, we will not be in a position to lead the nation.”