One of the many attractions of Texas to those moving here over the years has been the lack of a state income tax. Texas is one of just nine states with no income tax, and that has helped burnish the state's low-tax reputation. But that may become less of a novelty, as other red states are now catching on to the trend. "A handful of states--Mississippi and Louisiana being amongst the most nearby ones--but we've also seen Arkansas, South Carolina, Georgia, North Carolina all seeking to enact legislation to move to zero income tax rates," says Patrick Gleason with Americans for Tax Reform.
Some analysts are even questioning if all 50 states should eliminate their state income tax. That is unlikely to happen, since many states have grown to rely on the revenue stream from an income tax, and blue states like California, New York, and Illinois require a high income tax in order to fund their big-spending ways. But even states without an income tax often end up making up for it with high taxes in other areas, like sales taxes, business taxes, or property taxes. In recent years, Texans have become increasingly frustrated with high property taxes, despite repeated efforts by state lawmakers to rein them in. "It's important for states to facilitate income tax reduction, not by shifting the burden to another tax, but with a combination of spending restraint and economic growth," says Gleason.
Moving forward, Gleason warns that Texas cannot just rest on its 'low-tax laurels.' "Other states are now seeking to join Texas in the club of no income tax states," he tells KTRH. "So as that becomes less of an advantage, it's important for lawmakers to address other flaws in the code, whether that be disproportionately high property taxes, or whether it's continuing to chip away at the (business) margins tax."
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