Texas ranked among the top ten states with the highest property tax burden, according to a new study.
The WalletHub 2022 Tax Burden by State report found that the Lone Star state ranked highly for property tax burden because it has the ninth highest state and local property tax, expressed as a fraction of personal income at 3.97%.
“Property taxes are an important source of income for state and local budgets,” said Jill Gonzalez, WalletHub analyst. “However, if the property tax burden becomes too high, it can deter people from wanting to live and work in a certain state, and this would have a negative impact on the state’s economy.”
However, Texas ranks fairly well when it comes to taxes overall.
With residents’ property tax burden at 3.97% and the sales and excise tax at 4.25%, Texas’ overall tax burden of 8.22% is ranked No.32, according to the data.
“Texas has such a low overall tax burden mainly because the state does not impose an income tax,” said Gonzalez. “Because the tax burden is low in Texas, we can say that the state’s residents are not struggling financially, which is an indication that the state’s economy is on a strong recovery path from the effects of the pandemic.”
The study suggested that Republican states like Texas have a lower tax burden than Democratic states such as New York.
“States benefit from having a lower tax burden because this attracts people who are looking to relocate,” Gonzalez told The Dallas Express.
The study further found that New York landed the top spot with a total tax burden of 12.75%, encompassing a property tax of 4.43%, a sales and excise tax of 3.42%, and an individual income tax of 4.90%.
“New York ranks so much higher than Texas because its property tax burden is higher and most importantly because New York state has an income tax, which is the highest in the country,” Gonzalez said in an interview. “The fact that Texas does not impose an income tax is the main reason for its low ranking.”
Alaska scored the lowest in the country, with an overall tax burden of 5.06%, according to Gonzalez. Alaska’s property tax burden is 3.54%, and its sales and excise tax is 1.52%.
“State and local authorities compensate for the lack of income tax revenue with a higher level of property taxation,” she said. “To catch up with Alaska, Texas would need to have a lower property tax burden as well as a lower sales and excise tax burden.”
Texas landed in eleventh place for total sales and excise tax burden. However, lowering this tax would likely increase other Texdas taxes.
“The sales and excise taxes are imposed on all retail sales, leases, and rentals of most goods and taxable services,” Gonzalez added. “A lower sales and excise tax would mean even higher property taxes or the introduction of an income tax. Neither of those would be good news for Texas residents.”
