High-income earners in Texas pay some of the lowest state and local taxes compared to other states. But low-income earners pay for it.
Nationwide, the poorest 20 percent of Americans will pay an average of 10.9 percent of their income in state and local taxes in 2015, while the top 1 percent will pay an average of 5.4 percent. That means the share of income that the wealthiest are paying towards state and local taxes is roughly half the share of the lowest-income earners.
In Texas, the inequality is even worse. The top 1 percent only pay, on average, 2.9 percent of their income in state and local taxes – one of the lowest rates in the nation. Meanwhile, the lowest 20 percent of earners pay an average of 12.5 percent of their income in state and local taxes – one of the highest rates in the nation. That comes out to a tax burden for low-income earners that’s roughly 4.3 times as high as for the top 1 percent.
This disparity lands Texas’s tax structure as the third most regressive in the U.S. As the Center for Public Policy Priorities puts it, “Texans who are least able to afford it pay more in taxes as a percentage of their income than those who could easily afford to pay more.”
The fact that such inequality exists in Texas’s tax system is no surprise. Because Texas has no income tax, the tax burden falls on consumption-related taxes. And consumption takes up a much greater share of the low-income family’s budget than the wealthier family’s. According to the ITEP report, “No income-tax states like Washington, Texas and Florida do, in fact, have average to low taxes overall. However, they are far from ‘low-tax’ for poor families. In fact, these states’ disproportionate reliance on sales and excise taxes make their taxes among the highest in the entire nation on low-income families.” Texas actually gets two-thirds of its tax revenue from sales and excise taxes, compared to a national average of around one-third.