By Sasha Richie
The Dallas Morning News
(TNS)
Only two things in life are certain, death and taxes. At least in Texas, the taxes are better than most other states.
According to the Tax Foundation’s 2027 State Tax Competitiveness Index, Texas has the fifth-best tax structure in the U.S., up from No. 7 the previous year. Wyoming ranked first, followed by South Dakota, Alaska and Florida. At the bottom of the list are Connecticut, Washington, New Jersey, California and, in last place, New York.
The index looks at five major areas of taxation: corporate taxes, individual income taxes, sales and excise tax, unemployment insurance taxes, and property and wealth taxes, though they are no weighted equally. The Tax Foundation, a non-profit policy research organization, says that the structure of a state’s taxes, not just how much they collect, can impact its business climate and economic growth.
“The states that rank really well on the index are states that have really broad bases, really low rates. So, generally, in the top 10, we see a lot of those states that are missing a major tax,” said Janelle Fritts, a senior policy analyst with the Tax Foundation’s Center for State Tax Policy. “We want states to have very broad tax bases, but it’s important that those broad bases are the right size.”
Texas famously has no state income tax, which helps it rank highly despite relatively low rankings in sales tax, property tax and unemployment insurance tax, and a bottom-5 ranking in corporate tax. Texas, unlike most states with a basic corporate income tax, has a gross receipts tax, which is levied on all revenue, not just profit, and it has high business personal property taxes that most states don’t, among others, Fritts said.
Texas’ biggest leap in recent years has been in property taxes after state officials and lawmakers made lowering the burden on homeowners a major priority. Texas moved up from No. 42 in the category in 2023 to 34th this year.
She explained that different taxes affect decisions differently, which is why the index doesn’t weight all taxes equally.
For example, she said, people tend to make more decisions based on income tax, unlike property taxes, which are more transparent and don’t move. She also said that the states can bring in a similar amount of tax revenue per capita but by collecting them differently create vastly different economic environments. She gave Hawaii as an example of an unproductive tax, as it taxes a lot of business-to-business purchases, which “can end up being absorbed by companies through lower wages, lower capital investment, and things like that.”
“Having the rankings for all the states is super handy, just as a shorthand for how states are doing, but the index is also a roadmap for what states can do better,” Fritts said. “If they’re ranking in, say, the bottom 10 [in something], this can be a change that would really matter. So it’s meant to be a roadmap to economic growth for states.”
Photo credit: famartin/Wikimedia Commons
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© 2026 The Dallas Morning News. Visit www.dallasnews.com. Distributed by Tribune Content Agency LLC.
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Tags: state taxes, Tax Foundation, Taxes, Texas, Texas state taxes
