Texas ranks among ten lowest-taxed states, study shows

Posted by Michael Pannell on Monday, August 25th, 2008 at 7:06pm.

Texas residents pay a smaller percentage of their incomes for state and local taxes than 42 of the 50 states, according to a new study released by the nonpartisan Tax Foundation. Texans paid an average of 8.4 percent of their income in state and local taxes, compared to the 9.9 percent national average. The state has placed among the ten lowest-taxed states in every one of the 32 years the Washington-based group has conducted its survey. Texas' ranking is in large part because it has no income tax and a favorable business tax structure. New Jersey residents pay the most, at 11.8 percent. Alaskans pay the least, at 6.4 percent. The estimates are based on the 2008 fiscal year, which ended June 30. Economists said tax rates often give a signal about a state's business climate, since companies consider states' corporate tax structures before investing in them. But the Tax Foundation's numbers don't necessarily give a complete view of each state's tax situation. "The numbers can tell you something about the business competitiveness in a particular state," said Chris Edwards, tax economist for the Washington-based Cato Institute. However, "you also want to know how efficient the tax system is. You can have states that collect a lot of taxes but don't necessarily reflect that in the level of services they provide to their residents." Indeed, most businesses consider taxes as just one of many factors when considering an investment, along with a state's educational facilities, worker-education levels and quality of life.

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