State income taxes vary by state and are basically a certain percentage of money that residents pay to the state government. This is based on how much income you make at your job. The collected state income tax is then used to fund a variety of public services as well as education, healthcare, transportation, assistance to low-income families, housing, and much more. However, there are currently nine states that have no state income tax. This includes Alaska, Tennessee, Wyoming, Florida, New Hampshire, South Dakota, Washington, Nevada, and our very own state – Texas. So what does this mean? In this month’s blog, we will discuss how no state income tax works in Texas and how public services are funded.

What Does No State Income Tax Entail?

No state income tax means a lower tax bill. This may sound appealing to many, however, don’t start planning your move just yet. Don’t assume living in a state with no income tax is cheaper and you should instead consider how exactly the state funds its public infrastructure and wide array of services.

Sources of Revenue

In order to fund its public services, Texas relies on sales, excise, and property taxes. For example, this means Texan residents tend to pay a higher sales tax when it comes to buying goods. According to The Dallas Morning News, for the fiscal year of 2019, sales tax made up about 26.6% of the state’s net revenue and an additional 19.8% came from taxes on oil production, motor vehicles, cigarettes, and natural gas. As you can see, sales and excise taxes make up almost half of the state’s net revenue, and it doesn’t stop there. Property taxes are also a major source of funding for public services. Texas’s property taxes are higher than most states and residents may see a tax burden of 8.20% of their personal income.


There are different sides to either having a state income tax or not at all. One way or another, there are tradeoffs to make up for the loss of revenue from no state income taxes. If you have any further questions about the different taxes that you have to pay, rely on MARIELA RUIZ, CPA, PLLC. We provide tax services and solutions to clients in Mission, TX and surrounding areas. To learn more about our services and what we do, please visit our website or call us at (956) 997-0067.