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FEBRUARY 2025 GLENN HEGAR • TEXAS COMPTROLLER OF PUBLIC ACCOUNTS TAXES OF TEXAS • A FIELD GUIDE •23 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S A FIELD GUIDE TO THE TAXES OF TEXAS Every year, the state of Texas collects billions of dollars in state taxes and fees, federal receipts and other sources of revenue. These funds are used to pay for all of the responsibilities of the state government, including the education of more than 5.5 million public school students and the provision of health insurance for about 4.1 million low-income Texans. This guide provides an overview of the major Texas state taxes. Read on to: • learn how major taxes have contributed to state revenue during the past 10 years; • see revenue collections, estimates and allocations on one page; and • connect to other, in-depth resources about state taxes and finances. State Tax Revenue By Source F I S CA L 20 2 4 All Funds, Excluding Trusts TOTAL = $81,874,229,481 Texas’ total tax revenue decreased by 0.3 percent in fiscal 2024, to $81.9 billion. The decrease is largely attributable to a decline in natural gas production tax collections due to lower natural gas prices. Cigarette and tobacco taxes, hotel occupancy tax and other taxes also had slight declines over the prior year, but the majority of taxes showed moderate growth from fiscal 2023. % OF TAXES SALES AND USE TAXES 57.6% $47,159,947,193 MOTOR VEHICLE SALES AND RENTAL TAXES 8.3% $6,835,103,072 MOTOR FUEL TAXES 4.7% $3,846,520,202 FRANCHISE TAX 8.4% $6,861,291,437 OIL PRODUCTION TAX 7.7% $6,304,153,532 INSURANCE TAXES 5.1% $4,157,636,347 CIGARETTE AND TOBACCO TAXES 1.3% $1,069,813,600 NATURAL GAS PRODUCTION TAX 2.6% $2,133,639,866 ALCOHOLIC BEVERAGES TAXES 2.2% $1,773,178,418 HOTEL OCCUPANCY TAX 0.9% $755,806,834 UTILITY TAXES 0.8% $664,577,642 OTHER TAXES 0.4% $312,561,337 Source: Annual Cash Report 2024, Texas Comptroller of Public Accounts Note: Percentages may not sum to 100.0 due to rounding.45 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S -10% 0% 10% 20% 30% 40% 50% 60% 70% 2020 202120222019 20182017 2016 2015 20242023 61.6% 58.4% Tax Collections (All Funds, Excluding Trusts) Personal Income A FIELD GUIDE TO THE TAXES OF TEXAS S TAT E TA X COLLE C T i ON S A N D P E R SON A L i NCOME FISCAL 2015 -2024 Cumulative Growth Rates Tax collections lagged growth in personal income in 2015 and 2016 due to franchise tax cuts and a slowdown in the oil and gas industries. Collections rebounded in 2018 due mostly to increased remittances from taxpayers in the oil and gas industries and rose moderately in 2019 as taxable spending in these industries plateaued. Some tax categories saw record year-over-year declines in fiscal 2020 collections due to the COVID-19 pandemic and a collapse in oil prices. As the Texas economy began to recover and oil prices rebounded, tax collections in nearly every category grew in fiscal 2021. In fiscal 2022, state tax collections saw record growth due to a vigorous economic rebound from the pandemic, high energy prices and inflation. Growth returned to a more typical rate in fiscal 2023, then declined slightly in fiscal 2024 largely due to lower natural gas prices. FISCAL 2021 FISCAL 2022 FISCAL 2023 FISCAL 2024 FISCAL 2025 FISCAL 2026 FISCAL 2027 ACTUALACTUALACTUALESTIMATEDESTIMATEDESTIMATEDESTIMATED Gross State Product (Billions, Current $)1,999.12,340.12,522.32,685.82,795.22,927.93,064.4 Annual Percent Change10.917.17.86.54.14.74.7 Texas Personal Income (Billions, Current $)1,744.01,847.91,969.02,071.82,188.82,324.42,455.9 Annual Percent Change9.26.06.65.25.66.25.7 Texas Resident Population (Thousands)29,404.829,948.4 30,427.630,984.431,387.231,763.832,145.0 Annual Percent Change1.21.81.61.81.31.21.2 Texas Unemployment Rate (Percent)6.24.14.04.04.14.24.3 NYMEX Oil Price ($ per Barrel)54.4989.9079.0879.9070.0071.0076.00 NYMEX Natural Gas Price ($ per Million BTUs)2.655.314.772.502.453.003.50 Consumer Price Index (1982- 84=100)266.6287.7302.3311.8319.0327.1334.2 Annual Percent Change3.37.95.13.12.32.52.2 Sources: Glenn Hegar, Texas Comptroller of Public Accounts; and S&P Global. TEXAS ECONOMiC HiSTORY AND OUTLOOK Fall 2024 State Economic Forecast • Texas imposes a 6.25 percent sales and use tax on sales, leases and rentals of goods as well as on taxable services such as telecommunications and amusement services. • Texas taxes motor vehicle sales at a rate of 6.25 percent of the sales price minus any trade-in allowance. Motor vehicle rentals are taxed at 6.25 percent or 10 percent of gross receipts depending on the length of the rental contract. • Texas’ motor fuel tax rates vary depending on the type of fuel; the two most common, gasoline and diesel, are taxed at 20 cents per gallon. • The state’s franchise tax is imposed on taxable entities, such as corporations, banks, limited liability companies and certain partnerships, doing business in Texas. Of the millions of businesses across the state, only about 127,000 filers usually owe any franchise tax. • Texas’ severance taxes are imposed on entities that extract nonrenewable natural resources such as oil or natural gas. They are levied at rates of 4.6 percent of market value for oil and condensate and 7.5 percent of market value for natural gas. Revenues from these taxes are highly variable depending on market conditions. • The state’s insurance taxes include a number of premium taxes levied at rates ranging from 0.5 percent to 4.85 percent of gross premiums, as well as various maintenance taxes. • Texas levies alcoholic beverages taxes on alcohol at the first sale or importation and on mixed beverages sold to consumers. Tax rates on malt beverages, wine, and liquor range from 19.4 cents per gallon to $2.40 per gallon. There are two taxes on mixed beverages - an 8.25 percent sales tax and a 6.7 percent gross receipts tax. • The state's tobacco taxes are levied on cigarettes at a rate of $1.41 per pack of 20; cigars at four rates based on weight, price, and ingredients of the product; and other tobacco products at a rate of $1.22 per ounce. • The state hotel occupancy tax is 6 percent of the room rate paid by an occupant. Local taxing entities may impose an additional hotel tax that is collected at the local level. • The state levies three utility taxes on utility companies. The largest is the gas, electric, and water utility tax, levied at a rate of 0.581 percent to 1.997 percent of gross receipts, depending on the population of the city served. W H E R E D O E S T E X A S’ TA X R E V E N U E C OM E F ROM? Texas relies on revenue generated by more than 30 different taxes to fund the functions of state government. Tax collections made up 45 percent of state revenue in fiscal 2024.67 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S W H E R E D O E S T E X A S’ TA X R E V E N U E G O? For accounting and budgeting purposes, state revenue is deposited or transferred into various funds, with most going into the General Revenue Fund (GR) for appropriation by the Legislature. Some tax revenue, however, is deposited directly or transferred into special funds for specific purposes. Three of the state’s most prominent special revenue funds are the State Highway Fund (SHF), the Property Tax Relief Fund (PTRF) and the Economic Stabilization Fund (ESF). The SHF is used for the construction and maintenance of public roads. Historically, the primary revenues for this fund have been federal receipts, 75 percent of motor fuel tax net collections, most motor vehicle registration fees and, since fiscal 2015, one-half of 75 percent of oil production and natural gas production tax revenues exceeding fiscal 1987 collections in any fiscal year. Additionally, the first $2.5 billion of state sales tax collections in excess of $28 billion in a fiscal year, as well as 35 percent of motor vehicle sales and rental tax collections in excess of $5 billion, are transferred to the SHF. In the 2026-27 biennium, the Comptroller’s office estimates the SHF will receive $33.1 billion from all sources. The PTRF is used along with GR and other funds to finance the state’s K-12 public education system. The major revenue sources for this fund include the amount of franchise tax collections generated by its restructuring in fiscal 2008, and revenue from the $1 increase in the cigarette tax rate implemented in fiscal 2007. Over the 2026-27 biennium, the PTRF will receive an estimated $5.3 billion from all revenue sources. The ESF, also known as the Rainy Day Fund, receives one-half of 75 percent of oil production and natural gas production tax revenues in any fiscal year that exceeds fiscal 1987 collections, and one-half of any unencumbered GR surplus remaining at the end of each biennium. The constitutional ESF cap is expected to be reached for the first time in its existence in fiscal 2026. A portion of the severance tax transfer in fiscal 2026 (an estimated $307 million), as well as the full severance tax transfer in future years and interest earnings from the fund, will be retained in GR and available for general-purpose spending. State Highway Fund (SHF) FISCAL 2024FISCAL 2025FISCAL 2026FISCAL 2027 ACTUALESTIMATEDESTIMATEDESTIMATED Total State Revenue $11,628,801,277 $11,166,895,000 $10,937,493,000 $11,093,167,000 Total Federal Income $4,965,368,992 $5,480,843,000 $5,503,139,000 $5,519,267,000 Total Revenue $16,594,170,270 $16,647,738,000 $16,440,632,000 $16,612,434,000 Property Tax Relief Fund (PTRF) Economic Stabilization Fund (ESF) FISCAL 2024FISCAL 2025FISCAL 2026FISCAL 2027 ACTUALESTIMATEDESTIMATEDESTIMATED Ending Cash Balance $2,569,339,005 $2,257,822,107 $3,199,730,403 $3,199,730,403 Ending Invested Balance $18,446,787,296 $22,024,488,990 $24,235,174,145 $25,301,826,396 Total Ending Balance $21,016,126,301 $24,282,311,097 $27,434,904,548 $28,501,556,799 ESF Cap $26,429,846,923 $26,429,846,923 $26,513,570,147 $26,513,570,147 FISCAL 2024FISCAL 2025FISCAL 2026FISCAL 2027 ACTUALESTIMATEDESTIMATEDESTIMATED Total Revenue $2,813,183,823 $2,539,002,000 $2,519,041,000 $2,817,321,000 Transfers $6,147,400,000 $6,147,400,000 $0 $0 Total Revenue $8,960,583,823 $8,686,402,000 $2,519,041,000 $2,817,321,000 1011G L E N N H E G A R • TE X A S C OMP TROL L ER OF PUBL IC AC C OUNT S MOTOR VEHICLE SALES AND RENTAL TAXES E N A C T E D 1 9 4 1 The motor vehicle sales and use tax is generally imposed on the retail sales price of motor vehicles sold in Texas and is the largest tax in this category. The motor vehicle rental tax is levied as a percentage of gross receipts derived from the rental of a vehicle, at a rate that varies depending on the length of the rental. In November 2015, voters approved a constitutional amendment to deposit 35 percent of the net annual revenue from these taxes above $5 billion to the SHF. The $5 billion threshold was first reached in fiscal 2021 with a transfer of $237 million, and the transfer is projected to total $1.2 billion in the 2024- 25 8.3% Percentage of Total Tax Collection FIS CAL 2024 All Funds, Excluding Trusts $6.84 BILLION MOTOR VEHICLE SALES & RENTAL TAXES COLLE C T I ON S All Funds, Excluding Trusts (billions) $0 $1 $2 $4 $5 $7 $3 $6 $8 $7.01 ACT U A L ESTIMA TED 2026202720152016201720182019202020212022202320242025 R E V E N U E BY SO U RC E TAXFUNDFISCAL 2024 Motor Vehicle Sales and Use Tax General Revenue Fund1 $6,142,426,711 Property Tax Relief Fund2 $35,013,699 Motor Vehicle Rental TaxGeneral Revenue Fund $442,047,472 Motor Vehicle Sales and Use Tax – Seller-Financed Motor Vehicles General Revenue Fund $176,999,066 Manufactured Housing Sales and Use Tax General Revenue Fund $38,616,124 TOTAL3 $6,835,103,072 H I STO RI C A L VO L ATI LI T Y Year-Over-Year Change FOOTNOTES 1 Since fiscal 2015, 95 percent of revenue is deposited into the General Revenue Fund; the remaining 5 percent is retained by counties. 2 Revenue derived from the tax based on a used vehicle’s presumptive value is deposited into the Property Tax Relief Fund. 3 May not sum due to rounding. 4 The 6.25 percent sales and use tax is based on the vehicle sales price less any trade-in. Additional taxes or surcharges may apply to the sale of certain diesel trucks. Rentals are taxed at 10 percent of gross receipts for rentals of 30 days or less and at 6.25 percent for rentals of 31 to 180 days. Manufactured housing sales are taxed at 5 percent of 65 percent of the sales price on the initial sale or use of a new manufactured home. 5 Estimated initial distribution of total motor vehicle sales tax revenue in fiscal 2027, as projected in the January 2025 Tax Exemptions and Tax Incidence Report. Compound Annual Growth Rate (Fiscal 2015-2024): 4.7% H I GH L I GH T S REVENUE FISCAL 2024 $ 6.84B STATE RATE LOCAL RATE NONE FEDERAL RATE NONE WHO PAYS?5 BUSINESS 42.1% CONSUMER 57.9% FISCAL20162023202020212019201820172022 0.7% 0.2% 2.3% 12.5% 19.0% 2024 4% 8% 12% 16% 18% 20% 2% 6% 10% 14% -4% -2% 9.7% -3.9% 5.8% 0% Want More Details? The Comptroller’s office publishes many reports that assist state government planning and decision making and account for state spending for the taxpayers of Texas. This guide highlights some of the current data from several of these reports and provides links to find more in-depth or updated data. The full reports can be found at Net State Revenue By Source FISCAL 2024 • ALL FUNDS , E XCLUDING TRUST S SOURCEREVENUE CHANGE FROM FISCAL 2023 Tax Collections $81,874,229,481 -0.3% Federal Income $58,866,331,106 -14.3% Licenses, Fees, Fines and Penalties $6,937,494,250 4.1% State Health Service Fees and Rebates $14,148,222,895 29.6% Net Lottery Proceeds $3,089,863,571 -7.8% Land Income $3,539,734,921 -6.8% Interest and Investment Income $5,755,097,296 37.0% Settlements of Claims $848,335,921 34.4% Escheated Estates $1,280,676,502 17.4% Sales of Goods and Services $259,086,276 -15.9% Other Revenue $4,518,413,779 -24.4% Total Net Revenue $181,117,485,998 -3.6% Non-tax Revenue The state’s major non-tax revenue sources are federal income, fees and licenses, state health-related fees and rebates, state lottery proceeds, land income and proceeds from the state’s investments. Taxes That Texas Does Not Levy Texas does not collect a state property tax. Property taxes are levied by local governmental entities, school districts and special purpose districts (see p. 24). Texans pay federal income taxes but not state or local income taxes. Federal dollars contributed 33 percent of total state net revenue in fiscal 2024. KEY TO SOURCES, PAGES 8-2189 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S SALES AND USE TAXES EN A C T ED 1 9 6 1 Sales and use taxes are the state’s single largest source of tax revenue, raising about 58 cents of every state tax dollar in fiscal 2024. The sales tax generally is imposed on sales, rentals and leases of tangible personal property — physical goods or their electronic equivalent — and on sales of certain services, such as amusements, telephone services and the repair of tangible personal property. Starting in fiscal 2018, a constitutional amendment requires up to $2.5 billion to be transferred to the SHF from net sales tax revenue in excess of $28 billion each fiscal year. The 2019 passage of House Bill (HB) 1525 by the 86th Legislature, requiring online marketplace providers to collect taxes on sales made through their platforms, has resulted in additional sales tax collections of $6.7 billion through fiscal 2024 and will bring in an estimated $2 billion in fiscal 2025 and $4.5 billion in 2026-27. This revenue is deposited outside GR to the Tax Reduction and Excellence in Education Fund. Percentage of Total Tax Collection FISCAL 2024 All Funds, Excluding Trusts $47.16 BiLLiON R E V E N U E BY SO U RC E TAXFUNDFISCAL 2024 Limited Sales and Use Tax General Revenue Fund1 $30,625,174,307 Tax Reduction and Excellence in Education Fund $1,880,966,000 Prepayments of Limited Sales and Use Tax General Revenue Fund $14,512,943,759 Boat and Boat Motor Sales and Use Tax2 General Revenue Fund $88,375,370 GR Account - Game, Fish, and Water Safety $1,636,014 Motor Fuel Lubricants Sales TaxState Highway Fund $38,000,000 Limited Sales and Use Tax - State3 General Revenue Fund $12,935,368 Fireworks Tax4 GR Account - Rural Volunteer Fire Department Insurance $958 Interest on Retail Credit SalesGeneral Revenue Fund $(147,205) Discount for Sales Tax - State Agencies and Higher Education General Revenue Fund $62,623 TOTAL5 $47,159,947,193 FOOTNOTES 1 Taxes on certain sporting goods are constitutionally appropriated to the Texas Parks and Wildlife Department and Texas Historical Commission. In fiscal 2024, $256 million was allocated to the two agencies. For additional information on special allocations, refer to the Sources of Revenue report. 2 County tax assessor-collectors or the Texas Parks and Wildlife Department may retain 5 percent of collections. 3 This amount represents the taxes collected on sales made by state agencies, departments, institutions, universities and colleges. 4 The 2 percent additional sales tax levied on fireworks was eliminated on Sept. 1, 2015; an equivalent amount now is transferred to GR Account 5066– Rural Volunteer Fire Department Insurance from GR. In fiscal 2024, that transfer was $2.53 million. 5 May not sum due to rounding. 6 Estimated initial distribution of total limited sales and use tax revenue in fiscal 2027, as projected in the January 2025 Tax Exemptions and Tax Incidence Report. 57.6% SALES AND USE TAXES COLLE C T i ON S All Funds, Excluding Trusts (billions) ACT U A L ESTIMA TED 2026202720152016201720182019202020212022202320242025 $0 $10 $20 $40 $30 $53.21 $50 $60 H i STO R i C AL VO L AT i Li T Y Year-Over-Year Change FISCAL 20162023202020212019201820172022 0% 10% 15% 20% 0.2% 1.2% 5.6% 2.3% 6.5% 8.4% -2.3% 10.5% 19.3% 2024 4% 8% 12% 16% 18% 2% 6% 14% -4% -2% Compound Annual Growth Rate (Fiscal 2015-2024): 5.6% H I GH L I GH T S REVENUE FISCAL 2024 $ 47.16B STATE RATE 6.25% LOCAL RATE UP TO 2% FEDERAL RATE NONE WHO PAYS?6 BUSINESS 41.4% CONSUMER 58.6%1011 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S MOTOR VEHICLE SALES AND RENTAL TAXES EN A C T ED 1 9 4 1 The motor vehicle sales and use tax is generally imposed on the retail sales price of motor vehicles sold in Texas and is the largest tax in this category. The motor vehicle rental tax is levied as a percentage of gross receipts derived from the rental of a vehicle, at a rate that varies depending on the length of the rental. In November 2015, voters approved a constitutional amendment to deposit 35 percent of the net annual revenue from these taxes above $5 billion to the SHF. The $5 billion threshold was first reached in fiscal 2021 with a transfer of $237 million, and the transfer is projected to total $1.2 billion in the 2024- 25 biennium and $1.3 billion in 2026-27. 8.3% Percentage of Total Tax Collection FISCAL 2024 All Funds, Excluding Trusts $6.84 BiLLiON MOTOR VEHICLE SALES & RENTAL TAXES R E V E N U E BY SO U RC E TAXFUNDFISCAL 2024 Motor Vehicle Sales and Use Tax General Revenue Fund1 $6,142,426,711 Property Tax Relief Fund2 $35,013,699 Motor Vehicle Rental TaxGeneral Revenue Fund $442,047,472 Motor Vehicle Sales and Use Tax – Seller-Financed Motor Vehicles General Revenue Fund $176,999,066 Manufactured Housing Sales and Use Tax General Revenue Fund $38,616,124 TOTAL3 $6,835,103,072 FOOTNOTES 1 Since fiscal 2015, 95 percent of revenue is deposited into the General Revenue Fund; the remaining 5 percent is retained by counties. 2 Revenue derived from the tax based on a used vehicle’s presumptive value is deposited into the Property Tax Relief Fund. 3 May not sum due to rounding. 4 The 6.25 percent sales and use tax is based on the vehicle sales price less any trade-in. Additional taxes or surcharges may apply to the sale of certain diesel trucks. Rentals are taxed at 10 percent of gross receipts for rentals of 30 days or less and at 6.25 percent for rentals of 31 to 180 days. Manufactured housing sales are taxed at 5 percent of 65 percent of the sales price on the initial sale or use of a new manufactured home. 5 Estimated initial distribution of total motor vehicle sales tax revenue in fiscal 2027, as projected in the January 2025 Tax Exemptions and Tax Incidence Report. COLLE C T i ON S All Funds, Excluding Trusts (billions) $0 $1 $2 $4 $5 $7 $3 $6 $8 $7.01 ACT U A L ESTIMA TED 2026202720152016201720182019202020212022202320242025 H i STO R i C AL VO L AT i Li T Y Year-Over-Year Change Compound Annual Growth Rate (Fiscal 2015-2024): 4.7% H I GH L I GH T S REVENUE FISCAL 2024 $ 6.84B STATE RATE 6.25%4 LOCAL RATE NONE FEDERAL RATE NONE WHO PAYS?5 BUSINESS 42.1% CONSUMER 57.9% FISCAL20162023202020212019201820172022 0.7% 0.2% 2.3% 12.5% 19.0% 2024 4% 8% 12% 16% 18% 20% 2% 6% 10% 14% -4% -2% -1.8% 9.7% -3.9% 5.8% 0%1213 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S R E V E N U E BY SO U RC E MOTOR FUEL TAXES EN A C T ED 1 9 2 3 Motor fuel taxes are the state’s consumption taxes on gasoline, diesel fuel and liquefied and compressed natural gas. In general, these taxes are charged on each gallon of fuel sold in Texas used to propel vehicles on Texas’ public roads. The rates for the gasoline and diesel fuel taxes last changed in 1991, when they were both increased from 15 cents to 20 cents per gallon. MOTOR FUEL TAXES TAXFUNDFISCAL 2024 Gasoline Tax1 General Revenue Fund $2,863,639,133 Diesel Fuel Tax2 General Revenue Fund $976,250,168 Liquefied and Compressed Natural Gas Tax2 General Revenue Fund $6,630,901 TOTAL3 $3,846,520,202 Percentage of Total Tax Collection FISCAL 2024 All Funds, Excluding Trusts $3.85 BiLLiON FOOTNOTES 1 After deductions for refunds, enforcement and other purposes, 25 percent is allocated to the Available School Fund; 50 percent is allocated to the State Highway Fund; and the remaining 25 percent also is deposited to the State Highway Fund, except that the first $7.3 million is deposited to the County and Road District Highway Fund. 2 After deductions for refunds, 25 percent is allocated to the Available School Fund and 75 percent is allocated to the State Highway Fund. 3 May not sum due to rounding. 4 This rate is for gasoline and diesel fuel (eligible transit companies qualify for a refund of 1 cent per gallon on gasoline and 1/2 cent per gallon on diesel fuel). Liquefied natural gas and compressed natural gas are taxed at 15 cents per gallon. 5 The federal tax rate for diesel fuel is 24.4 cents per gallon. 6 Estimated initial distribution of total gasoline tax revenue in fiscal 2027, as projected in the January 2025 Tax Exemptions and Tax Incidence Report. 4.7% COLLE C T i ON S All Funds, Excluding Trusts (billions) $0 $1 $2 $4 $3 ACT U A L ESTIMA TED 2026202720152016 2017 2018201920202021 2022 202320242025 $4.00 H i STO R i C AL VO L AT i Li T Y Year-Over-Year Change Compound Annual Growth Rate (Fiscal 2015-2024): 1.2% H I GH L I GH T S REVENUE FISCAL 2024 $ 3.85B STATE RATE $ 0.204 PER GALLON LOCAL RATE NONE FEDERAL RATE $ 0.184 5 PER GALLON WHO PAYS?6 BUSINESS 24.2% CONSUMER 75.8% FISCAL20162023202020212019201820172022 -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 2.0%2.0% 2.5% 5.2% 2.0% 2024 0.4% 1.9% -5.8% 1.3%1415 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S FISCAL 20162023202020212019201820172022 4.8% 0.6% -16.5% 14.4% -16.6% 13.7% 25.2% 20.2% 2024 -10% -5% 0% 10% 20% 25% 30% 5% 15% -20% -15% 2.5% FOOTNOTES 1 Margin is defined as total revenue less the greater of (1) the cost of goods sold, (2) compensation, (3) 30 percent of total revenue or (4) $1 million. An apportionment factor based on the portion of receipts that are sourced to Texas then is applied to calculate taxable margin. 2 The estimated amount of franchise tax revenues that would have been generated had the 2006 reforms not occurred. 3 All revenue exceeding the estimated amount that would have been brought in under the previous version of the franchise tax. 4 Reflects net payments and refunds related to franchise tax liability from reports due before the 2008 report year. 5 May not sum due to rounding. 6 A tax rate of 0.375 percent applies to taxpayers primarily engaged in retail or wholesale trade; other taxpayers pay a rate of 0.75 percent. Entities with $20 million or less in total revenue may elect to file an E-Z return. The tax rate for E-Z filers is 0.331 percent. 7 There is no federal franchise tax, but a corporate income tax is levied at 21 percent of net income. 8 Estimated initial distribution of total franchise tax revenue in fiscal 2027, as projected in the January 2025 Tax Exemptions and Tax Incidence Report. FRANCHISE TAX E N A C T E D 1 9 07 The franchise or “margins” tax is the current version of one of the state’s oldest taxes, levied for the privilege of doing business in Texas. The tax due is based on an entity’s taxable margin.1 In 2006, the Legislature made signifi- cant changes to the tax, including transitioning to the taxable margin as the sole base component and expanding the tax to limited partnerships, business trusts and other legal entities. These changes apply to reports due on or after Jan. 1, 2008. In 2015, the Legislature voted to reduce franchise tax rates by 25 percent, which took effect in fiscal 2016. Beginning in 2024, the no-tax-due revenue threshold was raised to $2.47 million and taxable entities at or under that threshold are not required to file a tax report but still are responsible to file public information or ownership information reports under Sections 171.202 or 171.203, Tax Code. FRANCHISE TAX TAXFUNDFISCAL 2024 Franchise/Business Margins Tax General Revenue Fund2 $4,802,847,353 Property Tax Relief Fund3 $2,058,387,431 Franchise Tax4 General Revenue Fund $56,653 TOTAL5 $6,861,291,437 8.4% Percentage of Total Tax Collection FISCAL 2024 All Funds, Excluding Trusts $6.86 BiLLiON R E V E N U E BY SO U RC E COLLE C T i ON S All Funds, Excluding Trusts (billions) 6 7 9 $0 $1 $2 $4 $5 $3 $6 $7 $8 $9 $8.11 ACT U A LESTIMA TED 2026202720152016201720182019202020212022202320242025 Compound Annual Growth Rate (Fiscal 2015-2024): 4.4% H i STO R i C AL VO L AT i Li T Y Year-Over-Year Change H I GH L I GH T S REVENUE FISCAL 2024 $ 6.86B STATE RATE 0.75%/ 0.375%6 LOCAL RATE NONE FEDERAL RATE NONE7 WHO PAYS?8 BUSINESS 100% CONSUMER 0.0%1617 G L E NN H EG A R • TE X AS C OMP TROLLER OF PUBLIC AC C OUNT S -20% FISCAL20162023202020212019201820172022 -16.9% 23.6% 14.6% -40.8% 60.9% 2024 -30% -10% 0% 40% 70% 80% 90% 20% 60% -50% -40% 30% 10% 50% 6.8% -6.8% 84.4% 6.3% R E V E N U E BY SO U RC E FOOTNOTES 1 Twenty-five percent is statutorily dedicated to public education funding and allocated to the Foundation School Account. 2 Or 4.6 cents on each barrel of oil produced, whichever is greater. 3 Estimated initial distribution of total oil production tax revenue in fiscal 2027, as projected in the January 2025 Tax Exemptions and Tax Incidence Report. TAXFUNDFISCAL 2024 Oil Production Tax General Revenue Fund1 $6,304,153,532 TOTAL $6,304,153,532 Percentage of Total Tax Collection FISCAL 2024 All Funds, Excluding Trusts $6.30 BiLLiON OIL PRODUCTION TAX EN A C T ED 1 9 0 5 The oil production tax is a severance tax on the removal of crude oil from Texas land. The rate has remained unchanged since 1951, longer than for any other major state tax. Twenty-five percent of the revenue from this tax is allocated to the Foundation School Account, with the remaining amount deposited into GR. Portions of the amount deposited into GR may be transferred to the ESF and SHF. OIL PRODUCTION TAX 7.7% H i STO R i C AL VO L AT i Li T Y Year-Over-Year Change COLLE C T i ON S All Funds, Excluding Trusts (billions) $0 $1 $2 $4 $5 $3 $6 $7 $6.13 ACT U A LESTIMA TED 2026202720152016201720182019202020212022202320242025 Compound Annual Growth Rate (Fiscal 2015-2024): 9.1% H I GH L I GH T S REVENUE FISCAL 2024 $ 6.30B STATE RATE 4.6%2OF MARKET VALUE LOCAL RATE NONE FEDERAL RATE NONE WHO PAYS?3 BUSINESS 100% CONSUMER 0.0%Next >