Texas Property Tax Replacement - What it Means for Texas Businesses
Texas Property Tax Replacement Plan Series
What It Means for Texas Businesses
The Texas Property Tax Replacement Plan eliminates commercial property taxes, business personal property taxes, the franchise tax, and all other state taxes — replacing them with a single 3.25% transaction tax on commercial purchases. This analysis shows, industry by industry, what that trade actually means for Texas businesses.
Overview
Texas businesses operate under one of the heaviest commercial tax burdens in the developed world — not because nominal rates are high, but because the structural design of the current system falls disproportionately on commercial activity. The EY/COST annual study of state and local business taxes found that 59.3% of all Texas state and local taxes are paid by businesses, compared to a national average of 43.6%. Texas ranks 14th highest nationally in effective business tax burden — not the low-tax haven its reputation suggests.[TTARA, 2023]
The Texas Property Tax Replacement Plan (TPTRP) restructures this entirely.
Under TPTRP, every ad valorem property tax is abolished — including commercial property taxes, industrial property taxes, and business personal property (BPP) taxes. The franchise tax is abolished. All other state-level taxes — motor fuels, motor vehicle, natural gas production, oil production, alcohol, tobacco, insurance premium, utility, and hotel occupancy — are abolished and replaced by the unified TPTRP sales-and-use tax. And a new constitutional amendment permanently bans any future tax on business revenues, profits, or income at the state level in Texas.
What businesses gain: elimination of every ad valorem property tax, abolition of the franchise tax, abolition of all other state taxes, a constitutional ban on income and revenue taxes, and dramatically simplified compliance — one tax, one rate, one return.
What businesses pay under TPTRP: a 3.25% transaction tax on all taxable commercial purchases — including business-to-business inputs, commercial utilities, and all service purchases at every stage of the supply chain.
The net result is dramatically favorable for most Texas businesses — because the taxes being abolished are larger, more distortive, and more administratively burdensome than the TPTRP they replace. This article makes that case industry by industry, with full transparency about what each sector pays under TPTRP and what it saves.
The Current Business Tax Burden in Texas
What businesses actually pay today — and why the structure is distortive
What Businesses Pay Today
The Texas Comptroller's Tax Exemptions and Tax Incidence Report (Publication 96-463, January 2025) provides the authoritative state analysis of who bears the Texas tax burden. Combined with the EY/COST annual study (FY2024), the picture is stark.[EY/COST, 2025]
Statewide TY2025 property tax levy: $89.45 billion (Texas Comptroller PTAD TY2025)
Of that total, the non-residential share — commercial, industrial, utilities, business personal property, and mineral interests — accounts for approximately 47.6% of the total levy, or roughly $42.6 billion annually paid by Texas businesses on real and personal property assets. That figure excludes the property taxes businesses pay indirectly through commercial lease agreements, where landlords embed property tax costs into rent rates.[TX Comptroller Pub. 96-463, 2025]
Franchise tax revenue FY2025: $7.08 billion (Texas Comptroller FY2025 Annual Cash Report)[TX ACR FY2025]
The franchise tax hits every Texas business with revenue over $2.47 million. The standard rate is 0.75% on margin; retail/wholesale 0.375%; EZ computation 0.331%. The margin calculation requires choosing among four methods and maintaining parallel books separate from federal returns. Analysis from the Bush School of Government and Public Service at Texas A&M documented that many firms spend more on franchise tax compliance than the tax itself — the tax is "particularly hostile to the business services industry" because service firms cannot deduct much of their cost structure using the COGS method.[Bush School / Texas A&M, 2020]
Property taxes penalize capital investment — every building, every machine, every warehouse is taxed annually regardless of profitability. The franchise tax penalizes revenue, not profit — a company can owe it in a loss year. Both are fixed costs that do not scale with economic conditions, creating an asymmetric risk that falls hardest on small and mid-sized businesses with thin margins.[TPPF, 2022]
Texas commercial property tax rates: 2x to 4x comparable states. The average effective commercial property tax rate in Texas is 1.83–2.0% of assessed value annually. By comparison, Seattle/King County runs 1.0–1.2%; Denver runs 0.5–0.7%. Texas rates are "not modestly higher — they are two to four times higher than comparable markets," per Innergy Integral's 2026 cross-market analysis.[Innergy Integral, 2026]
Property taxes across Texas have increased 160% since 2014, reaching $125.05 billion statewide in 2024 — a trajectory that makes 10–20 year capital planning effectively impossible for businesses with significant fixed assets.[O'Connor & Associates, 2026]
The BPP Tax — A Unique Texas Burden
Texas is one of only a handful of states that aggressively taxes business personal property — furniture, computers, machinery, vehicles, and fixtures — in addition to real property. The BPP tax creates a direct disincentive to capital investment: every piece of equipment a business acquires increases its annual tax bill, not just in year one but every year thereafter. TPTRP eliminates BPP taxes entirely.
The Constitutional Income/Revenue Tax Ban
TPTRP introduces a constitutional provision that goes beyond property tax abolition: a permanent ban on any state-level tax on business revenues, profits, or income. This means:
- The franchise tax is not merely repealed by statute — it is constitutionally barred from return
- No future legislature can impose a state corporate income tax
- No future legislature can impose a state gross receipts tax (outside the TPTRP structure)
- No future legislature can impose a payroll tax
Texas's franchise tax has already been through one structural redesign since 2006. The constitutional ban eliminates this entire category of future policy risk — converting a legislative repeal into a permanent constitutional guarantee. For a business evaluating a 10–20 year investment decision, that difference is the difference between regulatory risk and constitutional certainty.
TPTRP Mechanics — The Full Picture for Businesses
What is taxable, how the tax works, and how pyramiding is prevented
What Is Taxable — No Exceptions, No Sector Carve-Outs
Under TPTRP, every commercial transaction in Texas is taxable at the applicable rate. There are no sector exemptions, no industry carve-outs, no manufacturing input certificates. The TPTRP applies to all of the following purchases:
- All goods purchased by businesses from other businesses (B2B inputs: raw materials, components, supplies)
- All services purchased by businesses — consulting, legal, accounting, marketing, IT, logistics, maintenance, repair, and every other professional service
- All commercial utilities — electricity, natural gas, water, telecommunications, internet, data center power
- All technology licensing, SaaS subscriptions, software, and digital services
- All logistics, freight, warehousing, and distribution services
The TLES 12 categories exempt only household living essentials — groceries, residential rent, residential home utilities (not commercial), prescription drugs, medical services, education, gas at the pump, childcare, primary-residence home purchase, residential property insurance, personal auto insurance, and individual life insurance. None of these protections extend to commercial or business transactions.
How the Tax Works — The Buyer Pays, Once, Per Transaction
The buyer in each transaction pays the applicable TPTRP rate on the value of that transaction — once, at the point of purchase. A business does not pay a tax when it sells; it collects the tax from its buyer and remits it to the state. This is identical in structure to how the current Texas sales tax works on retail goods today.
This means the business cost analysis is straightforward: a business's TPTRP cost is the sum of the applicable rate it pays on everything it buys — inputs, services, utilities, and any other taxable commercial purchases. What it collects from its own customers is a pass-through remittance obligation, not a business expense — just as collecting sales tax from customers is not a cost to a restaurant today.
Definition 2 — The Anti-Pyramiding Mechanism
The question that naturally follows is: if every stage of a supply chain is taxed, doesn't the same underlying dollar get taxed over and over as it moves from raw material to finished product to consumer?
The answer is no — and Definition 2 (Agent Transaction) is the structural mechanism that prevents it.
An Agent Transaction is any transaction performed by an agent — a person or business acting on behalf of a principal — where the agent purchases a product or service on the principal's behalf, and separately renders their own labor or provides their own product to the principal. Products or services purchased by the agent on behalf of the principal are taxed at the point of purchase. That tax cost is passed through to the principal in the final bill — it is not taxed again. The agent's own labor or product rendered to the principal is a separate taxable transaction.
A concrete example makes this clear. A homeowner hires a contractor to remodel a bathroom. The contractor buys lumber, tile, and fixtures from a supplier — and pays the TPTRP on those purchases at the point of sale. The contractor is acting as the homeowner's agent for those purchases; the homeowner is the principal who benefits from the materials. When the project is complete, the contractor bills the homeowner for the full scope of work. The materials are passed through as an identified line item — already taxed at purchase, not taxed again. The contractor's own labor on the project is a separate, single taxable transaction that the homeowner pays TPTRP on when settling the bill. The final invoice contains exactly two rounds of TPTRP: the materials purchase (taxed at the lumberyard) and the labor engagement (taxed on the final bill). No dollar is taxed more than once.
This same principle applies throughout every supply chain. A manufacturer buys raw materials — paying TPTRP as the buyer at that transaction. Those raw materials are transformed into a finished product. When the manufacturer sells that product, the buyer at the next stage pays TPTRP on their purchase. Each party pays once, as a buyer. No party pays twice.
When a manufacturer purchases a bulk raw material — say, a ton of steel — it pays TPTRP on that purchase. That one purchase cost is then spread across every unit of finished product manufactured from that steel. The tax incidence per unit is therefore a fraction of the purchase-level tax amount: the larger the production run, the smaller the per-unit tax cost. Purchasing scale directly reduces per-unit tax exposure.
On pass-through: it is a business decision. Whether to reflect the cost of TPTRP on purchases in customer pricing is a business decision, not a tax requirement. Some businesses may absorb input tax costs rather than adjusting prices, particularly in highly competitive commodity markets. Others will reflect input tax costs in pricing. TPTRP does not mandate pass-through — the market determines pricing.
Commercial vs. Residential Utilities — A Critical Distinction
TLES-3 exempts residential home utilities — electricity and natural gas for household use. It does not exempt commercial utility purchases. A factory's electricity bill is taxable. A data center's power consumption is taxable. A restaurant's gas line for cooking is taxable. An office building's electricity is taxable. This is an important distinction because the prior sales tax system taxed commercial utilities at 8.25%; TPTRP taxes them at 3.25% — a 5-percentage-point reduction for commercial utility users.
The Rate Structure
| Tier | Layer | Maximum Rate |
|---|---|---|
| T1 | State | 1.00% |
| T2 | County | 0.40% |
| T3 | City | 0.60% |
| T4 | ISD | 1.20% |
| T5 | Special Districts | 0.05% |
| SCR — Standard Combined Rate (full metro) | 3.25% | |
| AFR — Aggregate Funding Rate (analysis floor reference) | 2.8559% | |
| CCR — Constitutional Combined Rate (hard ceiling) | 6.00% | |
Industry-by-Industry Impact Analysis
Six representative Texas business profiles — applying TPTRP mechanics to real data
The following six profiles apply TPTRP mechanics to representative Texas business cases using primary data sources. Every profile applies the same standard:
- The business cost table shows only taxes the business pays as a buyer — property taxes, franchise tax, and TPTRP on its own commercial purchases (inputs, services, utilities)
- TPTRP collected from the business's own customers is a pass-through remittance — not a business cost, identical in nature to sales tax collected and remitted today
- Commercial utilities are taxable at 3.25% SCR (down from 8.25% current)
- Net change = total TPTRP costs paid by the business minus total current system costs
Analysis: Commercial Real Estate Owner/Operator
Commercial real estate is arguably the sector most dramatically transformed by TPTRP. The dominant cost in the current system is the annual property tax bill — a fixed obligation that does not scale with occupancy, cash flow, or economic conditions. A 50-unit office/retail complex in the DFW metro carrying a $15M appraised value pays approximately $300,000 per year in property tax whether the complex is fully leased or half-vacant. That bill arrives every year, on a schedule set by external appraisal districts, with no relation to the owner's business performance.
Under TPTRP, that $300,000 annual obligation disappears entirely. The business's tax cost becomes only what it pays as a buyer on its own commercial purchases — property management services, maintenance, repairs, and commercial utilities. At 3.25%, those costs total $5,850 annually on $180,000 in purchases. Commercial utilities specifically shift from the prior 8.25% rate down to 3.25%, an immediate 5-point savings on that cost element alone.
The structural benefit extends further: commercial landlords who no longer carry a $300,000 annual property tax obligation are no longer compelled to embed that cost in lease rates. This creates downward pressure on commercial rents across the Texas market — a benefit that flows directly to tenants, improving affordability and occupancy rates for the operator. The net result is a 98% reduction in annual business tax cost from $317,850 to $5,850.
| Tax Item | Current System | Under TPTRP | Net Change |
|---|---|---|---|
| Property tax (2.0% avg commercial rate × $15M) | $300,000 | $0 | −$300,000 |
| Franchise tax (0.75% on ~$400K margin) | $3,000 | $0 | −$3,000 |
| TPTRP on B2B inputs purchased: property mgmt, maintenance, repair services (3.25% × ~$120K) | — | $3,900 | +$3,900 |
| TPTRP on commercial utilities purchased — common areas, shared HVAC (3.25% × ~$60K) | — | $1,950 | +$1,950 |
| Current ST on those same utilities/services (8.25% replaced by 3.25% above) | $14,850 | $0 | −$14,850 |
| NET ANNUAL CHANGE | $317,850 | $5,850 | −$312,000 (−98%) |
Analysis: Manufacturing Firm (Industrial/Petrochemical)
Manufacturing is one of the most capital-intensive sectors in the Texas economy, and the current tax system is structurally hostile to capital investment. A mid-size manufacturer on the Houston Ship Channel with $25M in plant and $10M in equipment carries a combined $700,000 per year in real property and BPP taxes on those assets — a fixed obligation that exists whether the plant is operating at full capacity or sitting idle during a downturn. The BPP tax in particular functions as a direct annual penalty on capital investment: every machine a manufacturer buys increases the next year's tax bill.
Under TPTRP, both taxes disappear entirely. The manufacturer's tax cost becomes the 3.25% it pays as a buyer on raw materials, components, services, and commercial utilities. An important economy-of-scale dynamic applies here: when a manufacturer purchases a bulk raw material — say, a ton of steel — it pays TPTRP once on that purchase. That purchase cost is then spread across every unit of finished product manufactured from that steel. The tax incidence per unit is a fraction of the purchase-level amount, and the larger the production run, the smaller the per-unit cost. This profile applies the full 3.25% to all utility and input purchases without any credit for current §151.317/318 industrial exemption benefits, making it the most conservative basis for comparison.
The net result is an 18% reduction in annual tax cost — from $1,026,000 to $845,000 — entirely driven by the elimination of property and BPP taxes. In lower-rate jurisdictions, the TPTRP on inputs is further reduced, improving the net position. The constitutional ban on income and revenue taxes provides the long-run strategic benefit: a manufacturer investing in a $50M facility expansion no longer carries the risk of a future state corporate income tax on the returns from that investment.
| Tax Item | Current System | Under TPTRP | Net Change |
|---|---|---|---|
| Real property tax ($25M @ 2.0% avg) | $500,000 | $0 | −$500,000 |
| BPP tax — machinery/equipment ($10M @ 2.0%) | $200,000 | $0 | −$200,000 |
| Franchise tax (0.75% on ~$4.8M margin) | $36,000 | $0 | −$36,000 |
| TPTRP on B2B inputs purchased: raw materials, components, services (3.25% × $24M) | — | $780,000 | +$780,000 |
| TPTRP on commercial utilities purchased — plant power, gas, water (3.25% × $2M) | — | $65,000 | +$65,000 |
| Current ST on commercial utilities (8.25% replaced by 3.25% above) | $165,000 | $0 | −$165,000 |
| Current ST on other business inputs — partial, now unified under TPTRP | $125,000 | $0 | −$125,000 |
| NET ANNUAL CHANGE | $1,026,000 | $845,000 | −$181,000 (−18%) |
Analysis: Warehouse, Distribution & Logistics (3PL)
The warehouse and distribution sector illustrates one of the most compelling cases for TPTRP. A regional 3PL operator running 500,000 square feet in North Texas carries an $840,000 annual property tax bill on the facility alone — the single largest cost in the analysis. Add $63,000 in BPP taxes on forklifts, rack systems, and dock equipment, and $18,750 in franchise tax, and the current system costs this operator over $1.15 million per year before it makes a single delivery.
Under TPTRP, the $840,000 property tax obligation disappears entirely. The operator's tax cost becomes what it pays on its own commercial purchases: commercial fuel, vehicle maintenance, repair services, and utilities. Those purchases total approximately $2.8M annually, and at 3.25% the TPTRP is $91,000. This represents a 92% reduction in annual business tax cost — the largest improvement of any profile in this analysis. The logistics services this operator provides to its clients generate TPTRP that those clients pay as buyers; that is their tax cost, not this operator's.
Location strategy matters here. In an unincorporated county area with no T3 municipal tier, the effective rate drops to approximately 2.65%, reducing the TPTRP on $2.8M in purchases to approximately $74,200 — an additional $16,800 in annual savings from a single siting decision. For operators evaluating new facility locations, the TPTRP rate differential across jurisdictions creates a quantifiable, transparent economic lever that the current property tax system — with its opaque appraisal process — cannot match.
| Tax Item | Current System | Under TPTRP | Net Change |
|---|---|---|---|
| Real property tax (500K sqft @ ~$80/sqft appraised × 2.1% rate) | $840,000 | $0 | −$840,000 |
| BPP — forklifts, rack systems, dock equipment (~$3M @ 2.1%) | $63,000 | $0 | −$63,000 |
| Franchise tax (0.375% retail/wholesale rate, ~$5M margin) | $18,750 | $0 | −$18,750 |
| TPTRP on B2B inputs purchased: commercial fuel, vehicle maintenance, repair services (3.25% × ~$1.8M) | — | $58,500 | +$58,500 |
| TPTRP on commercial utilities purchased — dock power, warehouse lighting, HVAC (3.25% × ~$1M) | — | $32,500 | +$32,500 |
| Current ST on those inputs and utilities (8.25% replaced by 3.25% above) | $231,750 | $0 | −$231,750 |
| NET ANNUAL CHANGE | $1,153,500 | $91,000 | −$1,062,500 (−92%) |
Analysis: Technology / Software / SaaS (B2B)
The technology and SaaS sector presents a different picture than the capital-intensive industries above, and it is important to frame it accurately. A B2B SaaS firm with $20M in revenue, leased office space, and minimal physical assets has relatively few of the current system's largest costs to eliminate. BPP taxes on ~$625K in office equipment total $12,500. Franchise tax on $5M in margin is $37,500. And because much of the current sales tax base exempts services, the firm pays limited sales tax today on its primary purchases. These are modest costs relative to a manufacturer or warehouse operator.
Under TPTRP, the firm pays 3.25% on all commercial purchases — cloud infrastructure, software tools, subcontractor services, and office utilities. On $3M in purchased inputs and $100K in utilities, that is $100,750 annually. With only $85,000 in current system costs to eliminate, the result is a modest net increase of $15,750 (+19%) at SCR. This is transparent, and it is the honest trade: the current narrow sales tax base — which exempted most business services — shifted the tax burden onto capital-intensive industries. TPTRP broadens the base so all commercial activity contributes, enabling the rate for everyone to be far lower.
Three strategic contexts matter significantly for this sector. First, constitutional certainty: the ban on income and revenue taxes eliminates an entire category of future investment risk. A Texas technology company that grows from $20M to $500M in revenue will never face a state corporate income tax on those profits — a risk that exists in every competing state. Second, input cost scale: the $97,500 in TPTRP on $3M in purchased inputs spreads across the firm's entire product and service output, making the per-contract impact a small fraction of that total. Third, location leverage: in an unincorporated county area at 2.65%, the same $3M in inputs costs $79,500 — an $18,000 annual improvement from a single location decision.
The TPTRP that a B2B SaaS company's clients pay on their subscription invoices is collected by the firm and remitted to the state — this is a pass-through remittance, not a business expense. This is identical to how sales tax collection works for any business today. Just as a restaurant's sales tax collections are not listed as a restaurant cost, a SaaS firm's TPTRP collections from clients are excluded from its cost table. The firm's TPTRP cost is only what it pays as a buyer on its own purchases.
| Tax Item | Current System | Under TPTRP | Net Change |
|---|---|---|---|
| Property tax — BPP only (leased office; ~$625K equipment @ 2.0%) | $12,500 | $0 | −$12,500 |
| Franchise tax (0.75% on ~$5M margin, revenue minus compensation method) | $37,500 | $0 | −$37,500 |
| Current ST on business inputs — partial (some software, services) | $35,000 | $0 | −$35,000 |
| TPTRP on B2B inputs purchased — cloud infra, subcontractors, tools (3.25% × $3M) | — | $97,500 | +$97,500 |
| TPTRP on commercial utilities purchased — office electricity, internet, telecom (3.25% × ~$100K) | — | $3,250 | +$3,250 |
| NET ANNUAL CHANGE | $85,000 | $100,750 | +$15,750 (+19%) |
Analysis: Oil & Gas — Exploration and Production
The oil and gas sector carries one of the heaviest tax burdens under the current system — not primarily from property taxes, but from production taxes that are uniquely absent from the TPTRP structure. A mid-size Permian Basin E&P operator with $150M in annual revenue currently pays approximately $5.175M in oil production tax (4.6% of market value) and $750,000 in natural gas production tax (7.5% of market value) — a combined $5.925M in production taxes alone. Add $1.6M in real property and mineral interest taxes, $900,000 in BPP taxes on drilling and production equipment, and $562,500 in franchise tax, and the current total burden approaches $9.3M annually.
Under TPTRP, all of these obligations are eliminated. The operator's tax cost becomes what it pays as a buyer on its own commercial purchases: drilling services, oilfield chemicals, equipment purchases, field power, and compressor station utilities. At 3.25% on approximately $35M in combined inputs and utilities, the total TPTRP is $1,137,500. The production taxes eliminated — $5.925M — alone dwarf the entire replacement cost. The net result is an 88% reduction in annual tax burden from $9.277M to $1.137M, the second-largest percentage improvement in this analysis.
The structural benefit for the energy sector extends beyond the immediate tax reduction. BPP taxes on drilling equipment and production infrastructure function as a direct annual penalty on capital deployment — every new well pad, every production separator, every compressor station increases the next year's tax bill. Under TPTRP, capital investment in new production infrastructure carries no ongoing annual tax obligation after the initial purchase transaction. For a capital-intensive industry where multi-year investment decisions depend on long-range cost modeling, that predictability is strategically significant.
| Tax Item | Current System | Under TPTRP | Net Change |
|---|---|---|---|
| Real property & mineral interests ($200M @ est. 0.8% effective rate) | $1,600,000 | $0 | −$1,600,000 |
| BPP — drilling equipment, production equipment (~$50M @ 1.8% avg) | $900,000 | $0 | −$900,000 |
| Oil production tax (~4.6% of market value, approximate) | $5,175,000 | $0 | −$5,175,000 |
| Natural gas production tax (~7.5% of market value, approximate) | $750,000 | $0 | −$750,000 |
| Franchise tax (0.75% on margin, ~$7.5M margin) | $562,500 | $0 | −$562,500 |
| TPTRP on B2B inputs purchased: drilling services, chemicals, oilfield equipment (3.25% × ~$30M) | — | $975,000 | +$975,000 |
| TPTRP on commercial utilities purchased — field power, compressor stations, processing (3.25% × ~$5M) | — | $162,500 | +$162,500 |
| Current ST on inputs/utilities at 8.25% (replaced by TPTRP above) | $289,750 | $0 | −$289,750 |
| NET ANNUAL CHANGE | $9,277,250 | $1,137,500 | −$8,139,750 (−88%) |
Analysis: Restaurant / Food Service (Chain, 5 Locations)
The restaurant and food service sector provides an instructive example for understanding what TPTRP costs a business versus what it collects. A Texas restaurant chain operating five locations in DFW with $10M in combined revenue currently pays $52,500 in real property taxes on owned locations, $15,750 in BPP taxes on equipment and fixtures, and $5,625 in franchise tax — plus $230,625 in sales tax on the inputs and utilities it purchases today. The current total business cost is $304,500 annually.
Under TPTRP, the property taxes, BPP taxes, and franchise tax disappear entirely. The chain pays 3.25% on its own commercial purchases — food supply, kitchen equipment, cleaning services, and commercial utilities — totaling approximately $2.8M annually. That yields $91,000 in TPTRP as the buyer. Because commercial utilities drop from 8.25% to 3.25%, the utility cost element specifically decreases as well. The net result is a 70% reduction in annual business tax cost from $304,500 to $91,000. The TPTRP that diners pay on their meals is a pass-through remittance — collected by the restaurant and forwarded to the state, just as current sales tax works today. That is not a business cost and is excluded from this analysis.
An additional competitive benefit applies on the consumer side. Under the current system, diners pay 8.25% on their meals. Under TPTRP, that rate drops to 3.25% — a 5-point reduction. Texas restaurants can use this either to reduce menu prices and drive volume, or to improve margin while remaining competitively priced. That strategic flexibility does not exist in the current system. For a restaurant chain operating on typical food-service margins of 3–6%, the ability to reprice relative to competitors in other states is a meaningful long-term advantage.
The TPTRP that diners pay on their meals is collected by the restaurant and remitted to the state — a pass-through remittance, not a business expense. This is identical to how sales tax on restaurant meals works today. Notably, under TPTRP the rate diners pay drops from 8.25% to 3.25% — a benefit to the customer and a competitive pricing advantage for the operator.
| Tax Item | Current System | Under TPTRP | Net Change |
|---|---|---|---|
| Real property taxes (5 locations × ~$500K avg value × 2.1% rate) | $52,500 | $0 | −$52,500 |
| BPP — restaurant equipment, fixtures, POS systems (~$750K @ 2.1%) | $15,750 | $0 | −$15,750 |
| Franchise tax (0.375% retail rate, ~$1.5M margin) | $5,625 | $0 | −$5,625 |
| TPTRP on B2B inputs purchased: food supply, kitchen equipment, cleaning services (3.25% × ~$2.5M) | — | $81,250 | +$81,250 |
| TPTRP on commercial utilities purchased — gas (cooking), electricity, water (3.25% × ~$300K) | — | $9,750 | +$9,750 |
| Current ST on those same inputs and utilities (8.25% replaced by 3.25% above) | $230,625 | $0 | −$230,625 |
| NET ANNUAL CHANGE | $304,500 | $91,000 | −$213,500 (−70%) |
Net Impact at a Glance
All six industry profiles — buyer-side business costs only, SCR 3.25%
The following table presents the net impact for each industry profile at SCR 3.25%. In every case, the business cost includes only what the business pays as a buyer — property taxes, franchise tax, and TPTRP on its own input and utility purchases. TPTRP collected from customers is excluded as a pass-through in both columns.
| Industry Profile | Current System | Under TPTRP (SCR 3.25%) | Net Change | % Change |
|---|---|---|---|---|
| Commercial Real Estate ($15M, DFW) | $317,850 | $5,850 | −$312,000 | −98% |
| Manufacturing ($80M rev, $35M assets) | $1,026,000 | $845,000 | −$181,000 | −18% |
| Warehouse / 3PL ($30M rev, 500K sqft) | $1,153,500 | $91,000 | −$1,062,500 | −92% |
| Technology / SaaS ($20M B2B rev) | $85,000 | $100,750 | +$15,750 | +19% |
| Oil & Gas E&P ($150M rev, $200M assets) | $9,277,250 | $1,137,500 | −$8,139,750 | −88% |
| Restaurant Chain (5 locs, $10M rev) | $304,500 | $91,000 | −$213,500 | −70% |
Beyond the Tax Bill — Structural and Strategic Benefits
What the dollar figures don't fully capture
End of Business Personal Property Tax
Texas is one of only a handful of states that aggressively taxes business personal property — furniture, computers, machinery, vehicles, inventory — in addition to real property. The BPP tax creates a direct disincentive to capital investment: every piece of equipment a business acquires increases its annual tax bill, not just in year one but every year thereafter. The most capital-intensive industries pay it hardest.[Matthews Real Estate, 2025]
TPTRP eliminates this entirely. Under TPTRP, a manufacturer who invests $5M in new equipment pays TPTRP once on that purchase — and then that equipment generates no annual tax obligation whatsoever. Under the current system, that same $5M equipment purchase would generate roughly $90,000–$100,000 per year in BPP taxes for as long as the equipment is on the books. Over a ten-year equipment lifecycle, that is $900,000 to $1,000,000 in taxes that simply cease to exist under TPTRP.
When businesses no longer face an annual tax bill for owning equipment, they are free to invest in technology, automation, and efficiency improvements without an annual tax penalty. This is a structural incentive to modernize Texas industry that the current BPP system actively suppresses.
Compliance Simplification — One Tax, One Return
Texas businesses currently navigate a multi-layer tax compliance regime:
- Property tax: Annual appraisal protests, multiple taxing entities, BPP rendition filings, deadline management across county appraisal districts
- Franchise tax: Margin calculation (four methods), parallel books, revenue above $2.47M threshold management, annual return, quarterly estimates
- Production taxes (energy sector): Monthly returns, Railroad Commission production reports, production type differentiation
- Sales tax: Permit maintenance, exemption certificate management, resale certificate documentation, local rate tracking
Under TPTRP, all of this collapses to one tax at one rate on all commercial purchases. One return. One rate table. No exemption certificates. No appraisal protests. No BPP rendition filings.[BPM Tax & Accounting, 2026]
The franchise tax compliance cost alone is significant. Analysis by the Bush School of Government and Public Service found that compliance consumed on average 1–3% of the franchise tax's revenue yield in direct administrative costs — and for firms near the margin threshold, the compliance cost routinely exceeded the tax itself.[Bush School / Texas A&M, 2020]
Predictability and Capital Planning
Property taxes create a fundamental planning problem: the assessment is external, the rate is set by multiple independent entities, and the bill arrives regardless of whether the business had a good year. A warehouse operator who builds a new 500,000 sq ft facility cannot know what the property tax bill will be in year 10 when modeling the investment in year 0.
Under TPTRP, the transaction tax scales with economic activity — you pay when you transact. A business in a slow year pays less. A business that closes temporarily pays nothing on the TPTRP side. And the 6.00% Constitutional Combined Rate ceiling provides a hard upper bound — no combined TPTRP rate at any tier can ever exceed 6.00%, enshrined in the constitutional amendment. For capital-intensive projects with 10–30 year payback horizons, that structural certainty is worth a substantial premium.[TPPF, 2022]
Location Competition Among Texas Jurisdictions
Because the TPTRP rate is tiered across five layers — State (T1), County (T2), City (T3), ISD (T4), and Special Districts (T5) — the effective rate varies by jurisdiction. The SCR of 3.25% represents the full metro rate with all tiers present. But:
- In unincorporated county areas with no T3 municipal layer: ~2.65% effective rate
- In cities with below-floor T3 rates: 2.95% or lower
- In areas with minimal or no T5 special district overlay: further reduction
This creates genuine economic competition among Texas jurisdictions to attract business investment. A large logistics operator evaluating a new facility can quantify the annual tax savings from locating in an unincorporated area vs. a full metro rate jurisdiction. That transparency is a structural incentive embedded in TPTRP's architecture that the current property tax system, with its opaque appraisal process and inconsistent rate-setting, cannot match.
The Constitutional Income/Revenue Tax Ban — A Long-Run Strategic Asset
Converting a political preference into a permanent legal guarantee
For Texas to compete globally for long-horizon capital investment, constitutional certainty is more valuable than a favorable current statutory environment. Statutes change. Constitutional provisions require supermajority approval and broad public consensus to alter.
The TPTRP constitutional amendment permanently removes the threat of:
- Corporate income tax — Every state that currently imposes a corporate income tax began with a similar "we would never do that" political culture. Texas's constitutional ban converts a political preference into a legal mandate.
- Gross receipts tax / revenue tax — Several states have introduced gross receipts-based alternatives to income taxes. The constitutional ban covers this category explicitly.
- Margin/franchise tax — Even after TPTRP, a future legislature could theoretically propose to reimpose a franchise-style margin tax. The constitutional ban prevents this.
- Payroll tax — The constitutional ban covers all taxes on revenues, including payroll-based taxes.
"For a corporate site selection team evaluating a 20-year manufacturing investment in Texas vs. a competing state, the constitutional income tax ban is a quantifiable risk reduction. Every other state in competition for that investment carries income tax risk. Texas, under TPTRP, does not."— TPTRP Business Impact Analysis · Texas House District 109 · 2026
For a corporate site selection team evaluating a 20-year manufacturing investment in Texas vs. a competing state, the constitutional income tax ban is a quantifiable risk reduction. Every other state in competition for that investment carries income tax risk. Texas, under TPTRP, does not.[TCCRI, 2022]
The Business Case for Texas Under TPTRP
Why TPTRP makes Texas a stronger destination for business investment
Absolute tax reduction for capital-intensive businesses. Manufacturing, distribution, commercial real estate, and oil and gas — the backbone of Texas's industrial economy — see net tax reductions ranging from 18% to 98% when business costs are correctly measured.
Structural neutrality across business types. The current system discriminates against capital-intensive businesses and in favor of pure service firms. TPTRP applies the same flat rate to all transactions, removing that distortion.
Predictability and constitutional certainty. The 6.00% CCR is a hard constitutional ceiling. No income or revenue tax can ever be imposed. Long-horizon capital investment can be modeled with confidence that was structurally impossible under the property tax regime.
Compliance consolidation. Multiple parallel tax obligations — property, franchise, production, fuels, occupancy — collapse into one return. The cost savings are real and recurring, year after year.
Location competition among Texas jurisdictions. The tiered rate structure creates genuine economic competition among Texas cities, counties, and unincorporated areas. Texas jurisdictions that want to attract business investment have a direct, transparent lever to do so.
Addressing the Critics
Six substantive objections — answered with the same factual rigor applied throughout this article
Every significant policy reform attracts serious objections. The six most substantive criticisms of the TPTRP's business impact are addressed directly here.
Criticism 1: "The 3.25% rate is misleadingly low — the real consumer rate will be much higher through pyramiding"
The concern is that because TPTRP applies at every stage of the supply chain — B2B and consumer — the tax is collected multiple times on the same underlying value as it moves from raw material to finished product to consumer, creating an effective rate far above 3.25%.
This is the most common technical objection, and Definition 2 (Agent Transaction) is its direct structural answer. Under TPTRP, no dollar is taxed more than once. Each buyer at each stage pays once on their own purchase. The 3.25% is the actual rate at each transaction — not a cumulative rate that stacks across stages. The contractor example from Section 2 illustrates this precisely: the lumber is taxed once at the lumberyard, the labor is taxed once on the final bill. Two separate taxable events, two separate buyers, two applications of 3.25% — but no dollar taxed twice.
This is structurally identical to how consumption taxes work in every country that has adopted a broad-base transaction tax — Canada's GST, Australia's GST, New Zealand's GST, and the EU's VAT all operate on this same principle. TPTRP's Definition 2 performs that function. The 3.25% rate is exactly what it claims to be at every transaction in the chain.
Criticism 2: "Taxing all B2B transactions will make Texas-made goods uncompetitive with out-of-state products"
The argument is that a Texas manufacturer paying TPTRP on every input purchase carries an embedded tax cost that competitors manufacturing in other states do not, making Texas-made goods more expensive to produce and less competitive.
This argument overlooks the larger embedded cost that the current system already places on Texas-made goods — and that TPTRP eliminates. Under the current system, every Texas manufacturer pays property taxes on its plant, real estate, and equipment every year, regardless of profitability. The manufacturing profile in Section 3 shows $700,000 in annual property and BPP taxes on a mid-size Houston facility — that embedded cost is already in every product shipped. TPTRP replaces that larger, less visible, fixed embedded cost with a smaller, visible, variable one that scales with actual production activity. On net, the total tax embedded in Texas-made goods decreases for capital-intensive manufacturers under TPTRP.
Criticism 3: "Small businesses will be disproportionately harmed — they can't absorb input tax costs the way large businesses can"
The current system is already structurally more punishing to small businesses than TPTRP will be. The franchise tax compliance burden — choosing among four margin calculation methods, maintaining parallel books, managing the $2.47M threshold — costs disproportionately more for a small business relative to its tax liability. Small businesses also bear property tax costs embedded in commercial leases even when they do not own their space — they cannot protest the appraisal or appeal the rate.
Under TPTRP, the franchise tax disappears entirely. The economy-of-scale argument on input costs actually favors well-run small businesses in high-volume input sectors: a small restaurant buying food wholesale pays TPTRP once on that bulk purchase, and that cost spreads across every meal served. The per-unit input tax incidence is a fraction of the purchase-level figure — and it scales with actual production volume, not with a fixed asset base that never adjusts for a bad year.
Criticism 4: "Technology and service sector businesses face a new tax burden that did not previously exist"
This is acknowledged directly and transparently in this article. The TPTRP broadens the tax base to include services because the current narrow base forces higher rates on everyone else — manufacturing, warehousing, energy, and real estate pay more today to compensate for the service sector's exemption from the sales tax. The trade is a modest new cost on B2B service inputs in exchange for the constitutional income tax ban, franchise tax elimination, and BPP elimination.
For high-growth technology companies, that trade is strongly favorable over any meaningful time horizon. A Texas-based SaaS company scaling from $20M to $500M in revenue will never face a state corporate income tax on those profits under TPTRP's constitutional ban. In every other competing state — California, New York, Washington — that income tax risk is real and growing. The constitutional certainty TPTRP provides is worth substantially more than the $15,750 annual net increase shown in the Section 3 profile, and that value compounds with scale.
Criticism 5: "Industrial electricity and utility exemptions will be eliminated, increasing energy costs for large manufacturers"
This is a nuanced but legitimate concern. Texas Tax Code §151.318 currently exempts manufacturing raw materials and machinery, and §151.317 provides partial exemptions for industrial electricity and natural gas used directly in manufacturing. Under TPTRP, all existing sales tax exemptions are eliminated — there are no industry-sector carve-outs. The TLES protects only residential home utilities; commercial and industrial utility purchases are taxable at the applicable rate.
For industrial users currently paying the full 8.25% commercial utility rate, TPTRP represents a direct 5-percentage-point reduction — from 8.25% to 3.25%. For industrial users who currently benefit from §151.317 partial exemptions or §151.318 manufacturing input certificates, TPTRP will represent a net increase on the utility and input line specifically, even as it simultaneously eliminates property taxes, BPP taxes, and franchise tax obligations. Large manufacturers and petrochemical operators in this situation should model their specific exemption profile against the full TPTRP impact to determine their individual net position. The industry profiles in this article assume the full 3.25% on all utility and input purchases — the most conservative basis for assessment.
Criticism 6: "ISDs lose local control over their own tax rates — school funding will become uncertain"
The distinction between losing funding and losing rate-setting authority is critical here. Under TPTRP, every ISD is guaranteed its full Total Revenue Obligation (TRO) — the total revenue it is entitled to receive — through the T4 tier and the TPTRP distribution mechanism. No ISD loses a dollar of funding as a result of TPTRP. What ISDs lose is the authority to set an independent rate against an uncertain, fluctuating assessed-value base.
That loss of authority is actually a structural improvement in funding stability. Today, ISD funding fluctuates with real estate valuations — when property values fall, ISDs face shortfalls they must cover through rate increases, fund balance draws, or service reductions. Under TPTRP, ISD revenue is drawn from a far broader and more stable transaction tax base of $7.128 trillion in annual economic activity — a base diversified across consumption, energy, real estate, financial services, and digital commerce, not concentrated in assessed property values alone. The AFR (2.8559%) — an analysis floor reference — demonstrates that the minimum combined rate needed to fund all TROs statewide is always within the five-tier structure.
Data Behind the Analysis
All source data, industry profile calculations, rate structure details, and supporting figures organized by topic. Pass 2 will populate each tab.
| Tier | Layer | Max Rate | Notes |
|---|---|---|---|
| T1 | State | 1.00% | Constitutional baseline; funds state TRO share |
| T2 | County | 0.40% | County general fund and special services |
| T3 | City | 0.60% | Municipal general fund; absent in unincorporated areas |
| T4 | ISD | 1.20% | School district funding; guaranteed TRO floor |
| T5 | Special Districts | 0.05% | MUDs, hospital districts, etc. |
| SCR — Standard Combined Rate (full metro) | 3.25% | All tiers present | |
| AFR — Aggregate Funding Rate (analysis floor reference) | 2.8559% | Analysis tool showing minimum rate needed to fund all TROs statewide | |
| CCR — Constitutional Combined Rate (hard ceiling) | 6.00% | No combination of tiers may exceed this | |
| Jurisdiction Type | Tiers Present | Effective Rate |
|---|---|---|
| Full metro (all tiers) | T1 + T2 + T3 + T4 + T5 | 3.25% |
| Below-floor city | T1 + T2 + T3(reduced) + T4 + T5 | ~2.95% |
| Unincorporated county (no T3) | T1 + T2 + T4 + T5 | ~2.65% |
| Unincorporated, no special districts | T1 + T2 + T4 | ~2.60% |
| Anchor | Full Name | Value |
|---|---|---|
| FTB | Final Tax Base | $7,127,552,538,811 |
| TRO | Total Revenue Obligation | $203,554,603,387 |
| SCR | Standard Combined Rate | 3.25% |
| CCR | Constitutional Combined Rate (ceiling) | 6.00% |
| AFR | Aggregate Funding Rate (analysis tool) | 2.8559% |
| Tax Item | Current System | Under TPTRP | Change |
|---|---|---|---|
| Property tax (2.0% × $15M) | $300,000 | $0 | −$300,000 |
| Franchise tax (0.75% on ~$400K margin) | $3,000 | $0 | −$3,000 |
| TPTRP — B2B inputs (3.25% × ~$120K) | — | $3,900 | +$3,900 |
| TPTRP — commercial utilities (3.25% × ~$60K) | — | $1,950 | +$1,950 |
| Current ST on utilities/services (8.25% → replaced) | $14,850 | $0 | −$14,850 |
| Net Annual Total | $317,850 | $5,850 | −$312,000 (−98%) |
| Tax Item | Current System | Under TPTRP | Change |
|---|---|---|---|
| Real property tax ($25M @ 2.0%) | $500,000 | $0 | −$500,000 |
| BPP tax — equipment ($10M @ 2.0%) | $200,000 | $0 | −$200,000 |
| Franchise tax (0.75% on ~$4.8M margin) | $36,000 | $0 | −$36,000 |
| TPTRP — raw materials & services (3.25% × $24M) | — | $780,000 | +$780,000 |
| TPTRP — commercial utilities (3.25% × $2M) | — | $65,000 | +$65,000 |
| Current ST — commercial utilities (8.25% → replaced) | $165,000 | $0 | −$165,000 |
| Current ST — other business inputs (partial → replaced) | $125,000 | $0 | −$125,000 |
| Net Annual Total | $1,026,000 | $845,000 | −$181,000 (−18%) |
| Tax Item | Current System | Under TPTRP | Change |
|---|---|---|---|
| Real property tax (500K sqft @ ~$80/sqft × 2.1%) | $840,000 | $0 | −$840,000 |
| BPP — forklifts, rack systems (~$3M @ 2.1%) | $63,000 | $0 | −$63,000 |
| Franchise tax (0.375% retail/wholesale, ~$5M margin) | $18,750 | $0 | −$18,750 |
| TPTRP — fuel, maintenance, repair (3.25% × ~$1.8M) | — | $58,500 | +$58,500 |
| TPTRP — utilities (3.25% × ~$1M) | — | $32,500 | +$32,500 |
| Current ST on inputs/utilities (8.25% → replaced) | $231,750 | $0 | −$231,750 |
| Net Annual Total | $1,153,500 | $91,000 | −$1,062,500 (−92%) |
| Tax Item | Current System | Under TPTRP | Change |
|---|---|---|---|
| BPP only — leased office (~$625K equipment @ 2.0%) | $12,500 | $0 | −$12,500 |
| Franchise tax (0.75% on ~$5M margin) | $37,500 | $0 | −$37,500 |
| Current ST — partial on some inputs (→ replaced) | $35,000 | $0 | −$35,000 |
| TPTRP — cloud, subcontractors, tools (3.25% × $3M) | — | $97,500 | +$97,500 |
| TPTRP — office electricity, internet, telecom (3.25% × $100K) | — | $3,250 | +$3,250 |
| Net Annual Total — SCR (3.25%) | $85,000 | $100,750 | +$15,750 (+19%) |
| Scenario: Unincorporated county (~2.65%) on same $3.1M purchases | $85,000 | ~$82,150 | ~−$2,850 (−3%) |
| Tax Item | Current System | Under TPTRP | Change |
|---|---|---|---|
| Real property & mineral interests ($200M @ 0.8%) | $1,600,000 | $0 | −$1,600,000 |
| BPP — drilling & production equipment (~$50M @ 1.8%) | $900,000 | $0 | −$900,000 |
| Oil production tax (~4.6% of market value) | $5,175,000 | $0 | −$5,175,000 |
| Natural gas production tax (~7.5% of market value) | $750,000 | $0 | −$750,000 |
| Franchise tax (0.75% on ~$7.5M margin) | $562,500 | $0 | −$562,500 |
| TPTRP — drilling services, chemicals, equipment (3.25% × $30M) | — | $975,000 | +$975,000 |
| TPTRP — field power, compressor stations (3.25% × $5M) | — | $162,500 | +$162,500 |
| Current ST — inputs/utilities (8.25% → replaced) | $289,750 | $0 | −$289,750 |
| Net Annual Total | $9,277,250 | $1,137,500 | −$8,139,750 (−88%) |
| Tax Item | Current System | Under TPTRP | Change |
|---|---|---|---|
| Real property (5 locs × ~$500K × 2.1%) | $52,500 | $0 | −$52,500 |
| BPP — equipment, fixtures, POS (~$750K @ 2.1%) | $15,750 | $0 | −$15,750 |
| Franchise tax (0.375% retail rate, ~$1.5M margin) | $5,625 | $0 | −$5,625 |
| TPTRP — food supply, equipment, cleaning (3.25% × $2.5M) | — | $81,250 | +$81,250 |
| TPTRP — cooking gas, electricity, water (3.25% × $300K) | — | $9,750 | +$9,750 |
| Current ST on inputs/utilities (8.25% → replaced) | $230,625 | $0 | −$230,625 |
| Net Annual Total | $304,500 | $91,000 | −$213,500 (−70%) |
| Industry Profile | Current System | Under TPTRP (SCR 3.25%) | Net Change | % Change |
|---|---|---|---|---|
| Commercial Real Estate ($15M, DFW) | $317,850 | $5,850 | −$312,000 | −98% |
| Warehouse / 3PL ($30M rev, 500K sqft) | $1,153,500 | $91,000 | −$1,062,500 | −92% |
| Oil & Gas E&P ($150M rev, $200M assets) | $9,277,250 | $1,137,500 | −$8,139,750 | −88% |
| Restaurant Chain (5 locs, $10M rev) | $304,500 | $91,000 | −$213,500 | −70% |
| Manufacturing ($80M rev, $35M assets) | $1,026,000 | $845,000 | −$181,000 | −18% |
| Technology / SaaS ($20M B2B rev) | $85,000 | $100,750 | +$15,750 | +19% |
| Combined (all 6 profiles) | $12,164,100 | $2,266,100 | −$9,898,000 | −81% |
Five of six sectors show significant net reductions. The Technology/SaaS profile shows a modest +19% increase due to its low base of current costs (minimal physical assets, low franchise tax). Even in that case, constitutional income tax prohibition and compliance simplification substantially change the long-run calculus.
| Statistic | Value | Source |
|---|---|---|
| Business share of TX state & local taxes | 59.3% | EY/COST FY2024 Business Tax Study |
| National avg business share of state & local taxes | 43.6% | EY/COST FY2024 Business Tax Study |
| TX national rank — effective business tax burden | 14th highest | EY/COST FY2024 |
| Statewide TY2025 property tax levy | $89.45B | TX Comptroller PTAD TY2025 |
| Non-residential share of statewide levy | 47.6% | TX Comptroller Pub. 96-463, Jan 2025 |
| Commercial/industrial levy (annual, paid by businesses) | ~$42.6B | TX Comptroller PTAD TY2025 |
| Franchise tax revenue FY2025 | $7.08B | TX Comptroller FY2025 Annual Cash Report |
| Franchise tax — standard rate (margin) | 0.75% | TX Comptroller franchise tax rates |
| Franchise tax — retail/wholesale rate | 0.375% | TX Comptroller franchise tax rates |
| Franchise tax — revenue threshold | $2.47M | TX Comptroller franchise tax rates |
| TX avg effective commercial property tax rate | 1.83–2.0% | TX Comptroller PTAD; Innergy Integral (2026) |
| Seattle/King County commercial property tax rate | 1.0–1.2% | Innergy Integral (2026) |
| Denver commercial property tax rate | 0.5–0.7% | Innergy Integral (2026) |
| TX property tax growth since 2014 | 160% | O'Connor & Associates (2026) |
| TX statewide property tax total (2024) | $125.05B | O'Connor & Associates (2026) |
| Oil production tax rate | ~4.6% | TX Comptroller Ch. 202, Tax Code |
| Natural gas production tax rate | ~7.5% | TX Comptroller Ch. 201, Tax Code |
| Current commercial utility sales tax rate (TX) | 8.25% | TX Comptroller sales tax — commercial |
| TPTRP commercial utility rate (SCR) | 3.25% | TPTRP rate architecture |
| Reduction in commercial utility tax rate | −5 pts | Derived: 8.25% → 3.25% |
| Source | Organization | Year | Sections Used |
|---|---|---|---|
| EY/COST Total State & Local Business Taxes FY2024 | Ernst & Young / COST | 2025 | Overview, Sec. 1 |
| TTARA — The Myth of Texas as a Low Tax State | TX Taxpayers & Research Assoc. | 2023 | Overview, Sec. 1 |
| Tax Exemptions & Tax Incidence Report (Pub. 96-463) | TX Comptroller of Public Accounts | Jan 2025 | Sec. 1 |
| State of TX Annual Cash Report FY2025 | TX Comptroller of Public Accounts | 2025 | Sec. 1, all profiles |
| Property Tax Rates and Levies (PTAD TY2025) | TX Comptroller PTAD | 2026 | Sec. 1, all profiles |
| Giving an "F" to the Franchise Tax | Bush School / Texas A&M | 2020 | Sec. 1, 5, 8 |
| Eliminating Property Taxes in Texas: A Path Forward | Texas Public Policy Foundation | 2022 | Sec. 1, 5 |
| Biggest Texas Property Tax Changes in 2025 | O'Connor & Associates | 2026 | Sec. 1 |
| Texas Property Taxes and Real Estate Development | Innergy Integral | 2026 | Sec. 1 |
| Oil Production Tax — Ch. 202, TX Tax Code | TX Comptroller of Public Accounts | 2025 | Sec. 3 (O&G) |
| Natural Gas Production Tax — Ch. 201, TX Tax Code | TX Comptroller of Public Accounts | 2025 | Sec. 3 (O&G) |
| The Texas Property Tax Dilemma | Matthews Real Estate Inv. Services | 2025 | Sec. 3 (Warehouse), Sec. 5 |
| NFIB Texas Small Business Victories | National Fed. of Independent Business | 2025 | Sec. 3 (Restaurant), Sec. 8 |
| 5 Common Pain Points: Texas Franchise Tax | BPM Tax & Accounting | 2026 | Sec. 5 |
| HW&M Committee Testimony — Commercial Property Taxes | Texas Conservative Coalition Research | 2022 | Sec. 6, 8 |
| Franchise Tax — Rates, Thresholds, Requirements | TX Comptroller of Public Accounts | 2025 | Sec. 1, 5, 8 |
References
Sources organized by article section. APA 7th Edition. All sources are primary or authoritative originals; no internal working documents are cited.
Overview & Section 1 — Business Tax Burden in Texas
Texas Taxpayers and Research Association (TTARA). (2023, January). The Myth of Texas as a Low Tax State. https://ttara.org/
Primary source for the 59.3% business share of Texas state and local taxes. TTARA is Texas's leading nonpartisan business tax research organization. Grounded the Overview and Section 1 framing of Texas's effective business tax burden.
EY / Council on State Taxation (COST). (2025, August). Total State and Local Business Taxes FY2024. https://www.ey.com/en_us/insights/tax/total-state-and-local-business-taxes-fy24
Annual national study of state and local business tax burdens. Source for Texas's 14th-highest national ranking in effective business tax burden and the 43.6% national average comparison figure.
Texas Comptroller of Public Accounts, Property Tax Assistance Division (PTAD). (2026). 2025 Property Tax Rates and Levies. https://comptroller.texas.gov/taxes/property-tax/rates/
Official state data on TY2025 statewide property tax levy ($89.45B) and commercial/industrial rate distributions. Source for non-residential share (47.6%) and $42.6B commercial levy calculation.
Texas Comptroller of Public Accounts. (2025, September). State of Texas Annual Cash Report FY2025. https://comptroller.texas.gov/transparency/reports/annual-cash-report/2025
Official state fiscal document. Source for FY2025 franchise tax revenue ($7.08B) and all other state tax revenue figures cited in Section 1 and industry profiles.
Texas Comptroller of Public Accounts. (2025, January). Tax Exemptions and Tax Incidence Report (Publication 96-463). https://comptroller.texas.gov/taxes/publications/96-463.pdf
Authoritative Comptroller analysis of who bears the Texas tax burden. Used in Section 1 for commercial property tax share analysis and structural distortion framing.
Bush School of Government and Public Service, Texas A&M University. (2020). Giving an "F" to the Franchise Tax. https://bush.tamu.edu/
Peer-reviewed academic analysis of franchise tax compliance costs and structural hostility to service-sector businesses. Source for compliance-cost-exceeds-tax finding and "particularly hostile to business services" characterization in Sections 1 and 5.
Texas Public Policy Foundation. (2022). Eliminating Property Taxes in Texas: A Path Forward (Ginn, Quintero & Antoni). https://www.texaspolicy.com/
Policy foundation analysis of structural distortions created by the property tax system and the case for elimination. Provides framework for capital planning certainty discussion in Sections 1 and 5.
O'Connor & Associates. (2026, January). Biggest Texas Property Tax Changes in 2025. https://www.poconnor.com/
Property tax industry analysis source for the 160% growth in Texas property taxes since 2014 and the $125.05B 2024 statewide levy figure cited in Section 1.
Innergy Integral. (2026, March). Texas Property Taxes and Real Estate Development. https://innergyintegral.com/
Cross-market analysis source for Texas commercial property tax rate comparison to Seattle/King County (1.0–1.2%) and Denver (0.5–0.7%). Source for "two to four times higher" characterization.
Sections 2–4 — TPTRP Mechanics and Industry Profiles
Texas Comptroller of Public Accounts, PTAD. (2026). 2025 Commercial Property Tax Rate Data. https://comptroller.texas.gov/taxes/property-tax/
Specific rate data applied in industry profiles: 2.0–2.1% commercial rates for DFW metro and Houston Ship Channel; industrial and mineral interest effective rates for Oil & Gas profile.
Texas Comptroller of Public Accounts. (2025). Oil Production Tax — Chapter 202, Texas Tax Code. https://comptroller.texas.gov/taxes/oil-production/
Official source for 4.6% oil production tax rate applied in the Oil & Gas E&P industry profile (Section 3).
Texas Comptroller of Public Accounts. (2025). Natural Gas Production Tax — Chapter 201, Texas Tax Code. https://comptroller.texas.gov/taxes/natural-gas/
Official source for 7.5% natural gas production tax rate applied in the Oil & Gas E&P industry profile (Section 3).
Matthews Real Estate Investment Services. (2025, September). The Texas Property Tax Dilemma. https://www.matthews.com/
Commercial real estate industry analysis of Texas BPP tax burden. Source for BPP disincentive to capital investment discussion in Section 5 and warehouse profile data.
National Federation of Independent Business (NFIB). (2025). NFIB Texas Small Business Victories. https://www.nfib.com/
Small business advocacy source providing perspective on franchise tax and property tax compliance burden for Texas small businesses. Supports Section 8 Criticism 3 response.
Sections 5–8 — Structural Benefits, Constitutional Ban, and Criticisms
BPM Tax & Accounting. (2026, May). 5 Common Pain Points: Texas Franchise Tax. https://www.bpm.com/insights/texas-franchise-tax/
Practitioner-level documentation of franchise tax compliance complexity. Source for compliance simplification discussion in Section 5 — margin calculation methods, parallel books, and threshold management.
Texas Conservative Coalition Research Institute (TCCRI). (2022). Testimony: House Committee on Ways & Means — Commercial Property Taxes. https://www.txccri.org/
Legislative testimony source for constitutional income tax ban as competitive advantage. Provides framework for Section 6 analysis of constitutional certainty vs. statutory environment for long-horizon capital investment.
Texas Comptroller of Public Accounts. (2025). Franchise Tax — Rates, Thresholds, and Requirements. https://comptroller.texas.gov/taxes/franchise/
Official source for franchise tax rates (0.75% standard; 0.375% retail/wholesale; 0.331% EZ), $2.47M revenue threshold, and four margin calculation method descriptions cited in Sections 1, 5, and 8.