In a move that has sent ripples through the business community, the Texas Legislature approved a significant tax reform bill on May 30, 2026, aimed at both individuals and corporations.
The bill, which passed with a narrow margin of 75-73 in the House, introduces a tiered income tax structure for high earners and adjusts corporate tax rates. Governor Greg Abbott has indicated his support, stating, "This reform will ensure that the wealthiest Texans contribute their fair share, allowing us to invest in schools and infrastructure that our families need."
Under the new legislation, individuals earning over $300,000 annually will face a 5% tax rate, while the corporate tax rate will be adjusted from 1% to 2.5% for companies generating revenues exceeding $5 million. Proponents of the bill argue that these measures will lead to a more equitable tax system and provide vital funding for public services. House Speaker Dade Phelan remarked, "This is a historic moment for Texas, as we take a step towards addressing income inequality in our state."
However, critics contend that the reforms could drive affluent individuals and businesses out of Texas, potentially jeopardizing the state's economic growth. "This tax increase is a direct threat to the very economic vitality that has made Texas a magnet for businesses and individuals alike," warned Senator Angela Paxton, who vocally opposed the bill.
The bill's passage comes at a time when Texas's economy is showing signs of recovery from the pandemic, with unemployment rates falling to 4.2%. Yet, the lingering impacts of inflation and rising energy costs have created a complex economic landscape.
As the legislature prepares for the upcoming election cycle, the new tax structure is expected to be a focal point in debates. With local elections approaching in November, Texas citizens and businesses alike will be closely watching how these reforms will shape their livelihoods and the broader economy.