When it comes to protecting taxpayers and ensuring people keep as much of their hard-earned money as possible, Texas usually leads the way. With no state income tax on individuals or corporations, investment is flocking to the Lone Star State and boosting industries throughout the state’s economy.
This November, Texas voters will decide on two pro-taxpayer ballot measures that would bolster the state’s reputation as the best place to do business in the country by prohibiting taxes on capital gains and financial transactions. Together, Propositions 2 and 6 will safeguard financial security, promote investment, and maintain a business-friendly climate that supports growth and innovation.
Proposition 2 would prohibit the state of Texas from imposing a tax on realized or unrealized capital gains of individuals, estates, and trusts. Capital gains taxes apply to profits from investments like stocks, real estate, or other assets. Since Texas does not currently levy a state-wide capital gains tax, Proposition 2 acts as a preventative measure that ties the hands of lawmakers who would try to raise taxes. This ensures households and businesses can plan, invest, and save without the threat of new capital gains taxes being enacted in the future.
Proposition 6 builds on this by banning taxes on securities transactions, like stock trades, and blocking occupation taxes on those working in the securities industry, including banks, brokers, and dealers. Like Proposition 2, it preemptively blocks tax hikes and creates certainty for investors and businesses, ensuring routine investment activity isn’t subject to unpredictable levies. Together, these measures create a stable tax environment that supports entrepreneurship and cements Texas’s reputation as a state that is open for business.
A quick survey of the state’s tax system illustrates why these two ballot measures are especially important for taxpayers. Texas relies primarily on sales and property taxes to fund government operations. Local governments, including school districts, counties, and cities, collect property taxes to pay for public services. By banning the imposition of capital gains and securities taxes in the future, Propositions 2 and 6 shield taxpayers from new financial burdens and prevent the gradual expansion of the state’s tax base.
A simple, predictable tax system is a cornerstone of a thriving economy. Businesses make decisions on where to expand their operations based on local tax climate, regulatory certainty, and the ability to reinvest profits without interference. By enshrining these safeguards into state law, Texas signals to entrepreneurs and investors alike that it values long-term capital formation and innovation. This ensures Texas maintains a competitive edge over other states that may be raising taxes or adopting more aggressive regulatory policies.
Other states’ missteps demonstrate why Propositions 2 and 6 are so important for taxpayers. Proposals for financial transaction taxes in New York and New Jersey during the COVID-19 pandemic alarmed investors and jeopardized retirement accounts, even prompting discussions about moving the Nasdaq stock exchange to another state. Although both states ultimately abandoned those taxes, the episode illustrates the harm spendthrift lawmakers can do without adequate legal constraints on their powers.
The planned Texas Stock Exchange, backed by BlackRock and Citadel Securities, illustrates how the state is increasingly becoming a major player in the financial sector to better compete with states like New York and Illinois. By banning both capital gains taxes and occupation taxes on securities, Propositions 2 and 6 will create the regulatory certainty that will allow capital markets to thrive in Texas. Moreover, preempting these taxes ensures that a Texas-based stock exchange can flourish, attracting both capital and financial talent to the state.
Financial firms have already begun fleeing jurisdictions with heavy-handed tax and regulatory policies for more welcoming destinations. From 2019 to 2023, nearly 160 Wall Street firms moved their headquarters out of New York, taking approximately $1 trillion in assets under management with them. Capital is highly mobile, and states must be careful to craft business climates that actually reward risk-taking and entrepreneurship rather than drive it away.
These measures also protect taxpayers by promoting sound governance. By taking the option of new taxes off the table, lawmakers will be incentivized to manage existing resources more prudently, rather than seeking additional revenue through new levies. This approach will, in turn, encourage more responsible spending and enhance predictability for households and businesses alike.
Texas voters should carefully weigh the long-term fiscal implications of Propositions 2 and 6. These measures are more than technical tax reforms, they are a thoughtful decision about the kind of economy Texas wants to foster. Should voters approve them, Texas will maintain a competitive edge over high-tax states like New York and California all while putting the interests of taxpayers first.