Texas Public Policy, Criminal Justice & State Finance Practice Test 2025 - Free Practice Questions and Study Resources

Franchise taxes and sales taxes are indeed major sources of revenue for Texas state finance. The state of Texas operates without a personal income tax, which distinguishes its revenue system from many other states. Instead, it relies heavily on the sales tax, which is collected on a variety of goods and services purchased by consumers. The franchise tax is a type of business tax applied to businesses operating in Texas, providing a significant contribution to the state’s revenue.

This revenue system is important for funding various state programs, including education, public safety, and infrastructure. In Texas, the combination of these taxes allows for a stable source of funding while also promoting economic growth by not imposing a state income tax, which can be a deterrent for individuals and businesses considering relocation to the state.