No Capital Gains Tax in Texas: What It Means for Businesses and Residents
In 2025, the Texas Legislature passed House Joint Resolution 6 (HJR 6), placing a proposed constitutional amendment on the ballot for the November 4, 2025, election. If approved by voters, the amendment would permanently prohibit Texas from ever imposing a tax on individuals’ net capital gains. While Texas already does not levy a personal income tax, including on capital gains, this measure would codify that policy into the state constitution, preventing any future changes without a subsequent constitutional amendment. If passed, the law will take effect on January 1, 2026. This move is part of a broader strategy to maintain Texas’s reputation as a low-tax haven and a pro-business environment. It aligns with other economic developments, including recent federal and state-level updates to labor laws such as the expanded overtime protections under the Fair Labor Standards Act (FLSA), which will also impact the Texas workforce beginning in 2025.
Analysis
Texas’s current lack of a personal income tax has long served as a magnet for high earners, investors, and businesses. Codifying this approach through HJR 6 ensures future legislatures cannot reverse this policy without going through the arduous process of another constitutional amendment.
Assuming it passes, the amendment will provide long-term financial predictability for investors, entrepreneurs, and business owners, particularly in sectors like real estate, finance, and technology. These stakeholders benefit from knowing that future capital gains—realized or unrealized—will not be subject to state tax, incentivizing investment and asset retention within Texas.
For residents, especially those with growing investment portfolios or planning for retirement, this could represent significant long-term savings. The law complements new labor developments like the expanded overtime eligibility set to take effect nationally in 2025, which will increase wages for lower- and middle-income workers. Together, these changes create an economic environment where upward mobility could be supported through both wage protection and tax shielding for long-term investments.
However, critics warn that the capital gains amendment primarily benefits the wealthy and could widen inequality. They argue that while higher earners receive greater tax advantages, the state risks limiting future policy flexibility—particularly in areas like education funding and infrastructure. Additionally, the federal overtime law’s increased payroll obligations for businesses could offset some of the tax savings realized through capital gains protections.
Texas’s proposed constitutional ban on capital gains taxes reflects a deep commitment to economic conservatism and low taxation. While the benefits are clearest for high earners and business owners, there are meaningful implications for broader economic stability and growth. When paired with updated labor protections such as expanded overtime eligibility, the policy may create a nuanced landscape: tax relief on long-term wealth accumulation alongside wage growth for working-class Texans. Nonetheless, this measure must be met with continued scrutiny to ensure it does not further entrench wealth inequality or strip future policymakers of tools needed to respond to fiscal challenges. Texas’s leadership must balance tax freedom with strategic investments that uplift all residents—not just those with capital gains to protect.
Engagement Resources
- Texas Public Policy Foundation
A conservative think tank that supports HJR 6 and promotes limited taxation and economic growth.
https://www.texaspolicy.com - Every Texan (formerly Center for Public Policy Priorities)
Offers policy research and advocacy focused on tax equity, labor protections, and economic justice.
https://everytexan.org - S. Department of Labor – Wage and Hour Division
Provides detailed information on new overtime eligibility and compliance standards under FLSA.
https://www.dol.gov/agencies/whd