The Texas State Legislature voted to send an amendment to voters this November that would prohibit the legislature from enacting taxes on realized or unrealized capital gains of an individual, family, estate, or trust, including a tax on the sale or transfer of a capital asset. The amendment would not apply to property taxes, sales taxes, use taxes on goods and services, or general business taxes on business activity.

A capital asset is property held for personal investment, like stocks, bonds, real estate, and personal vehicles. Realized gains are the profits an individual makes from the sale of that investment, while unrealized gains are the potential profit an individual could make if they sold that investment at its current market value.

Sen. Charles Perry (R-28) authored the amendment. He said, “The state’s failure to prohibit the imposition of a capital gains tax leaves open the possibility that a future legislature could attempt to impose such a tax, potentially undermining Texas’ economic competitiveness. Capital gains taxes, whether on realized or unrealized gains, could discourage investment, slow economic growth, and reduce job creation.”

Currently, there are eight states, including Texas, that do not tax capital gains. Like Texas, the other seven states also do not tax personal income. The states include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, and Wyoming.

This amendment follows several other tax preemptions approved in Texas. In 2023, Texas voters approved Proposition 3, which prohibited the legislature from enacting a wealth or net worth tax. The vote margin was 67.9% to 32.1%. Texans also approved Proposition 4, which prohibited a state income tax, in 2019 with 74.4% of the vote.

In Texas, a two-thirds vote is required in both chambers to place an amendment on the ballot. The amendment was introduced as Senate Joint Resolution 18 (SJR 18). It passed in the Senate on March 18 by a 24-6 vote with one absent. The House passed an amended version of SJR 18 on April 28 by a vote of 104-26, with 20 not voting or absent. The Senate concurred with the amendments on May 5 by a 25-6 vote. All voting Republican legislators supported SJR 18, while Democrats were divide,d with 40.7% voting in favor of the amendment.

This is the second amendment certified in Texas for the November ballot. The first amendment would prohibit laws that impose an occupation tax on a registered securities market operator or a securities transaction tax.

Since the adoption of the Texas Constitution in 1876, Texans have decided on 711 ballot measures, all constitutional amendments—approving 530 and defeating 181 measures.