Texas Voters Lock a Capital Gains and Estate Tax Ban Into the Constitution

Texas voters went to the polls on November 4, 2025 and approved two constitutional amendments that permanently bar the state from ever taxing capital gains, estates, inheritances or gifts. Proposition 2 and Proposition 8 both passed easily as part of a slate of 17 constitutional amendments on the ballot, with KUT reporting that 16 of the 17 measures passed, most with well over 60 percent approval.

What changed

Texas already has no state income tax, no capital gains tax and no estate or inheritance tax, so neither amendment changes what residents owe today. What they do is close the door on the legislature ever adding those taxes without another statewide vote to amend the constitution again. Proposition 2's ballot language, reported by FOX 7 Austin, prohibits a tax on the realized or unrealized capital gains of an individual, family, estate or trust, a scope that also covers the kind of unrealized-gains tax proposals that have circulated at the federal level. Proposition 8 separately prohibits any future tax on a deceased person's property or on the transfer of an estate, inheritance, legacy, succession or gift, and passed with about 72 percent of the vote according to state election returns.

Who is affected

The amendments matter most to two groups: current Texas residents with meaningful investment portfolios, business equity or family wealth who want certainty that the state's tax-free treatment of gains and transfers cannot change with a future legislature, and people currently living in a high-tax state who are weighing a move to Texas as part of retirement, a business sale or an equity liquidity event. For that second group, the amendments remove one layer of uncertainty from a relocation decision, since the destination state's tax treatment is now fixed unless voters change the constitution again.

The after-tax math

Example, using round numbers: a couple who sells a business or a concentrated stock position for a $5,000,000 gain while living in a state with a combined state and local capital gains tax rate of roughly 10 percent would owe about $500,000 in state tax on that sale alone, on top of federal capital gains tax. The same sale completed while domiciled in Texas would trigger no state-level capital gains tax, leaving that $500,000 in the household's pocket, before federal tax. On the estate side, a family passing $10,000,000 to the next generation in a state with a separate state estate tax could face a state-level bill in the hundreds of thousands of dollars depending on that state's exemption and rate; in Texas, there is no state estate tax to calculate.

Moves to discuss with your advisor

Households considering a move to capture this treatment often find it worth discussing residency and domicile requirements with a CPA, since establishing Texas residency for tax purposes generally requires more than owning a home there, and the state you are leaving may still claim you as a resident for a period of time. Business owners planning a future sale may want to talk through the timing of a move relative to a transaction, since moving after a sale is negotiated can raise separate questions about which state taxes the gain. None of this is a reason to relocate on its own, and households with strong ties to their current state may find the analysis is about more than tax alone.

What to watch

Texas joins a small group of states, including Florida and several others with no income or capital gains tax, that are increasingly marketing this treatment to high earners and retirees from higher-tax states. Whether other states pursue similar constitutional locks, and whether Congress revives federal proposals to tax unrealized gains that Proposition 2's language appears aimed at pre-empting at the state level, are both worth watching into 2026.

After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.