Texas’s State Tax System Essay Example

Texas has an advantage over most other states in attracting businesses, in that its constitution won’t allow for an income tax to be levied on businesses and individuals.  Although there is a draw to the idea of not paying income taxes, the state government can’t run without generating revenue.  This revenue is mainly attained through a more equality-based form of collecting taxes vice utilizing an equity type approach to the collection of taxes.  While having no income taxes is attractive to businesses, Texas should impose a more progressive tax system through the implementation of an income tax because it would cause a more equitable spread of responsibility for state revenue generation, create opportunities for more of the state’s citizens, and is the job of the state government to promote fair reasonable taxation across all income groups.  

Progressive versus regressive tax system, really is just a play on equity versus equality in the tax system.  In this situation a progressive tax system is similar to “equity” and is like the federal income tax where the rate at which an individual is taxed rises as their income increases so, people with lower income pay less than those with a higher income (Champagne et al).  Where a regressive tax system would be “equality”, meaning that everybody in the population pays the same percentage based more so off of consumption rather than earned income.  Thus, making those with smaller incomes carry a higher tax burden relative to that income.  Currently Texas has one of the most regressive tax systems in the United States, due to their tax system being based off of consumption and not including a progressive income tax.  Therefore, Texas’s bottom 20% of earners paid about 13% of their income to state tax compared to the top 1% paying only 3.1% in 2018 (Champagne et al.).  

There are some steps that Texas’s legislature could take to move the needle of their tax system from regressive to a more progressive system.  Adding an income tax with a progressive taxing scale would be simplest but not easiest fix.  Therefore, utilizing targeted refundable tax credits aimed at the lower income population and phasing out at the higher incomes would decrease the lower income populations tax burden (O'Neill).  Although this would have to be coupled with some other type of revenue generating tax plan for the higher income population to make up the difference.   The end goal of molding Texas’s tax system should be for the lower income population to be able to keep a higher percentage of their total income while the state still receives the tax revenue required to continue governing the state.  

Big business is a major contributor to the political parties that run the Texas government, their hundreds of millions of dollars in donations indisputably having an influence on the decisions made during the biennial legislative process (Champagne et al.).  Becoming more progressive would mean that the rich would be taxed at a higher rate than they currently are, these are the same people that run big business so they would not be in support of altering the system out of their favor.  Without an income tax there isn’t an easy way to take major steps toward a progressive tax system and currently there is no income tax for Texans, and this will be nearly impossible to overcome as it will require an amendment to the Texas Constitution.   

Texas’s state tax system has the ability to promote equity of taxation across the income groups and it should.  State politicians should use the tools they have control over to raise the standard of living of their constituents as that is who they represent and owe their seat too.  Small changes in the tax code can have profound effects over the standard of living for the state’s population.  The legislators will have to play a balancing act with tax reform to keep the state business friendly and still provide equity of taxation to its population.  

Although, Texas is a very business friendly state it is not a lower income friendly state due to its regressive tax structure.  The rich keep getting richer, and the wealth gap continues to increase, it is the states politicians’ job to do what ever they can to fix this and help the entire state prosper not just those filling their coffers.  Texas should impose a more progressive tax system through the implementation of an income tax causing a more equitable spread of responsibility for state revenue generation, creating opportunities for more of the state’s citizens, this being the job of the state government to promote fair reasonable taxation across all income groups.