Essay Assignment No. 5
GOVT 2306
Summer 2000
Milton J. Sweet
In this state, we believe that strong government and personal income tax are “un-Texan”. Texans have the dubious honor of being at the bottom of the list of states in many areas. Some of these areas include teachers’ salaries, SAT scores of our children, classroom crowding, and job training. We are at the top of the list in other areas, including social security beneficiaries, non-violent crime, violent crime, and inmates on death row. All of these areas require action, and action requires money. In this paper I will discuss what makes a fair tax, how we tax, and what we should do.
In order to be fair, it is generally understood that a tax should be equitable, balanced, and adequate. It should place no undue burden on one class individual over another. It should cover a broad base of business and persons. It should also be able to grow with the needs of the state without frequent tax hikes.
In Texas, we get much of our revenue from sales tax, motor fuels tax, and sin tax. All of these taxes are regressive; they hit a low-income family much harder than a high-income family. Low-income individuals are also more likely to smoke, drink in excess, and buy lottery tickets than higher income families. This is shifting more of the tax burden to the poorer family. Our system therefore fails the equity test.
Our local taxes depend heavily on property tax and sales tax. When property values fluctuate with booms and busts of the economy so does our tax base. In Texas the franchise tax applies only to corporations, and not other forms of business. Corporations carry 60% of the state tax burden to the individuals 40%. Our system therefore fails the balance test.
With the oil boom of the ‘70s and the tax revenue it generated, Texans thought they would never have to worry about money for the state treasury. With the oil bust of the ‘80s, the lost jobs, and dropping property values, worry became very real. Texas was able to stave off an income tax by raising property tax rates, bringing in para-mutual betting, and setting up a state lottery, but not forever. Now according to Vice President Al Gore last week, Texans are again running in a deficit. Our system therefore fails the adequacy test.