Texas can be referred to as a low tax state due to its current tax system. The state is currently ranked at number 48 among the states in relation to the taxes that individuals pay relative to their personal income (Council of State Taxation, 2009). On the other hand, according to the taxes paid by businesses relative to gross product, Texas State is considered a high tax state, ranking 18th among states (Council of State Taxation, 2009). The current tax structure in Texas is as represented in the table below based on the individuals and businesses. The table below indicates how individuals and businesses pay taxes in Texas based on property tax, sales tax, franchise/corporate tax, personal tax, and personal income tax.
The above table reveals that individuals Texas are exempted from some taxes, which reduces the tax burden for them in the state. The tax burden in Texas is currently 37 percent below the national average while that of businesses is 8 percent above the national average. About 61 percent of the taxes paid in Texas State and local governments are paid by the business (State Finance Report, 2011). However, the lack of income tax in Texas State combined with other factors makes the state an attractive location for corporate headquarters since it provides a better environment for the incubation of new businesses. Individuals also have a higher advantage over other states upon retirement since they have a lot to save during their employment.
On the other hand, this implies that the state heavily relies on sales and property taxes. The disadvantages of relying heavily on property taxes include tying the state’s tax system to the production and sales of commodities. This places a higher tax burden on the capital intensive business (Combs, 2013). The major disadvantage of this regressive tax system is that, the lower income families see higher effective tax rates than the upper income families (Combs, 2013). Texas Gov. Rick Perry complained of this regressive tax system in Texas during his presidential campaigns in defense of the poor families claiming that, in Texas, the tax burden is disproportionately shouldered by those families living below the poverty line, which is consistent with a newly released data from the Census Bureau (Combs, 2013).
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This table indicates the major tax contributions in Texas State from different sectors in the economy. The above table reveals that the agricultural sector is the highest taxed sector followed by utilities and the financial sector. Services, especially related to individual incomes are the least taxed in the state. In my opinion, if I were a legislator in Texas, I would ensure that the income taxes on individuals are progressive such that the people earning higher salaries pay more taxes than the low income earners. In this manner, the low income earning families would not bear most of the tax burden. Additionally, I would reduce property and sales taxes for businesses. This would reduce the costs of production, thereby reducing the costs of commodities for the low income earners. The current tax system in the state loses a lot of revenue from sectors such as services, industry and residential goods respectively, which inversely reflects on the poor (Combs, 2013).
Combs, Susan. Revenue by Source for Fiscal Year 2013 (All Funds, Excluding Trust). Texas Transparency http://www. texastransparency. org/State_Finance/Budget_Finance/Reports/Revenue_by_Source/
Council of State Taxation, http://www. cost. org/ 2009