Texas prides itself on being a low state. There is no question that Texas’ current economic success is at least partly due to its relatively low tax burden. Many companies – and workers – relocate to Texas to avoid high business taxes and personal income taxes levied in other states. In this recent article, the New York Times quotes Louisiana governor Bobby Jindal: “You go to Dallas, you go to Houston, and there are entire neighborhoods that are filled with our neighbors from Louisiana.” The jobs are there, he argued, because Texas does taxes right. TheWashington Times agrees, noting about 225,000 people move to Texas from California each year to escape that state’s high taxes.
On the other hand, your textbook argues that the lack of a personal income tax makes it harder for Texas to get its fair share of federal grant money, much of which is distributed based on formulas that favor high-tax states. Of non-federal sources, a lot of state revenue comes from the sales tax, which – despite exemptions to favor the poor – is considered regressive.
Write a 3 page essay explaining Texas’ tax system. Tell your reader the state’s important sources of revenue, and discuss the advantages and disadvantages of our current system. Finally, if you were a Texas legislator, what changes, if any, would you favor in our state tax system?