Texpatriate on State Income Tax

The following Editorial was written by Noah M. Horwitz and concurred to by George Bailey & Andrew Scott Romo. Olivia Arena dissented from this Editorial, but did not write a response.

The Austin Chronicle recently commented on developments related to the Special Election in House District 50. From what I understand, the three Democratic candidates are desperately trying to outflank one another to the left in the somewhat yuppie district. One of these such issues is taxation. Celia Israel, arguably the most progressive candidate in the race, has come out swinging in favor of a State Income Tax, and has berated her opponents for not doing so.

Texas, of course, is one of nine states without an income tax. The most recent public official to have the untethered temerity to support one was Bob Bullock, the Lieutenant Governor from 1991-1999. Bullock supported the tax, much to the chagrin of then-Governor Ann Richards, who opposed a tax. Richards, most Conservative Democrats and Republicans joined together to push the idea down.

The Texas Constitution (Article 8, Section 24) places some restrictions on possible State Income Taxes. Most notably, any tax must explicitly be approved by the voters. Given that referendums take place in odd-numbered years, where turnout often dips into the single digits, this means that a State Income Tax’s enactment would be extremely unlikely.

But aside from the infeasibility of a State Income Tax’s chances to pass, I would like to talk about why it is bad idea as well.

Once upon a time, Texas did have an income tax. In 1863, the Confederates implemented a somewhat harsh rate upon all its denizens. Following the end of the war, Republicans controlling the State continued the punitive tax. Only in 1871 was it finally abolished, and the State did not look back.

Individuals who conflate income taxes with progressive rates, or property taxes with regressive rates, are severely misinformed. For example, the Commonwealth of Massachusetts (in which I currently sojourn) imposes a flat-rate income tax of 5.25% on all its citizens. Flat rates, of course, are instinctively regressive. This means that the infamously liberal Massachusetts actually boasts a severely regressive tax system.

Texas’ property taxes are regressive too, however. Combined with a harshly regressive and high sales tax, I completely empathize with individuals on the left who believe raising a State Income Tax is the best way to improve Texas–though I respectfully disagree. Rather, Texas should focus on creating more fair and equitable property taxes and sales taxes.

I have always thought that it is not the duty of the State to duplicate the taxing authority of the Federal Government. Accordingly, the State taxes both property and sales, rather than income. I also ask my fellow liberals why so many businesses are relocating to this State and why our economy is booming? Do you think they like the way Houston looks or how well our sports teams are doing?

The reason, of course, is that Texas boasts comparatively low regulations and taxing burdens compared to other large States, and the lack of a State Income Tax is a big part of that. Now, I will be the first to admit that the Republican Party takes this too far. Nobody relocates their business to Texas because our fertilizer plants lack safety regulations and nobody moves here because we refused to expand Medicaid. Those actions do not affect jobs and employment, but imposing a massive tax on incomes does.

Instead of stifling business, Texas should raise revenue by create new business. Legalizing gambling and marijuana come to mind immediately as good ideas. Further, property taxes should be reformed to ensure a more progressive makeup. Among the solutions that come to mind is reworking the system to operate progressively, where you pay a higher property tax percentage depending on how much your property is worth. Additionally, the system would be protected against bubbles by ensuring that taxpayers pay the rate on the lowest value the property was appraised at in the last three years.

But to raise revenue by imposing a State Income Tax would be a horrible mistake.

The Texpatriate Editorial Board is comprised of Olivia Arena of Austin, George Bailey & Noah M. Horwitz of Boston and Andrew Scott Romo of New Orleans.

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One thought on “Texpatriate on State Income Tax

  1. Pingback: Texpatriate | In re eliminating Property Taxes

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