Texas Sized Tax Reform?
During the last election, Texas voters overwhelmingly approved a state constitutional amendment prohibiting a state income tax, solidifying Texas’ position among the 8 U.S. states with no income tax. However, that doesn’t mean Texas has low taxes. 57% of the state’s revenue is collected via sales taxes with another 42% from taxes on other goods and transactions (gas, cigarettes, etc.). Plus, business owners pay an additional franchise tax and property taxes (funding local priorities) which equal $33 billion in just the 6 largest counties. It is also interesting to note that local governments spend up to $557 million each year just to assess and collect their taxes.
Some in Texas are now suggesting a single rate consumption tax to replace all taxes, including payroll taxes. It would work much like a sales tax but only on new goods and services with the most common exception being a rebate to those living on income below the poverty level. The idea being a fair distribution of the tax burden, incentives to reuse and recycle, savings encouraged over consumption, and lower cost of tax compliance.
If this topic interests you, the Texas Society of CPA’s recently published an excellent article providing more detail and highlighting where the idea is already gaining traction nation-wide. You may access their article here.
[This article is not tax advice. Please consult your tax advisor for specifics.]
[Constructive comments worthy of licensed professionals are welcomed below.]