Problems with current tax system in Texas:

Regressive

3rd in terms of regressivity

Unfair to business

Inadequate

Solutions:

Add progressive income tax

Lower sales tax rate

Challenge:

Difficult to keep discussion focused on tax facts

Most Texans not aware of facts

Rather focus on "corrupt politicians," etc.

Why have a progressive income tax:

Make tax system less regressive

Smith: tax based on ability to pay

Families in bottom 20 percent pay 13.9 percent of income

Top 1 percent pays 3.9 percent

Tax equity in business community

Actually have a corporate income tax (it's a secret)

Part of the franchise tax

Corporations pay either:

4.5 percent of profits

.25 percent tax on property

Large businesses owned by one person or partnership do not pay taxes

Corporate income tax paid by corporations

Personal income tax paid by business owners and partners

Lower other tax rates

82 percent of revenue comes from sales taxes

Possible to lower sales tax rates

Have to keep a sharp eye to make sure it actually happens

Benefits-received principle

High incomes result from the values of others

High incomes have more to protect from fire, theft, etc.

More protected by an orderly society

Reap benefits but only paying a small portion of the cost

Level playing field between haves and have-nots

Redistribution of wealth

Reduce the surplus resources wealthy have to get political power

Is this a proper function of government?

Income tax has worked at federal level and in other states

Has been progressive

Stouffer argues that the tax code as become less progressive over time, however

End subsidy by Texas taxpayers of other state budgets

"Americans living in forty-two other states reduce their federal income tax payments because they pay state income taxes."

Residents of states without a state income tax pay "full-fare"

What is the role of political culture in the debate over a state income tax?

Progressive v. Regressive

Definitions

Progressive

Regressive

Is the sales tax progressive or regressive?

How about the income tax?

Problems of business taxes

Tax shifting

Pass the tax on to the consumer

Supply-side economics

Tax wealthy less and they will save and invest which will stimulate the economy