Research Paper: Texas And The State Income Tax

Introduction

In our nation today, taxes are what represent the people and our government. Political standings also rely tremendously on the viewings of taxes. Having these taxes are very important because it is what shapes our state into what it becomes. It is beneficial for the community that these taxes are spent wisely and can create openings for all. I personally believe that state with no state income tax flourish more than states with these taxes. It creates many opportunities for everyday people and businesses big and small. It is important that citizens pay these taxes as they are seen as beneficial.

Texas has always been an excellent state to live in and have businesses because of the lack of income taxes. Texas ranks at the top when it comes to businesses. These taxes have been absent for a long time, and the State Constitution forbids them. Texas, however, isn’t the only state without them. There is a total of nine states that don’t have these taxes which are Washington, Nevada, South Dakota, Wyoming, Florida, Alaska, and Texas. Each state has its differences and regulations that make them unique, just because they have do not have a state income tax doesn’t mean that they are cheap to live in. Out of these seven states there is only one that ranks in the top ten states to live. The other six are ranked at thirty and below. Despite this, these few states are creating stepping stones for the future of our economy. With the population increasing every year in Texas we can see why no income tax in a huge win for everyone. With out the tax on personal things we can see a big increase on the state’s growth and popularity. Texas officially decided to abolish this tax in 1993, when voters were quick to act on this matter. Texas has an important pro-growth tax code which its no income tax policy has made it a key pillar of our economy today. “Texas’ tax structure ranks 15th most competitive in the Tax Foundation’s 2019 State Business Tax Climate Index” (Lucci, 2019).

According to this article Texas is a very competitive state when it comes to taxes. Texas has to rely mainly on sales tax to provide revenue since its lack of income tax. According to Lucci, “Texas brings in 35. 4 percent of total revenue from sales tax compared to a 23. 6 national average and a 43. 8 percent of their total revenue from property tax compared to a 31. 5 percent national average”. This shows that Texas has made up for not having an income tax by having a higher tax on sales and property. State income tax functions much the same as federal income tax, people must report back with their income, which includes wages from jobs, investments and gains from property and other sales. This allows for deductions to be made, just like federal income tax. These taxpayers can usually pick from filing a paper tax return or using an online return for paying their tax. One of the main differences between these two is that state income tax comes in at a little bit lower rate. Each state has its own system for regulating tax brackets, which are based off of income and filing statuses. One thing to consider when comparing these two types of taxes is that states that have no income tax usually have a higher sales tax to make up for revenue missed. States with no income tax aren’t usually cheaper to live in, despite living in an income free state usually it’s made up for in another form of tax. All states must create a form of revenue and they do so by creating taxes on various things such as a sales tax, property tax, fuel tax, etc. The list could go on and on. Despite issues some states face with having no income tax, some states tend to find balance between low budgets, quality places to live, and affordability. Another factor that usually contributes to whether or not you live in an income tax free state is your political standings. The Liberal group usually like income taxes and social programs, conservatives usually dislike these income taxes and favor to minimize the government’s control. There are plenty of benefits that come along with no state income tax, such as that it gives the states government more money to put towards public programs. This allows more funding to be put into the community, like education, infrastructure, and jobs. Another benefit is that you don’t have to spend as much on personal things, so this could help save a little bit of money. Also, you don’t have to rely on public transportation, so you might not see a lot of buses or lower quality transportation. If state decides to spend that tax money wisely, everyone can benefit from it and not just them. Some drawbacks of not having an income tax is that other taxes are a lot higher. Having to pay a higher tax on sales and property taxes can affect your budget. It could have a negative affect upon your finances, which probably is not the best thing to have.

Conclusion

I personally believe that there are many ways to create a simpler solution to this matter. I think that having a general tax on things is fine and all, but creating a tax on every single thing purchasable is a little much. I understand tax on property, and things in that department, but having a tax on food shouldn’t be allowed. I believe as people we are entitled to food and it should not cost extra to buy that necessity. Politicly, this could cause major problems as our leaders only care about money. One way to abolish this problem is to tax higher on other things if they see this as such a problem. I believe this that would cause some problems, but is overall worth it in the endgame. Having the right to have no taxes on food would be an overall win for everyone and we could see the same amount of revenue come across if we just play smart.