Now that you have a basic understanding of the budget and revenue systems, we can begin to discuss why a state income tax is the best solution for our current problems. Key facts about a Personal Income Tax include:
- The State Constitution Guarantees:
- 2/3 of the revenue from a state income tax must be used to cut property taxes
- The remaining 1/3 can only be spent on education
- Voters have control over the rate of a personal income tax and any future property tax increases
- State income tax payments are deductible from taxable income when calculating the federal income tax.
- Most Texas families would pay less in taxes overall under a state/local tax system that included an income tax.
Now if you aren't convinced by the above facts, because you are still curious as to why we need to pay another tax, then recall that our current tax structure does not provide for a prosperous future. In the upcoming session, the Comptroller of Accounts estimates a $8.1 billion dollar shortfall! Thus, Texas needs an additional source of revenue. What should it be?
The sales tax can't carry more of the load, because in Texas the sales tax is near its limit. The Texas' state rate of 6.25% is tied for the 7th highest in the country; no state has a rate of over 7%. Not only do Texans pay high sales taxes, but the sales tax is highly regressive. This is because lower income families tend to consume a much higher proportion of their income than do higher income families who can afford to invest surplus wealth.
An income tax, as opposed to increased sales taxes, would greatly improve the fairness of Texas taxes. According to the Texas Comptroller of Public Accounts, those making under $24,899 pay approximately 12.5% of their income on Taxes. As you climb up the income ladder, individuals pay less taxes as a percentage of their income. When you look at those making over $109,182, you see that they pay a little over 4% of their income!!! Texas Impact, along with other organization such as the Center for Public Policy Priorities, call for a revenue system that takes into account a person's means and requires them to contribute accordingly. A just system is a system that does not take a disproportionate amount of money from those who do not have money to give.
An income tax would help balance the unfair burden placed on low and middle income families by the rest of the Texas tax system. According to the Comptroller of Accounts, those making under $24,899 would pay 7% of their income, if an income tax were implemented. Those making over $109,182 would also pay 7% of their income. This is a giant step towards justice.
