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Pros and Cons of Regressive Tax Policy in Texas Essay

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Updated: Feb 24th, 2022

Introduction

Taxation has been a subject of heated debate since the foundation of the United States. The current state of affairs has not yet resolved the tensions: the left-wing representors support the ideas of high taxes spent on the common needs. Meanwhile, some libertarians see taxation as a form of organized theft: “the mass of ordinary working-class people have everything to gain by the abolition of taxation” (Tame 2). These debates are reflected in the tax policies of different countries of the world, and even within countries, those models can vary – the United States is no exclusion in this context. Texas is one of the nine states that does not have an individual income tax (Batheja 7). The state is also estimated to be in the bottom 20 on the property, sales, and corporate taxes (Batheja 7). However, despite the numerous supporters of this model and its undoubted advantages, the discussion continues due to the number of disadvantages this system demonstrates in the social support system. Hence, the Texas case becomes exceptionally peculiar in the context of taxation, as it appears to be a part of a broader discussion.

Advantages of Regressive Tax Policy In Texas

Firstly, some associate the Texas tax policy with high employment opportunities in the state. As Bobby Jindal claims, some neighborhoods in Dallas and Houston are filled with Louisianans (Batheja 4). As Aman Betheja understands it, “too many Louisiana residents are moving to Texas because that is where the jobs are, he said. The jobs are there, he argued, because Texas does taxes right” (2). That is why some states such as Georgia, North Carolina, and Ohio express their will to adapt to Texas’s taxation system (Batheja 7). Interestingly, it is calculated that “the luxury tax cost the federal government more in unemployment benefits than it ever brought up in as revenues” (Schlomach 4). Thus, there is a relation between regressive taxation and economic performance and employment in Texas.

Secondly, another argument for introducing the system is that it does not enlarge the social inequality, for which the regressive tax policy is sometimes blamed. The wealthiest people do not directly benefit from this system: they do not become more prosperous because of it. According to Brunori, the reason for that inequality and their incomparable wealth has little to do with the way taxation is organized (6). As he understands it, “George Soros, Sheldon Adelson, or the Koch brothers owe even a tiny part of their success to the tax system. The partners in Big Law or the Big Four accounting firms – all firmly entrenched in the top 1% – aren’t wealthy because the states have high sales or cigarette taxes. Rich folks getting richer has little to do with state taxes” (6). In other words, regressive taxation tends to be unfairly judged for social inequality, according to some opinions.

Disadvantages of Regressive Tax Policy In Texas

Nevertheless, there are some disadvantages to the current tax policy, which could affect Texas society. For instance, according to Spillman, the 2018 – 2019 budget was lower than in 2016 – 2017 by 6 percent (2). The drop in the state budget causes a lack of public spending. Therefore, public schooling, higher education, retired teachers receive less financing (Spillman 2). As a result, educational reformation lacks financial sustainability in the state (My San Antonio, 2019). In fact, in the upcoming years, public education’s state funding is estimated to lose about 3.5 billion dollars (De Matthews and Knight 2). These data demonstrate the effect the regressive taxation system has on public services like education in the example of Texas.

Moreover, one of the basic ideas behind taxation is the relocation of incomes so that the underprivileged groups The low social layers appear to be the most vulnerable to the regressive taxation: they pay between 11 and 13 percent and, thus, “spend a larger share of their income on sales taxes, raising the sales tax rate causes their total tax bills to grow relatively larger” (Spillman 4). In comparison, the highest earners in Texas pay about 2 – 5 percent (Sahadi 4). In a word, the argument of specific groups being underprivileged in a regressive taxation model seems convincing.

Conclusion

To conclude, the question of taxation has always been a subject of debate among various political ideologies and movements as it has a lot to do with the concept of human freedom. As a result, this problem’s reflection – the contradictory regressive taxation in Texas – becomes specifically peculiar. On the one hand, there are many vital considerations on how this model harms the community, favoriting the poor, and taking away the finances that could be invested in public services. Public schooling in Texas is shown to be an excellent example of this fact. On the other hand, there are also a lot of arguments in favor of regressive taxation. It is claimed to stimulate economic activity that guarantees Texas significantly more employment opportunities than its neighboring states. Moreover, some fairly point out that it is not the tax system that makes the wealthy people rich, so it is in vain to blame the regressive model for inequality.

Works Cited

Batheja, Aman. “”. The New York Times: 2020. Web.

De Matthews, David, and David S. Knight. “”. UT News. 2020. Web.

My San Antonio. “Public education reforms lack financial sustainability”. MYSA: 2020. Web.

Sahadi, Jeanne. “”. CNN Money: 2020. Web.

Spillman, Stephen. “Brown: Texas Has a Revenue Problem, and It’s Growing”. Houston Chronicle: 2020. Web.

Schlomach, Byron. “Progressive or Regressive, Is That Really the Question?”. Policy Perspective, 2006.

Tame, Chris. “Taxation Is Theft”. Libertarian Alliance: 2020. Web.

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