The COVID-19 pandemic and government response caused a sharp economic downturn and massive unemployment. Going forward, tax policy should be carefully weighed on how to efficiently raise revenues with the least adverse effect on economic recovery in Texas.

Key points:

  • Taxation exists on three planes: what you earn, what you own, and what you buy. Corporate taxation is often treated differently within each of these categories.
  • Taxes are necessary to fund government activity, but they can distort economic behavior.
  • Raising taxes in a recession is especially problematic because households already have less income, business revenues are lower, and employment opportunities are restricted.