What’s a Surefire Way to Jolt the Texas Economy?

Abolish the margin tax.

Don’t tinker with it. Don’t try to “fix” it. Scrap it entirely-just like Senator Craig Estes proposed today-and watch as people, jobs, and capital flock en masse to the only state in the nation without a tax on personal income or business. Texas could literally cement its image as a business-friendly mecca for years to come.

That’s not just us talking either. Earlier, we asked the Tax Foundation to speculate how Texas’ economic competitiveness might improve relative to other states, assuming lawmakers eliminated the margin tax. Here’s what they said (also, see their recent post on the matter too):

So in other words, if the only tax reform lawmakers pursued next session were the elimination of the margin tax, Texas would radically improve its competitiveness, jumping to the top of the Tax Foundation’s State Business Tax Climate Index ranking for corporate taxation, improving from its meager 38^th place ranking now.  

Inevitably, any time a proposal like this is put forward, the other side attempts to squash it by questioning how the state will cope with the loss of revenue. So here’s the answer.

Any revenue loss can be made up from a combination of three sources: existing revenue growth (sales taxes are going gangbusters); added revenues from the influx of new people, businesses and capital relocating to Texas; and spending reductions (TPPF identified billions and billions of reasonable reductions last session, many of which were never adopted. See here, here, and here).

The time is ripe for serious tax reform in Texas, especially considering that other states are going the opposite direction and raising taxes of all manner (I’m looking at you California). It’s time to abolish the Texas margin tax.

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