Friday, November 12, 2010

Where does the money come from? The Texas Budget

The state of Texas receives money from several funding sources, with about half of its income (approximately $44 billion in 2010-2011) coming from the state sales and use tax rate of 6 1/4% (.0625).   City, county and transportation authorities can also collect sales taxes, but the combined tax can be no more than 8 1/4% (.0825). The Sales and Use tax is imposed on
all retail sales, leases and rentals of most goods, as well as taxable services.
Sales tax is highly dependent on consumption, luckily, Texans have been willing to spend money so revenue was actually up by 2.2% by June 2010.

Motor Vehicle Sales and Use taxes make up the second largest source of income for the state and the Texas Franchise Tax is the third largest source of general revenue.  This tax collects 0.5 to 1.0% of  the margin from all corporations, Limited Liability Companies, Partnerships (with exceptions), Professional Associations,Joint Ventures, Business Trusts, and Other legal entities chartered in the State of Texas.  But what the hell is Margin?
Margin equals the lowest of three calculations:
  • total revenue minus cost of goods sold;
  • total revenue minus compensation; or
  • total revenue times 70 percent.

Here is a table from the Window on Open Government that details the General Revenue fund sources.


 As you can see revenues from the general sales tax, the motor fuels tax and alcoholic beverages taxes are up slightly, but revenues from all other funding sources are down, with total tax collections down by 2.5% and non tax collections down by 4.7% lowering General Fund Revenue by about $9 billion, a hole Texas can't really afford right now.

Texas also receives money from the federal government, about $55.1 billion during the 2010-2011 biennium.  In 2005 (according to the latest figures available by the Tax Foundation) Texas received $0.94 per dollar of taxes paid by Texans to the federal government.  So Texas is getting most of its money back and only actually contributing $0.06 to federal programs. Looks like we are getting off pretty cheap, especially compared to states like California, that only received $0.78 per dollar paid in income taxes.

Texans as a general rule are allergic to taxes and raising tax limits is tantamount to political suicide, but can we really afford to keep taxes this low???  

My next post will detail where the tax money is spent in Texas.

1 comment:

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