Answer to Question 1
Answer:
A. Absence of Texas's personal income tax
1. positives: Conservative view
a. makes it more difficult for the state to raise tax rates
b. that raising it would likely have a negative impact on the state economy
c. state government is restrained
1. expenditures are essentially limited to current revenues plus increases that result from economic growth
2. coupled with the balanced budget provision, it limits the growth of government
2. negatives: Liberal view
a. current system is far too restrictive
b. Some vital government programs, such as education, deserve more government funding from an income tax
c. addition of a state income tax, unlike the sales tax, would be deductible from federal taxes
Answer to Question 2
Answer:
A. Regressive tax
1. system of taxation whereby the tax rate increases as income decreases
2. places a higher burden on the poor than the wealthy
B. Texas sales tax
1. largest single component of tax revenue
2. sales tax revenue increased 39 percent from 2010 to 2014
3. one of the highest sales tax rates in the nation
4. 6.25 percent tax is on the retail price of selected goods and services sold in the state
5. cities can assess their own 1 percent tax, which is added to the state levy
6. Special districts, such as those for parks, crime control, or sport facility construction, often add another penny to the actual tax rate
7. combined local and state tax rate can range as high as 8.25 percent
C. Regressive nature of Texas sales tax
1. sales tax does not apply to all purchases
2. high sales tax on purchases burdens a low income family and makes their tax payout a greater percentage of their income
3. discourages spending, which has a negative impact on both jobs and the economy
D. Factors that lesson the regressive nature of Texas sales tax
1. many of the expenses of a financially disadvantaged family are sales tax-exempt
2. food and prescription and nonprescription drugs, medical services, housing, and utilities are all free from the state portion of the sales tax
3. sales tax only applied to prepared food
a. family earning more money would be likely to eat out more often paying more food taxes
4. motor vehicle sales tax to be a part of the broader tax
5. different services are taxable
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Personal Finance (5th Edition) (The Personal Series in Finance)