The Facts
- Consumption taxes or sales taxes are generally simple, transparent, and levied only on the end-user.
- Since the sales tax only affects personal consumption, income, investment, and job creation are not penalized.
- At the state level, Texas levies a 6.25% sales tax rate on consumers, slightly above the national median of 6%.
- In addition, local governments are also allowed to add a 2% levy to the sales tax rate for a maximum combined rate of 8.25%.
- Texas’ heavy reliance on consumption taxes is an attractive feature of its tax system for businesses and entrepreneurs.
- As of August 2012, the Texas economy had helped produce 28 consecutive months of increased state sales tax revenues, according to the Texas Comptroller of Public Accounts.
Recommendations
- State and local governments should continue to rely on consumption taxes as their main revenue generators.
- Any increase in the sales tax base or the sales tax rate should be accompanied by reductions in other taxes.
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