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The arbitrariness of our tax code

Wick Allison points out the winners and losers in Texas’ tax code.

Suppose you’re a young artist and you want to create a video installation. To do it, you have to buy lighting equipment. You will pay a sales tax. But suppose you run an ad agency and you have to buy lighting equipment to shoot a commercial. Good news! No sales tax.

Or maybe you run a small business and you need to buy a server to handle more web traffic. You will pay a sales tax. But if you are running a multimillion-dollar gaming company and you need a new server, no problem. You do not pay sales tax.

No matter what you are doing, if you buy a Coke or Dr Pepper, you pay a sales tax. But if you slake your thirst with bottled water, you do not.

These and hundreds of other special favors are threaded though the Texas tax code. In 1989, for example, the state created an exemption designed to encourage high-cost drilling in the Barnett Shale. The tax break must have worked. By 2009, there were 13,785 producing wells. The independents who first explored the field and sold out to major out-of-state energy companies are millionaires. But an exemption designed to spur that initial exploration still remains in the tax code, costing the state nearly $1 billion a year.

And on and on. Allison notes that the insurance industry is exempt from the “business franchise tax” (I presume he means the margins tax here). Keep that in mind when you write your next check for homeowners or auto insurance. The point of this is that when you hear Republicans talk about how we can only spend the money we have and we can’t “raise taxes”, what they’re really saying is that all of these weird, illogical, and often outdated tax exemptions are just fine with them. Which means that those of us who aren’t fortunate enough to be the beneficiaries of one of these exemptions are carrying the burden for those who are. It’s the Amazon issue repeated over and over again all around the state. You tell me if that makes sense.

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3 Comments

  1. No, it doesn’t make sense. That is why insurance lobbyists are abundant and insurance company contributions to certain races are so large. The only reasons bottled water should be taxed is that plastic is wasteful and doesn’t get recycled in Texas and neither does glass. It is not necessary except in places that don’t have a decent water system or good water wells. I don’t want to open the door to full taxation of food taken home to cook. I would keep that exception but bottled water from the roadside 7-11 type store tax it. We don’t need to give tax breaks for drilling. We have the gas and oil and prices are high.

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