Texas Revenues III GOVT 2306, Module 12 By PresenterMedia.com

Corporate Income Tax

Franchise Tax The franchise tax is a gross-receipts tax of 0.75 percent on businesses chartered or organized in Texas and doing business in the state. It is the primary tax assessed by state government on business. Keep in mind that businesses also pay property taxes to local governments and sales taxes to both levels of government..

Severance taxes are now falling because of falling prices. A tax levied on natural resources at the time they are taken from the land or water is known as a severance tax. The most important severance taxes in Texas are levied on the production of oil and natural gas. Severance taxes are now falling because of falling prices. Would you expect severance tax collections to be rising or falling?

Severance Taxes Severance taxes are important to the state, but they are not as important in Texas as in other energy states as a percentage of state revenues.

Falling oil and gas prices hurt Texas less than some other states.

Nonetheless, Texas collects more money from oil and gas taxes than any other state except Alaska.

Rainy Day Fund Revenues from oil and gas production fund the Economic Stabilization Fund, which is known as the Rainy Day Fund. It was created to help fund the budget in tight economic times.

Politics of Rain The Rainy Day Fund contains more than $8 billion. Should the legislature use the money to fund state services, return it to taxpayers as a tax cut, or let it sit? It takes a two-thirds vote to spend the Rainy Day Fund.

Oil and gas production has been growing. Why the recent increase in the fund?

Excise Taxes Texas state government levies excise taxes on motor vehicle sales and rentals, motor fuels, alcohol, and tobacco. Excise taxes are selective sales taxes, levied on a single item or class of items only.

Gasoline Tax The gasoline tax reflects the benefits received theory of taxation because money generated by it primarily goes to fund road maintenance and highway construction. Explain the benefits received theory of taxation. Those who benefit from a service pay the taxes to provide it.

The Texas gasoline tax rate of 20 cents a gallon is well below the national average of 30 cents a gallon. (The figure above shows the COMBINED state and federal gasoline tax rate in each state.)

What are sin taxes?

Sin Taxes A sin tax is a levy on an activity that some people consider morally objectionable, such as smoking or drinking. This is a joke. Not all professional services are taxed in Texas.

Non-Tax Revenue Sources 60 percent of state revenue comes from non-tax sources Federal funds Licenses and fees Interest and investment income Lottery Land income

Licenses and Fees Texans who wish to drive a motor vehicle, operate a business, practice a profession, go hunting and fishing, attend a state university, or sell alcoholic beverages must purchase licenses or pay a fee for the privilege.

Interest & Investment Income The state of Texas holds billions of dollars in cash and securities that generate dividend and interest income from their investment.

Funds Texas Teacher Retirement System (TRS) Trust Fund Employee Retirement System (ERS) Trust Fund Permanent School Fund (PSF) Permanent University Fund (PUF)

Land Income The state of Texas owns more than 20 million acres of land that produce revenue for the state from leases for agricultural use and for oil and gas production.

Lottery Since the Texas Lottery began operation in 1992 it has generated more than $24 billion for the state. Nonetheless, the lottery accounts for less than 2 percent of state revenue.

Sales by Game Pick 3 24 % Mega Millions 20 Powerball 20 Lotto Texas 14 Daily 4 8 Texas Two Step 4 Cash 5 5 All of Nothing 4 Scratch off tickets generate more money than other games, including Mega Millions and Powerball.

What You Have Learned What is the franchise tax? What are severance taxes? What is the Rainy Day Fund? What are excise taxes? What are the state’s most important sources of non-tax revenue? How important is the lottery as a source of state revenue?