Close Close
ThinkAdvisor
Palm trees in Florida

Regulation and Compliance > State Regulation > Texas

Texas to Vote on Wealth Tax Ban in November

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Voters will decide on a constitional amendment banning wealth taxation at the state level.
  • Democarats at the federal level and in other states have proposed wealth taxes, which opponents say are unworkable.
  • Other red states might follow Texas' lead, a Tax Policy Center associate says.

On Nov. 7, Texans will vote on an amendment to the state’s constitution to prohibit legislators from enacting a wealth tax.

“Texas is being proactive by introducing Proposition 3, prohibiting a wealth tax at the state level,” said Jeff Bush of The Washington Update.

“It’s undoubtedly accurate that states have a level of self-determination regarding their taxing authority,” Bush told ThinkAdvisor Friday in an email. “Just as Texas has a constitutional prohibition on income taxes, they are within their bounds to put forward the proposed amendment to prohibit wealth taxes.”

If successful, Bush continued, “it will be an interesting litmus test for red and blue legislatures around the country to see if they move on the issue within their states, adopting or prohibiting wealth taxation.”

Jared Walczak, vice president of state projects at the Tax Foundation, a right-leaning research group in Washington, added in another email Friday that “while states like California, Hawaii, and Washington have flirted with wealth taxes, no state has yet adopted one because lawmakers recognize that they’re economically destructive, legally dubious, and virtually impossible to implement correctly.”

While states like California and Washington “make entrepreneurs nervous, Texas lawmakers are looking to send a message that the Lone Star State is open to investment, business startups and economic opportunity,” Walczak said.

Added Walczak: “There’s a reason why most countries with wealth taxes have abandoned them, and why even states like California are skittish: whatever you tax, you get less of, and whatever people think about the wealthy in the abstract, most want wealth to be in their state, not elsewhere.”

Tax Policy and the 2024 Election

Wealth taxation, Bush said, “has gained popularity with progressives and is a critical element of the Democrats’ tax plan for 2025, as it was included in the failed Build Back Better tax plan from the Biden administration.”

Should Democrats have the opportunity after the 2024 election, wealth taxation “will be a significant component of their tax policy,” Bush continued.

This term, the Supreme Court “agreed to hear a case asking if taxing unrealized gains (wealth) is constitutional,” Bush relayed. ”This will either support the Democrats’ approach or put a dagger in its heart. If it’s found unconstitutional, the Democrats will return to the drawing board to meet their revenue goals.”

Republicans, meanwhile, “suggest that should they have the opportunity after the 2024 election, they want to extend the Tax Cuts and Jobs Act that, by law, sunsets at the end of 2025 with a possible increase” to the $10,000 federal cap on the state and local tax deduction, Bush said.

Former President Donald Trump “indicated an interest in lowering the corporate rate from the current 21% to possibly as low as 15%,” Bush said.

While “tax policy is an important issue in the 2024 election whether voters know it or not,” Bush added, “it’s not the biggest voting issue, that will be the economy viewed through the wallet of each voter.”

Richard Auxier, senior policy associate at the Tax Policy Center, a left-leaning research group in Washington, wrote in a recent blog post that “No one in Texas is proposing a wealth tax. But no one in Texas was proposing an income tax in 2019, and ta what didn’t stop three-quarters of Texans from amending the constitution that year to keep the income tax permanently out of the Lone Star State.”

As progressive groups push wealth taxes in blue states, Auxier said, “don’t be surprised if more red states join Texas in playing defense by sending similar prohibitions to voters.”


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.