New Report: Income Inequality Especially Bad in Texas

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Texas is among the states with the highest income inequality, according to a new report from the Center on Budget and Policy Priorities. Texas ranks 10th in the country, with its richest residents— the top five percent of households— having average incomes 15 times as large as the bottom 20 percent of households and five times as large as the middle 20 percent of households. The top five percent of Texas households receive 20 percent of the state’s income, even without counting capital gains (earnings from stocks and other investments).

The report also shows that the concentration of income among the wealthiest residents is striking in every state – reflecting three and a half decades of unequal income growth.

Income gains in the American economy over the last 30 years have gone largely to the richest households, while many middle and lower-income Americans haven’t shared in the nation’s growing prosperity.  This has reduced opportunities for Texas families striving to get ahead and weakened our overall economy.

The good news is that there are ways Texas can use state tax policies to begin to reduce inequality:

  • Eliminate costly, outmoded or ineff­ective tax breaks
  • Broaden the sales tax base to include more services consumed by high-income Texans — such as investment counseling or country club memberships.

Most importantly, Texas must maintain an overall state and local tax system that raises sufficient revenue to pay for the building blocks of shared prosperity.  Cutting state tax rates or capping the ability of local governments to generate necessary funds would reduce the services on which all Texans rely.

Dick Lavine focuses on state and local revenue issues. Before coming to the Center in 1994, he was a Senior Researcher at the House Research Organization of the Texas House of Representatives for ten years. He is a Chartered Financial Analyst, Chairman of the Board of Directors of the Travis Central Appraisal District, and a member of the Executive Board of AFSCME Texas Retirees, the statewide union local of retired public employees. The Equity Center named him the 2011 Champion for Equity for his work to reform our tax system to ensure it can adequately support public education and other public services. He earned a Bachelor of Arts in Economics, magna cum laude, from Harvard College in 1969, and a Doctor of Jurisprudence, cum laude, from the University of Pennsylvania in 1975.

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