Texas Tax Options
Zodrow, George R.
The State of Texas is contemplating sweeping changes in its revenue structure as part of a reform of the system of K-12 school finance in the state, with the main goal being a reduction in local school property taxes coupled with increased state level funding for education. This paper, which is an updated and abbreviated version of a report prepared for the Texas Joint Select Committee on Public School Finance, evaluates the relative advantages and disadvantages of the main potential approaches currently under active consideration in Texas. It considers three types of options — incremental reforms of the existing system, more fundamental reforms of the existing tax system, and the introduction of new taxes. The full report, titled “An Economic Evaluation of Alternative Sources of Tax Revenue for the State of Texas,” is available at the Texas School Finance Project website, http://capitol2.tlc.state.tx.us/psf/reports.htm. I would like to thank Timothy Bartik, John Diamond, Randall Eberts, Margaret Goertz, Harrison Keller, Charles McLure, David Monk, Lori Taylor, and Arnold Vedlitz for helpful comments and Joyce Tung for excellent research assistance.