The major source of revenue for local units. Tax reform has not reached Texas. The current systems disproportionately burdens low income families and business, and few of any attempts have been made to reform the tax system so it better fits with the way wealth is generated in the state. The courts have almost ruined the Texas franchise tax as a dependable source of revenue, and taxes which are aimed at suppressing drug activity turned out to be unconstitutional. Tax reform was the number one item on the 1997 legislative agenda.
State government depends heavily on regressive taxes to fund a minimal level of services.
Tax administration has become more costly as revenues have declined, particularly for the sales tax. When tax criteria are used to evaluate the Texas tax system, the state does not measure up very well. Business and poor individuals bear a disproportionate share of the tax burden. The tax system has not always generated adequate revenues and does not tap into much of the new economy of the state which is service based. There are few taxes with high elasticity, so Texas taxes do not generate increased revenues during periods of economic prosperity.