Proposition 3 Will Maintain Texas’ Extreme Wealth Inequality
We all benefit when everyday Texans, regardless of where we live or what we look like, have a fair opportunity to prosper. Contrarily, a state tax system designed to favor the ultra-wealthy undermines all of us. In Texas, the wealth gap is so extreme that 66 billionaires living in the state own more wealth than 70% of Texans combined. And this November, Texas voters face Proposition 3 – a critical ballot decision that could prohibit future lawmakers from establishing a wealth tax, a key policy to reshape our unfair tax system and make the rich pay what they truly owe.
This November, Texas voters should vote in their own interest. Proposition 3, a constitutional ban on a wealth tax supported by self-serving state leaders, freezes future Texas lawmakers’ options to make investments in our state’s most valuable asset, our people. A constitutional prohibition on a state wealth tax would also limit Texas’ ability to diversify state revenue sources and adapt to evolving economic challenges. A key step for shared prosperity through fair and equitable taxation starts with voting no on Proposition 3.
The state’s appalling wealth inequality is a result of an upside-down tax system. Texas’ tax system ranks as the second most regressive in the nation. This means that working residents pay a larger share of their income in taxes compared to the state’s wealthiest residents. Texas residents with the lowest incomes pay an average of 17% of their earnings in state and local taxes, three times more than what the wealthiest pay (4.75%). The broken tax system stems from a heavy dependence on sales, excise, and property taxes to generate the government revenue required for preK-12 and higher education, health care, infrastructure, and other essential services.
A more progressive tax system would ensure that the people who benefit the most from the upside-down system contribute in proportion to their wealth. Taxing the wealthiest Texans’ colossal $4.9 trillion fortune would be a powerful mechanism to rectify Texas’ regressive tax system. According to the Institute on Taxation and Economic Policy, a 2% tax on wealth over $30 million would generate an extra $33 billion in yearly tax revenue, a tenth of the 2024-2025 state budget. This revenue would provide much needed funds that support our communities, improving outcomes in education and health care.
This report relies on wealth estimates for Texas provided by the Institute on Taxation and Economic Policy (ITEP), which compiles data from the Internal Revenue Service (IRS), the Survey of Consumer Finances (SCF), and Forbes’ estimates of U.S. billionaire wealth from 2019. ITEP‘s analysis was performed using their Microsimulation Tax Model.
Texas’ Wealth Skewed to the Wealthiest 1%, Who Hold a Colossal $4.9 Trillion Fortune
Wealth, or net worth, is determined by assessing the total value of an individual’s or a family’s assets, including real estate, financial investments, bank deposits, and business equity. The total value of assets is subtracted by the individual’s or family’s outstanding liabilities, including mortgage debt, credit card debts, and loans on vehicles or education.
Given that wealth accumulates over years and generations, it serves as a significant gauge of financial stability in the Lone Star State. Wealth provides financial security against ups and downs in the economy, offering a stable foundation for improved educational attainment, health outcomes, and outsized political influence. This in turn generates more wealth, and the cycle reinforces itself. Meanwhile, families at the bottom experience fragile economic circumstances and are constantly at risk of experiencing a significant financial crisis due to an unforeseen expense, such as a medical or car repair bill.
In 2022, the total wealth of Texas’ 14.1 million tax filers totaled $10 trillion. Eight percent of the nation’s total wealth exceeding $30 million per household is held by households in Texas, the fourth highest state behind Florida, California, and New York. The wealth held by these four states accounts for more than half of the nation’s extreme wealth.
Texas’ astonishing wealth is concentrated in the hands of the wealthiest residents. The wealthiest 1%, approximately 140,400 tax filers, own a colossal $4.9 trillion in fortune, representing nearly half (49%) of the state’s total wealth. The 95-99%, around 563,000 tax filers, hold $2.5 trillion, about 25% of the state’s total wealth. In total, the top 5% hold 74% of the state’s wealth. The middle class, the 2.8 million tax filers in the 40th-60th percentile, own $246.8 billion, which is about 2.5% of the state’s total.
In stark contrast, the bottom 20% find themselves in dire financial strains, collectively carrying a negative net wealth of -$54.1 billion. The bottom 10% sits at an average wealth of -$35,000, and the 10th-20th percentile at -$3,000. These disparities illustrate the troubling wealth divide between the affluent few and the multitude of Texans grappling with economic insecurity.
The collective fortune of 66 billionaires in Texas exceeds the total wealth of 70% of Texans. The wealth of these 66 billionaire Texans, nearly 0.0005% of all state tax filers, adds up to a staggering $578.6 billion. In clear comparison, the bottom 70%, about 9.9 million tax filers, collectively own $463.8 billion. The wealth inequality in 2023 could be much larger, since ITEP relied on Forbes’ 2019 billionaire list.
- According to the Forbes’ 2023 billionaire list, Texas’ wealthiest billionaire is Elon Musk, founder of Tesla and SpaceX, whose wealth alone totals $251 billion. That is 300,000 times the average wealth held by all tax filers in Texas.
- Second to Musk is Michael Dell, CEO of Dell Technologies, with a total wealth of $71.5 billion, followed by Alice Walton, heiress to the fortune of Walmart, with a wealth of $66.5 billion.
Intersection of Wealth and Race Reveals Deep Inequalities in the United States
Racial wealth disparities in the United States, particularly between Black and Hispanic households, are deeply rooted in historical injustice and persist due to ongoing, systemic racism. Addressing the wealth gap requires recognition that discrimination in our public policies has systematically denied marginalized households access to wealth and maintains the state’s modern wealth inequality. Throughout generations, the institution of slavery and colonization, political disenfranchisement, redlining practices, and exclusion for G.I. Bill benefits prevented Black and Hispanic residents from building wealth.
While the ITEP analysis does not specifically disaggregate wealth by race, an analysis of the 2019 Survey of Consumer Finances (SCF) by the Board of Governors of the Federal Reserve System revealed that deep wealth inequalities exist across and within each race and ethnic group in the United States. In each race and ethnic group, the mean household wealth is consistently higher than the median wealth, meaning that wealth is strikingly concentrated at the top.
- The 2019 SCF national survey found that white households have the highest levels of median and mean wealth, $188,200 and $983,400, respectively.
- In contrast, Black and Hispanic households experienced significantly lower levels of wealth compared to white households.
- Notably, Black households owned close to 13% of the median wealth of white households, with a median wealth of $24,100 and a mean of $142,500.
- Meanwhile, Hispanic households reported median and mean wealth of $36,100 and $165,500.
- “Other” households, which represent households of diverse racial and ethnic identities, had higher wealth than Hispanic and Black households but less than white households.
Wealth Proxies Illustrate Disparities Across Race Groups in Texas Similar to the Nation
Because of limitations in data to uncover wealth held by race and ethnic groups in Texas, home values, along with household income and poverty rates, offer an additional measure to understand economic inequality. Mirroring the larger wealth disparities across the country, Black and Hispanic households in Texas experience lower home values, income levels, and higher poverty rates compared to their Asian and white peers. Longstanding exclusionary practices have limited the ability of Black and Hispanic Texans to access well-paying jobs and loans for higher-value homes, creating barriers to building substantial wealth. Furthermore, evidence suggests that racial inequality in home appraisals has increased in recent years.
Home values play a significant role in the assets of around 90% of American households. In Texas, the median home value stands at $275,400. Asian households lead with the highest median home value at $407,200, followed by white households at $322,100. However, the contrast is striking for Hispanic and Black households, as their median home values are notably lower, at $201,500 and $258,800 respectively. Homes owned by Black residents are valued about half the price of homes owned by Asian residents. This significant disparity reflects the broader wealth disparities among racial and ethnic groups at the national level.
Disparities in household income have a direct impact on a family’s ability to save and invest, ultimately affecting their prospects for wealth accumulation. In 2022, Asian households had the highest median income of $107,673, about 1.5 times higher than the state median income of $72,284. White households have the second highest household income of $86,229. In contrast, Black and Hispanic households experienced lower median incomes, with figures of $55,759 and $60,504 respectively.
Individuals living below the poverty line have limited financial resources, ultimately leading to a multi-generational challenge in building wealth. In Texas, white (8.4%) and Asian (9.2%) individuals experience a poverty rate lower than the state rate of 14%. Black individuals face the highest rate at 19.7%, with Hispanic individuals following at 18.6%. For both, the rates are higher than the state’s and twice as high compared to their Asian and white peers.
A Wealth Tax on the 1% is Key to a More Prosperous Future for All Texans
Texas voters should not continue to allow the wealthiest few to use their power and money to influence the tax system in their favor. A key step for shared prosperity through fair and equitable taxation starts with voting no on Proposition 3.
The wealth gap in the Lone Star State is so extreme that 66 billionaires living in the state own more than 70% of Texans combined. Texans deserve a tax system that shares prosperity to all residents through fair and equitable taxation, regardless of their background or zip code. The existing tax system creates an upside-down tax burden that benefits the ultra-wealthy, all while widening economic inequality for Black and Hispanic households.
A wealth tax could address these disparities by targeting the $4.9 trillion held by the wealthiest 1%, potentially generating an extra $33 billion annually in state revenue. Banning future lawmakers from establishing a wealth tax threatens the state’s ability to invest in our people and prevents the legislative body from competently responding to evolving economic challenges through diverse tax revenue streams.