This is a tough issue, but I generally disagree with Gov. Greg Abbott, who led the push for the ban. The Sons of Confederate Veterans has had local chapters that have been squirrely, but, how else do you put the SCV on vanity plates without the Confederate flag?
Here's the backstory:
In 2010, the Texas Department of Motor Vehicles Board denied a request from the Sons of Confederate Veterans' Texas Division that the state issue a license plate featuring the group's name and a picture of the Confederate flag. The board said it denied the application in part because "a significant portion of the public associate the confederate flag with organizations advocating expressions of hate directed toward people or groups that is demeaning to those people or groups."
And, if a pattern of hateful speech eventually becomes part of criminal activity, as with Charleston shooter Dylann (sic) Roof reportedly displaying a Confederate flag license plate, you then prosecute for a hate crime.
Otherwise, this is just like Adopt-a-Spot programs that have highway road signs. States, when someone like a Ku Klux Klan local has become an Adopt-a-Spot volunteer, have simply killed the public signage for the program.
And, the ACLU and Americans United for Separation of Church and State, among others, agree this is censorship.