He was paid for some work and then refused to refund the customer? Why was this criminal instead of civil? Did he collect money without ever having the ability or intention to do the work? If you pay me to do something, and I don't do it and keep the money, you could file a civil lawsuit against me seeking a judgment for damages. You could also call the police and ask them to press criminal charges against me for theft. You could do both.
Although there will always be exceptional cases such as the instance of the Texan gentleman imprisoned for a relatively minor infraction as per the heading question, on the most past these laws keep citizens safe and in any case should be taken into account by offenders after the first, let alone second, strikes.
No, these laws do not work. If due to Texas' 3-strikes law, a man was sentenced to life in prison for refusing to return a refund after an air conditioner repair, then this law is ridiculous and should definitely be changed. A less harsh and more lenient punishment should be in order.
This punishment is rediculous and does not fit the crime. What this man did should not be something that was covered by the civil courts and instead should be covered by the civil courts. He should not be going to prison for refusing to return a refund, which he might not have had anymore.