"Analysis: Texas lawmakers struggling to find a lovable tax" was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.
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The first real sign that this might be a shoot-the-moon year on financial matters came early, when the state’s top leaders said they wanted school finance and property taxes to be the central issues of the session.
The school finance deal announced on the lawn of the Governor’s Mansion on Thursday was the bookend to that announcement — an $11.6 billion package of education spending and tax buy-downs delivered just in time for lawmakers to vote before the Memorial Day end of the session.
Even with state Comptroller Glenn Hegar’s forecast that record amounts of money were coming into state coffers, top lawmakers made an abortive bid for a tax swap, saying they wanted to ask voters to approve a 16% increase in sales taxes in return for a cut in property taxes. The idea was to use existing income to pay for schools and new taxes to pay for property tax relief.
It took a while to sink in, but in the end, the idea was so unpopular that neither the full House nor the full Senate voted on it.
But this Texas Legislature was in the mood, apparently, for risking long-shot tax bills. Legislators can’t pass laws that require their successors to do things, to make laws that require future lawmakers to act in a particular way. They can, however, make it difficult for those successors.
One such notion — a repeater from two years ago — would have wiped out most school property taxes and sent the Legislature looking for the approximately $30 billion it would take to replace them every year. The bill from state Rep. Andrew Murr, R-Kerrville, would have killed the tax and started lawmakers on a sort of snipe hunt between now and the next regular legislative session in 2021 to find the money — he suggested consumption taxes — to replace the hated property tax.
The biggest consumption tax in Texas is the sales tax. And it would require a whopper of an increase in sales taxes to replace school property taxes. The state’s share of sales taxes brings in about $30 billion annually — about the same amount currently produced by the school maintenance and operations taxes Murr and others wanted to eliminate.
It’s a heck of a choice: The next Legislature could either resurrect the property tax, double the sales tax to 12.5%, or get rid of enough sales tax exemptions — on a long list of things from groceries to manufacturing equipment to over-the-counter drugs — to cover school costs.
With a chore like that before them, lawmakers in another state might turn to an income tax.
Not in Texas.
In fact, Texas lawmakers are so against income taxes that they’re asking voters to ban those levies in the state constitution.
There’s a lot of history to the state’s disdain for income taxes. In fact, installing such a tax would already require voter approval. And it’s like they saw into the future when they were writing this part: Two-thirds of the proceeds of an income tax would have to be used to cut school maintenance and operations taxes.
Don’t think about that too much, because this year’s Legislature wants you to erase it, by installing a ban on personal income taxes. They might have bit off more than they meant to chew; the language in that constitutional amendment could, in the minds of some experts, open the state’s major business tax to legal attack.
Stay tuned. Murr’s bill failed, but lawmakers might be in the tax business in 2021 after all, if the courts strike that business tax.
Even if that tax survives, Texas politicians are likely to encounter some of the same complaints when they get home that they were hearing before they came to Austin in January.
Property taxes are still high, and even a rewritten school finance system won’t provide a lot of relief in a short period of time. The new plan is supposed to trim property taxes a bit and make it harder for local schools and local governments to raise property taxes in the future.
But the idea of getting rid of property taxes altogether, or cutting them by a large amount, is still out there. Those are the taxes Texans really love to hate.