With a majority of Texans dissatisfied with the burden of property taxes, House members are this weekend working to sell a sales-tax-cut plan to taxpayers. Meanwhile, the media is pushing an “analysis” alleging that the highest paid Texans would benefit if the sales tax rate is reduced.
The Texas House is scheduled to debate House Bill 31, the sales-tax-cut proposal on Tuesday. (The Fiscal Responsibility Index will favorably consider the legislation.)
[side_text]POLL: If you could only chose one tax to cut, sales or property, which would you pick?[/side_text]The charge against the proposal by liberals, using data from the Legislative Budget Board, is that 40 percent of the House tax cut would go to “highest-paid fifth of Texans.” This criticism, however, is reflective of the fact that Texas’ sales tax is actually fairly “progressive,” in that life essentials — such as medicines and unprocessed groceries — are not taxed. The wealthiest Texans also pay the highest share of the sales tax, so a tax cut would follow the same pattern.
HB32 by State Rep. Dennis Bonnen (R-Angelton) would reduce state revenues by $4.9 billion, compared to the $4.6 billion in tax relief found in the Senate’s property-tax-focused plan. (Both plans include a reduction in the state’s business tax, though in slightly different ways.)
In an open letter to taxpayers, signed by 90 House Republicans, the GOP caucus says Bonnen’s “tax cut plan is compelling and worthy of your support.” Their letter praises the sales tax cut as “permanent – it can’t be taken away by local government or an appraiser, only by a vote of a future legislature.”
This is an allusion to state-pushed property tax rate reductions in the past having been unraveled by higher property valuations or local government rate increases.
It is also a none-too-subtle swipe at the Senate’s plan, which focused on reducing property tax burdens. The Senate passed with more than super-majority support in late March.
Unlike previous property tax reduction efforts, which the House caucus letter mentions, the Senate’s plan would double the homestead exemption and then allow the exemption to rise with inflation.
It should be noted that the Republican Party of Texas’ platform calls for the “abolishment” of property taxes, but the House is not currently slated to debate any legislation addressing the burdensome system.
Some policy proposals in the past have called for abolishing the property tax by putting greater reliance on the sales tax. Cutting the sales tax now limits the likelihood that a near-future legislature would seek to raise that tax for any reason.
Currently, the public politics favors the Senate plan. No one ran a campaign on sales tax relief, while property tax relief was the hallmark of Dan Patrick’s upset victory over incumbent David Dewhurst in 2014. In Greg Abbott’s 2015 State of the State address, he called for the business and property taxes to be reduced, but did not mention cutting the sales tax.
Texans have a clearly-expressed disdain for the burden of property taxes. A recent poll conducted by the University of Texas and Texas Tribune found 54 percent of Texans were dissatisfied with the property tax burden. The same poll found that an even larger percentage of Texans were satisfied with the sales tax burden.
Texans would see the sales tax relief in pennies every time they make a purchase, while the Senate’s property tax relief measure would be seen as a single large amount when property tax bills come due.