Regressive Reform
May 17th, 2007 at 9:56 pm
Now here’s a bill that deserves to slip through the cracks, never to see the governor’s pen, as the session nears the finish line: SB 407, allowing local voters to approve a reduction in property taxes offset by an increase in the sales tax.
Awaiting its turn on the House floor, this bill by Sen. Kevin Eltife (R-Tyler) continues the apparent never-ending quest to lower property taxes and generate ever-more Republican campaign fodder. SB 407 would allow cities and counties to raise sales taxes by 0.25 percent in order to lower property taxes.
Proponents trumpet “local control,” since voters must approve the tax swap, and the bill analysis claims the measure would alleviate increased “property tax burden” at the local level. Apparently alleviating the “burden” on a few citizens requires spreading it around to those neighbors least equipped to pay for it.
The faith-based group Texas Impact explains: “SB 407 represents a continuing shift away from taxes based on wealth onto taxes linked to consumption, which inherently puts a greater burden on lower- and middle-income working families.”
In April, when the bill came before the finance committee, only as Dick Lavine, senior analyst for the Center for Public Policy Priorities, testified on the bill, arguing that it harms more people than it helps. “Eighty percent of Texas families would lose under this provision,” he said. “Most Texas families would pay more in sales tax than they would gain in the property tax reduction.”
Only families making more than $110,000/year benefit from the tax switch.
The bill exacerbates the regressive nature of Texas’ tax system — already among the worst in the country. This 2005 CPPP analysis of the comptroller’s biennial tax report ranks the sales tax as the second-most regressive in the state.
It also includes this chart:
So in a state whose tax scheme is already out of whack, we’re going to make it worse? Bad idea.
May 18th, 2007 at 9:59 pm
Mr Wright and Texas Impact have it exactly right. The result of this bill would be a more regressive tax system. The wealthy would benefit the most. The poor and middle-class would end up paying more in taxes. The reason this can be sold to the public at all is because that property tax bill that arrives in your mailbox every year is very visible and very painful. Sales taxes, on the other hand, nickel and dime you to death, rarely big enough to notice or hurt.
Still, I really can’t bring myself to fight this proposed bill. It doesn’t actually swap property taxes for sales taxes. It only empowers local governments to do that, with approval of local voters. Empowering voters is, in general, a good thing. Yes, those voters can sometimes be persuaded by demagogues to do stupid things. But dictators do stupid things, too. If I have to live with stupid rules (and sometimes, I’m afraid, that’s just what we’re doomed to do), I’d rather live with the stupid rules imposed by my neighbors and myself than those imposed by Austin or Washington.
So, I won’t lobby for this bill, but I won’t be too vocal in my opposition, either. I’ll save my opposition for those local referenda, if and when they come, that propose to swap the property taxes on the wealthy for those sales taxes on the poor and middle-class.