A Taxing Exercise


Dave Mann

A Taxing Exercise

ou didn’t have to be a fortune teller to see it coming. Still, the implosion of the legislative session’s signature issue–a rewrite of the public school finance system–was an excellent spectacle. There may be no touchier public policy topic than one dealing with taxes and schools. It’s even harder when the Speaker of the House has only passing interest in the whole exercise and the Lieutenant Governor is focused on higher office. Add the combustibility from a shared hatred between these two most powerful men in the Capitol and fixing school finance close to impossible. No sooner had the school finance overhaul bill, and its cousin the property tax cut bill, died on the session’s final weekend than the Capitol halls filled with the sound of Craddick, Dewhurst, and other GOP leaders barking at each other over who was to blame. Of course, there’s plenty of fault to go around, and many people are dishing it out. Most of the state’s public interest groups and daily newspaper editorial boards have shifted into high hand-wringing mode over the legislature’s failure to act. We here at Observer, though, having looked over the House and Senate proposals, are quite happy at their demise. And you should be too, if you’re among the 80 percent of Texans who don’t earn six-figure salaries. The system is already dreadfully regressive. The poorest Texans pay the most in state taxes as a share of their income. (Those making $12,000 a year or less, according to the state comptroller, pay 14 percent of their income to the state; those earning $177,000 pay about 5 percent. Such is the magic of a high sales tax.) The reform plans would have accomplished the rather amazing feat of making the upside-down Texas tax system even more inequitable. Both the Senate and House proposals would have upped mainly the sales, business, and cigarette taxes, among others, to subsidize a multibillion-dollar cut in local property taxes. The net effect of the Senate’s tax-swap plan would have been an increase in taxes for everyone earning less than $140,000 a year, according to the number-crunchers at the state-run Legislative Budget Board. Meanwhile, the House’s initial proposal would have raised taxes for all families earning roughly $100,000 or less. Lawmakers will likely dust off something similar when they return later this year for an expected special session on school finance. As we go to press, rumors are swirling that the governor could call a special session as early as the end of June. So we may yet end up with a tax cut for the wealthy, subsidized by the lower and middle classes. It doesn’t have to be that way, though. There is one reform that would raise billions more for education and cut property taxes fairly. It’s the revenue source that dare not speak its name–a state income tax. Let’s just peek at the numbers. The brainy folks at the liberal Center for Public Policy Priorities calculate that if Texas adopted the income tax system from Kansas, not exactly a hotbed of Communism, the state could raise $18 billion a year. That would pay for a 90 percent–yes, 90percent–cut in property taxes, fund education adequately, and still have cash leftover to help pay for pressing needs like Medicaid. Because the income tax is so progressive, all this could be done without substantially increasing taxes for low- and middle-income Texans. Now, we know what you’re thinking: An income tax is a political impossibility. But perhaps that’s starting to change, thanks in part to the just-completed legislative session. If you honestly look at the past five months, and at the proposals (and their negative impact on most Texans), it’s hard not to think the whole school finance debacle doesn’t amount to an excellent argument for an income tax. —DM

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