Only the Right Income Tax Will Work
I was happy to see The Texas Observer’s April 21 cover story on a personal income tax for Texas. The headline, however, reads, “The Best Idea They Won’t Talk About.”
Well, I am talking about it. I have filed a bill providing for a Texas Education Income Tax at the beginning of every session of the Legislature since I was first sworn into office as a state representative in January 2003. (In this current special session, it is House Bill 20.) But an income tax will not help Texas unless it is structured the right way.
Our leaders spend significant political capital suppressing the idea of a state income tax. They often begin a discussion of school finance by resolutely announcing their opposition to income taxes and declaring their refusal to even consider the idea, as though that were somehow courageous.
There is nothing courageous about putting your head in the sand, yet this has been a highly effective strategy. For more than 80 years the “silent treatment” has served the wealthiest Texans very well—at the expense of low- and middle-income Texas families. We should not expect our state’s Republican leaders to change this approach. But we must raise the subject of an income tax at every possible juncture, and in every possible venue, and do battle by its virtues.
Texas has a lousy system of school finance. It is so unfair that the courts are ready to shut our schools. The solution our leadership has offered is a short-term solution—a Band-Aid on the system. They’re constructing a plan that least offends the powerful and shifts the focus away from our pressing educational needs.
We will never be able to satisfy the mandates of the Texas Constitution and still provide adequate funding for public education until we stop this nonsense. Elaborate equalization schemes like Robin Hood waste millions of dollars on administration while the gap between rich and poor grows yearly. This special session we will add billions of dollars in regressive new taxes to “buy down” the property tax rate, but at the same time we will give authority to raise those rates right back up. In a few years time, homeowners’ property tax cuts will have evaporated.
We can do better. My proposal will completely abolish the school-operations property tax and replace it with a state personal income tax dedicated to public education. You can read more about the plan at www.texastaxrelief.com. The Web site has a tax calculator that will tell you how much you would save in taxes under my plan for an Education Income Tax.
As a justification for adopting a personal income tax, we are often reminded that all but six other states have an income tax. I want people to know that most of those income tax structures are horribly flawed. We have to do better than those states. In fact, we have to do better than the federal tax structure. When a state income tax is finally “on the table” in this state, we must be prepared to oppose an income tax if it does not meet three main criteria.
First, everyone must be included. In part, we do this to satisfy a uniquely Texan cultural ethic of fairness: “It ain’t right to soak the rich,” and “everybody should pay their fair share.” Also, it vests everyone in the system. We must look at public education as an external entitlement. It may be a constitutional duty and a moral responsibility, but in the final analysis it must always be a community endeavor—with no one exempt from participation.
Secondly, an income tax must not contain “special interest” exemptions. This is so important that my plan would add it to the Texas Constitution—along with voter control over the income tax rate. My plan for an Education Income Tax allows no special interest loopholes. No capital gains rates, no oil depletion allowance, no credit for deep water exploration, nothing.
Finally, any income tax in Texas must have a truly progressive rate structure. This is where so many other state plans—and the federal plan—really fail low and middle-income taxpayers. If you understand the justification for a progressive rate structure (the concept of “disposable income” is necessary here), you can see why antiquated tax codes do such a disservice. Kansas offers a typical example of a structure that is not progressive at all. In Kansas, a family below the poverty line is taxed at 3.5 percent. Then there is a flat tax of 6.25 percent for all income above $15,000. The tax tops out at 6.45 percent for income above $30,000.
Under my bill, Texas would use a truly progressive tax structure, including a standard personal deduction of $3,200 per person. Those earning below $25,000 would be taxed at 1 percent. Those making between $25,001 and $50,000 would pay 2 percent. The rates increase by one percent over seven more income brackets. The top rates—for people earning $200,001 to $250,000 and those making more than $250,000—would be 7 percent and 7.5 percent, respectively.
Under this structure, even an income in the top bracket is still subject to a fairly low tax rate. After taking a deduction on federal income taxes, the effective rate will never exceed 5 percent of income for even the richest families.
A truly progressive income tax plan would provide enough revenue to completely abolish the education system’s dependence on property taxes. It also would increase new education funding by more than $5 billion per year, and it never exceeds a 7.5 percent levy on any income level. That is possible because the tax is based on the honest adjusted gross income of all individuals in the state.
I’m proud to see The Texas Observer break the suffocating silence that surrounds this issue. However, an income tax is not the right answer for Texas unless it is the right kind.
Eddie Rodriguez (D-Austin) is state representative for District 51.