Messing With Texas

HB 3 Passed the Texas House of Representatives yesterday. This is bad news for most Texans. It is described as revenue neutral, but is also being sold as a better way to fund schools that are lacking funds (hmm).

The Austin American-Statesman does a pretty good job breaking down the problems with the legislation. Essentially, HB 3 lowers the cap on the state-level property tax rate. It doesn't touch the local rates. In exchange for this, the bill raises lots of other taxes, most notably the cigarette tax and the general sales tax.

The Center for Public Policy Priorities examined the bill last week. Their findings can only be described as disheartening. 80% of Texans would se a tax hike, while those making over $100,000 would enjoy a tax cut.

Sales tax hikes raise more tax dollars from those with the least ability to spare them. A sales tax does not factor in how wealthy a person is when they make a purchase. The bill does exempt some "essentials" like diapers, but that doesn't come close to making up the difference.

Another big problem with this tax shift is that renters--typically less wealthy people than home owners--will not feel the effects of the lowered property tax cap. Eddie Rodriguez (D-Austin) tried to add an amendment that would have required landlords to pass along at least 75% of the money not spent on property taxes to their tenants. That proposal did not get very far.

And this is a bad decision for the long-term stability of the current level of school funding. By shifting revenue sources from property taxes onto cigarette taxes, the legislators have chosen a source that is sure to decline over time, forcing them to eventually raise the rates more and more as smoking, or at least tobacco purchases in Texas diminish.

This bill amounts to a handout to the most wealthy Texans at the expense of the vast majority of the state.

As The Daily Tax Report notes: "The speaker said the bill would create 48,000 jobs by 2007 and would boost personal income by $2 billion and investment by $3 billion. "Passage of H.B. 3 means voting for property tax relief, increased personal income, more investments, and tens of thousands of new Texas jobs," Craddick said"

It's a mystery where he pulled $2 and $3 billion from. As far as the job growth, perhaps. But only if he is predicting that 48,000 more people will need to work two jobs to afford buying goods with his new sales tax in place.

Hopefully the Texas Senate will think better of this scam.