It’s key for everyone to understand how we got to the budget situation were in today in Texas.
The money that was cut from the budget in 2011, and not replaced in 2013, is responsible for the surplus we now have that the GOP wants to give back to the wealthy and big business in tax cuts. Both budget estimates turned out to be way off base.
That original deficit in 2011 was caused by the GOP Tax Swap Scheme of 2006. Everyone knew, when it was passed, that it would create a structural deficit.
Teachers lost jobs, schools were de-funded, and many were forced to sacrifice so taxes on the wealthy and big business would not be raised.
Just think about that.
The money was never intended to be replaced. The GOP used the ruse of a tax swap in 2006 and the budget crisis it created in 2011 to gut public education. And since then, with the surplus it created, their main concern is to give more tax cuts to the wealthy and big business.
Kuff has the latest on the GOP tax cut Olympics that are going on in The Lege right now, We can always pay for tax cuts later.
The problem with the current tax cut schemes being discussed in The Lege is that there’s little relief being offered to those who pay the most, as a percentage of their income, in taxes. Via QR.
Texas earns dubious distinction, 3rd worst state for taxes inflicted on average Americans
Current tax cut bidding war means nothing to most Texans
While the Senate and House are in a bidding war for the biggest headline number of tax cuts that most Texans will not feel, the online financial publication “Marketwatch” named Texas the third worst state for taxes inflicted on average Americans.
The analysis reports that the Lone Star State has the fifth highest effective tax rate on the state’s bottom 20% at 12.5% and the 8th lowest rate on the top 1% at an effective tax rate of 2.9%.
From the story, “…the state relies heavily on sales and excise taxes. These consumption taxes accounted for nearly 32% of the state’s revenue, the ninth highest nationwide in fiscal 2012. The state also doesn’t provide low-income residents with any tax credits, which help offset sales, excise and property taxes in other states.”
The story can be found here.
The budget schemes of the Texas GOP is not only about lowering taxes, it’s also about destroying government – doing away with what they believe is unnecessary.
Texas Lt. Gov. Dan Patrick finally spilled the beans yesterday on his proposed tax swap scheme – not it’s not a tax cut! Via the HChron, Texas lt. gov. lays out transition from property to sales tax.
Texas Lt. Gov. Dan Patrick gave a rousing speech to the Texas Association of Business’ annual meeting in Austin on Tuesday…
Patrick’s draft budget would cut property taxes by about $2 billion and business taxes by $2 billion. Frankly, I think the $9 billion Texas Margins Tax on business needs to be scrapped completely and replaced with something new, but Patrick doesn’t appear to have that kind of ambition. He said there are proposals to cut taxes on inventories and equipment, but he added it is still early days in the session.
To pay for these tax cuts, Patrick said he would begin the slow migration away from property taxes to greater reliance on sales taxes, something he talked about on the campaign trail.
“The revenues we get at the state level are primarily sales tax,” Patrick said. “What we’ve done is a gradual transition from bringing more people in to help pay for what a handful of people – businesses and property owners – have been paying.”
There is no doubt that more people directly pay sales taxes than property taxes. But there is also no doubt that sales taxes hurt poor people more than rich people because more of a poor person’s income goes to buy goods and services than a rich person’s. That’s the reason why most governments use income taxes is to spread the burden based on the ability to pay. [Emphasis added]
Of course it’s no surprise that his plan is to lower taxes on the wealthy by raising taxes for everyone else.
BTW, here’s a list of items (see pages 7 & *) that are currently exempt from sales tax and will likely, as Patrick says, start the “slow migration” to being taxed. Things like baby formula, milk, and water just to name a few.
It’s becoming pretty clear what the cost Lt. Gov. Patrick’s “no matter what” tax cuts will be. There’s public education of course, a favorite punching bag of conservative Republicans, Early tax cut promises have education advocates worried.
The starting budgets of the state House and Senate, released last month, are similar on many fronts, but not with respect to education. Faced with $4.5 billion in additional revenue from increasing property values, the House has chosen to reinvest a portion of that in public education while the upper chamber is focusing on tax relief, a decision not sitting well with educators.
“I don’t know how you could say that budget prioritized public education,” Lonnie Hollings-worth, governmental relations director at the Texas Classroom Teachers Association, said of the Senate budget. “We think the priority should be to fund our public schools and not to do tax cuts.”
A cursory glance at the Senate’s document indicates the upper chamber wants to provide billions more this biennium for public education funding. But the promises of many senators, including new Finance Committee Chair Jane Nelson, to provide $4 billion in tax relief leave only around $200 million available for schools.
Here’s the interesting thing about the property tax cut that Lt. Gov. Patrick is proposing. The reason property taxes are out of control is because the state hasn’t increased revenue in a long, long time. Without increased funding from the state cities and counties have been forced to raise local taxes to keep up with needs.
City and county officials say they will work to educate lawmakers on the problems caps could bring. The messages vary across the state.
The Texas Municipal League has argued that cities and counties don’t deserve the blame for growing property tax bills. City taxes make up only 16 percent of the taxes levied across the state, while schools account for 55 percent of all property tax bills statewide, the organization says.
“Our message is that we are not the problem,” Sandlin said.
And leaders of fast-growing cities and counties say they need property tax revenue growth to pay for new roads, sewers and other infrastructure. Caps on how much appraisals grow could simply force cities to increase the tax rate, opponents of the bills say.
And the schools need that money because of the cuts to public education the state made during the budget “shortfall” in 2011. Which was not restored once prosperity returned in 2013.
The most egregious part of this is who will benefit and who will pay for these purported tax cuts.
Dallas County Judge Clay Jenkins said he worries that the caps would mostly help the rich. Property values tend to rise faster in the wealthier parts of town, he said, so those homeowners are the ones who would benefit most from a cap on appraisals.
“It is disguised as a tax break for all, but it is actually a shift from the upper class to the rest,” Jenkins said.
It’s the age-old story. The rich get richer, and the poor get poorer.
The cost of these tax cuts are not just to our pocket books. But they are to the future of Texas. The needed investments in education and infrastructure will be forsaken so the wealthy, who already have more then they need, can have even more.
Whenever the GOP wants to cut taxes all of us that aren’t rich need to grab our wallets. What are you willing to do without to get a tax cut? Tax cuts have a cost and we must make our politicians tells us what we will have to sacrifice to give wealthy Texans more money. Here’s some of what’s likely on the chopping block if the Texas GOP gets it’s wish, Some senators not so gung-ho for tax cuts.
Sen. Kevin Eltife, R-Tyler, said the Senate “base budget” unveiled last week by Lt. Gov. Dan Patrick and Senate Finance Committee Chairwoman Jane Nelson jumped to the conclusion that $3 billion in school property tax cuts and $1 billion in business-franchise tax reductions were possible.
Eltife, though, said the state also faces demands that it should spend more on highways and water infrastructure; shore up teachers’ and state workers’ pension funds; and preserve some money in case it loses the latest round of school-finance lawsuits.
Eltife said that like everyone, he is for tax cuts.
But he said he can’t support “removing $4 billion from the revenue stream until I know for sure that we can meet the needs of the state.”
Sen. John Whitmire, D-Houston, cited a major push that’s under way to shift around existing tax dollars, to increase transportation spending. It involves sales tax collected on cars, money that now supports schools, colleges, health care, prisons and general functions of state government. The Senate budget would shift $1.2 billion of the money into roads over the next two years. [Emphasis added]
Whitmire also talked about another idea popular with many business lobbyists — using some of the state’s expected surplus and “growth money” in 2016-2017 to retire state road bonds.
It should be no surprise that the GOP would sacrifice these things to get tax cuts for their campaign donors.
It may be hard to fathom for some but the purpose of these tax cuts has nothing to do with the timeworn wing-nut drivel that “you know better then government how to spend your money”. It has do with starving government, especially those things highlighted above, of money to continue. That’s always been the target for them.
Rick Casey asks this question in his column today, Does Texas really need lower taxes?
I like the idea of lower taxes. Who doesn’t? But, frankly, I’m not sure I deserve them.
For one thing, because I live in Texas, my state taxes are very low by national standards. The Census Bureau reports that Texans paid $1,865 a year in 2012, the latest year I could find. That’s lower than all but seven states.
But state governments split the costs of government with local governments in different ways. So it gets even better. According to the Washington-based Tax Foundation, Texans rank 47th in combined state and local taxes.
The typical Texan pays 7.5 percent of his or her income in state and local taxes. To pay less, I’d have to move to Wyoming, Alaska or South Dakota.
But the biggest city in those states is Anchorage, with 292,000 in the last census. Cheyenne, Wyoming’s biggest city, weighed in at less than 60,000. The entertainment options are limited. And high school football must have a short season.
Compared to the other biggest states, Texas is a bargain. Californians pay $5,136 in state and local taxes, compared to our $3,088. New Yorkers pay more than double what we do, at $6,622. The national average is $4,217.
Casey ends by pointing out that while he feels he deserves a tax cut, he would also like other things too. Like well paid police and teachers, affordable higher education, roads, water, and parks. The assumption is that we can’t have tax cuts and all those things too.
It’s true, we can’t have low taxes and the things we need. But that’s one of the lies Republicans have been selling since Reagan and too many voters keep buying. When the bill comes due for their tax cuts then they want to cut all those items like education, etc.. instead of raising taxes to pay for them.
There’s some context left out of this tax discussion. Who pays taxes in Texas. The tax burden in Texas falls greater on those at the bottom, and much less on those at the top. This recent report from the Institute on Taxation and Economic Policy (ITEP) shows how bad the disparity has gotten. BOR summarized the report, Texas has the Third Most Regressive Tax System in the U.S.
In Texas, the inequality is even worse. The top 1 percent only pay, on average, 2.9 percent of their income in state and local taxes – one of the lowest rates in the nation. Meanwhile, the lowest 20 percent of earners pay an average of 12.5 percent of their income in state and local taxes – one of the highest rates in the nation. That comes out to a tax burden for low-income earners that’s roughly 4.3 times as high as for the top 1 percent.
This disparity lands Texas’s tax structure as the third most regressive in the U.S. As the Center for Public Policy Priorities puts it, “Texans who are least able to afford it pay more in taxes as a percentage of their income than those who could easily afford to pay more.”
The fact that such inequality exists in Texas’s tax system is no surprise. Because Texas has no income tax, the tax burden falls on consumption-related taxes. And consumption takes up a much greater share of the low-income family’s budget than the wealthier family’s. According to the ITEP report, “No income-tax states like Washington, Texas and Florida do, in fact, have average to low taxes overall. However, they are far from ‘low-tax’ for poor families. In fact, these states’ disproportionate reliance on sales and excise taxes make their taxes among the highest in the entire nation on low-income families.” Texas actually gets two-thirds of its tax revenue from sales and excise taxes, compared to a national average of around one-third.
It’s obvious from this if the GOP wanted to lower taxes on those who pay too much, they would have to raise taxes on those who already have more then they need. And in actuality the cuts the GOP want to make will only lower the burden on the wealthy and raise it on the rest of us.
But the cuts the Texas GOP, and the right wing that’s running our state, want have never had anything to do with need. Never did and never will. It’s about ideology. They hate government and are convinced it can’t do anything good for anyone. And that’s what they intend to prove as they run out state into the ground.
As the middle class continues is 50 year decline the Texas GOP wants more tax cuts for the wealthy. Instead we should be fighting to rebuild the middle class.
Need has nothing to do with it.
The only thing sadder then the inauguration this week has been the reaction to it of retiring Texas Village Paul Burka. Also his lamenting the end of “adult behavior” because the 2/3rds rule is no more.
I have always been a fan of the two-thirds rule because it gave the minority a fighting chance to take on the majority and it required a level of bridge-building and consensus to pass legislation. On a more basic level, it imposed “adult behavior on people who might be otherwise inclined.” Unfortunately for the Democrats, their party just doesn’t have the numbers to fend off the majority, so Patrick doesn’t have to worry about bridge-building, consensus, or adult behavior as the presiding officer.
I’m not sure what Lege he’s been covering for the last 10 years, but adult behavior went out the door quite a while ago. We get it, things have changed over the last 40 years . This is what happens when we have one-party GOP rule, they change the rules.
When 60 percent of 30 percent of registered voters are allowed to pick our elected leaders this is what we get. I wish Scott Turner would have been elected Speaker. The Democrats should have voted for him. Nothing will speed Democrats back to power in Texas faster then giving the wing nuts control. Once they break Texas then maybe we can get back to sane and rational government – Burka’s adult hehavior.
Don’t get me wrong, there will be serious negative consequences because of how our state is now “governed”. Anyone that’s not wealthy and/or connected is left out. And as long as our elected officials are allowed to essentially bribe corporations with tax payer money – likely the same corporations that bankroll their campaigns – little is likely to change.
There was a good editorial in the SAEN yesterday, Unmet needs don’t spell tax cuts in Texas. It opens with a good description of where things stand as The Lege’s budget battle approaches.
It’s estimated that just keeping up with population growth will require $6 billion to $7 billion more in state spending on services. Much of that $5 billion is already spoken for. There remains supplemental Medicaid funding needs in the current budget. The state is appealing a court ruling that might require a revamping of state school financing, a key part of the ruling having to do with how underfunded the system is. The price of oil, taxes on which contribute much to the state budget, is on a downward spiral at the moment. And existing programs need more money than any of these extra dollars can address — likely more need than can be covered even if better-than-expected economic growth pumps in more than $5 billion extra into the budget.
In other words, unmet need atop unmet need in Texas.
So, of course, tax relief is said to be a priority for the Legislature next year. Huh?
Well, the far rights unmet need is always tax cuts. Unmet needs are in the eye on the beholder. The editorial goes on to discuss what could/should be done.
But needs cannot go unmet, and there are perhaps better ways to address this disdain for the property tax, inarguably high in Texas because it has no personal income tax. Creation of an income tax seems to be the third rail of Texas politics. It shouldn’t be.
If this incoming Legislature embarks on a path of tax relief, it must answer a few questions. Tax cuts necessarily mean less state revenue and the “extra” money won’t cover these and continuing needs. So:
Which programs will go unfunded or be under-funded? Make the case for diminishing these services, a likely result since population growth alone dictates new need. Agencies won’t be able to find enough “efficiencies” to make up shortfalls.
If the answer is to simply maintain current funding levels for various state agencies into the next biennium and crow about how no cut in funding occurred, see the question above. And explain this also in the context of the state not fully digging out of previous cuts.
If the answer is to shift money, say, for example, from the Department of Public Safety to transportation, where will the money come from to fill the hole at DPS?
There are proposals out there to increase the homestead exemption for property taxes for schools. It is currently a $15,000 exemption and legislators are talking about bumping that up to $25,000 to $30,000.
At $30,000, according to the Center for Public Policy Priorities, this would mean $1 billion less.
With so many needs unmet in Texas, we are skeptical of any tax cut, but an increase in the homestead exemption at least has the advantage of being progressive. This is money that will benefit low- to middle-income homeowner families. And such relief across the board can help ameliorate this strong bias in Texas against funding public services.
But the state must make schools whole, filling any shortfalls created, or this is not worth doing at all.
The editorial is great and there’s little for someone like me to quibble about. Yes, we should discuss an income tax and our needs must be met. But that’s likely to happen anyway. I’ve written words like this many times. The government that’s about to take office has no interest in anything with the word “progressive” attached to it.
I applaud the SAEN editorial board for writing this article and we need a steady chorus of this stuff over the course of years to get the message across. But anyone who thinks something like this is going to be accomplished this session needs their head examined.
An article from the DMN has a better take the fight will be over. Which tax cuts and how much will be cut, Prospects for Texas tax cuts dim as oil price drops. While the amounts may have be smaller, for now, when it comes to the folks that will be sworn in a week from Tuesday it’s still tax curs all the way.
Elated by prospects of an election romp and overflowing state coffers, some state Republican leaders suggested that significant cuts in Texas’ property and business taxes lay ahead.
But a year-ending plunge in oil prices, which help drive so much of state revenue, has tempered their optimism. Supporters are clashing over what to cut. And priorities for spending have shifted.
It all leads to downsized expectations of how much tax relief the GOP-controlled Legislature and top Republican leaders will be able to deliver in their session beginning next week, business leaders and key lawmakers say.
Even some tea party-backed conservative lawmakers say tax cut fever has cooled in recent weeks.
Tax cuts will be the key pocketbook issue in lawmakers’ five-month session. While guns, immigration and abortion are likely to generate more passion, GOP leaders’ desire to deliver at least some tax relief will drive budget decisions affecting public schools, state universities, prisons, roads and health care.
More money is needed to pay for our growing state, and all we’re likely to get is more tax cuts that will largely go to the wealthy. Money for nothing.
From EOW’s post election analysis:
The one issue that often gets overlooked, that made Davis and the Democrats job extremely hard, is the [extremely good] economic conditions in Texas.
There’s nothing so sweet as being the Texas Governor during an oil boom, and exiting right before the bust. Via Kevin Drum at MoJo, Rick Perry Is One Lucky Dude.
Man, Rick Perry is one lucky guy, isn’t he? It’s true that the “Texas Miracle” may not be quite the miracle Perry would like us to believe. As the chart below shows in a nutshell, the Texas unemployment rate has fared only slightly better than the average of all its surrounding states.
Still, Texas has certainly had strong absolute job growth. However, this is mostly due to (a) population growth; (b) the shale oil boom; and (c) surprisingly strict mortgage loan regulations combined with loose land use rules, which allowed Texas to escape the worst of the housing bubble. Perry had nothing to do with any of this. And now that oil is collapsing and might bring the miracle to a sudden end, Perry is leaving office and can avoid all blame for what happens next.
One lucky guy indeed.
This is culled from a blog post where the specter of oil busts past (1986) are being discussed.
As we weigh the evidence, we think Texas will, at the least, have a rough 2015 ahead, and is at risk of slipping into a regional recession. Such an outcome could bring with it the usual collateral damage that occurs in a slowdown. Housing markets have been hot in Texas. Although affordability in Texas looks good compared to the national average, it always does; compared to its own history, housing in some major Texas metro areas looks quite dear, suggesting a risk of a pull-back in the real estate market.
The effects of an oil bust will likely not be felt until the next legislative session. But if it starts to show during this session, the GOP will likely use it as an excuse to cut, or not fund, items that help middle class prosperity – public education, higher education, health care, transportation, etc. The things that have been neglected since the GOP took control of Texas.
While no one wants the Texas economy to turn sour, nothing can change the fate of a political party faster then a sinking economy and an inability to deal with it. Miracles cannot be explained. The so-called “Texas Miracle” never was one, and what happened in Texas was always explainable, The Texas Unmiracle.
So keep that in mind as the Texas GOP seeks to give businesses more tax breaks this session. As citizens we must be sure to ask how will they make up that money when the bill comes due in future sessions.
The problem with ending tax diversions has always been that the GOP will never say how they will replace the funding for the items the diversions are funding. That still holds true with the state Sen. Charles Schwertner (R-Georgetown) and his proposed legislation to end gas tax diversions.
He has pre-filed legislation to stop diverting $620 million dollars a year for other things.
Schwertner calls it “truth in taxation”, that he believes “when we have a dedicated tax, it should go to that dedicated purpose.”
Schwertner notes keeping all state fuel tax money for highways is only one piece of the funding puzzle, adding the state needs $4 to $5 billion dollars a year.
Schwertner says the fuel tax has been used, among other things, for the Texas A&M Transportation Institute, the Department of Public Safety, and the Attorney General’s office.
He says once this legislation is passed, then the discussion will start on prioritizing the state’s budget. [Emphasis added]
In other words Schwertner won’t tell us how he’ll replace the money, if at all, until his bill and amendment are passed. This legislation cannot be fairly evaluated without knowing how or if the diverted money will be replaced.
At the link above there’s an audio conversation available, give it a listen. For someone who likes to talk about so-called “truth in taxation” he’s certainly unwilling to admit how he would replace that $620 million.
One thing that was exposed as a result of the Lt. Gov. debate on Monday night was the extreme position of many in the GOP, highlighted by GOP nominee Dan Patrick, who want to make taxes more unfair in Texas. Via Forrest Wilder.
In the same way, he hopes to win in November by promising tax reforms that he’ll be hard-pressed to deliver. He’ll decrease some unspecified number of people’s property taxes by spiking the sales tax—in other words, he’ll move the state from a tax that hurts the middle class to a tax that hurts the poor. We’re weeks away from the election, and Patrick’s already got several sessions of dubious policies he’s promised to get done next session. (Add overhauling public ed to the list.)
As Kuff reminded us in his post on the debate, the GOP tried this in 2005. But the facts of how unfair a plan like this would came out, it was too greedy even for the GOP back then.
Texas families earning less than $100,000 a year would pay about $1.1 billion more a year in state taxes, while higher-income residents would see a tax cut of $437 million under a House bill designed to cut school property taxes, a report said Tuesday.
The Legislative Budget Board’s analysis of House Bill 3 also shows that the legislation would shift a portion of the state tax burden from businesses to individuals.
And that’s the kind of scam Patrick wants to run now. Instead of that gem the GOP wound up passing a tax swap in 2006, that created a structural deficit, but they left the sales tax alone.
Democratic candidate for Comptroller Mike Collier made this known back in the spring when his opponent Glen Hegar won the GOP primary, Hegar, who once urged “just do it” on property tax abolition, now more cautious.
During the recent Republican primary for state comptroller, state Sen. Glenn Hegar repeatedly endorsed eliminating local property taxes in Texas.
Borrowing from GOP opponent Debra Medina’s 2010 playbook, Hegar urged a shift to sales taxes to make up the more than $40 billion a year of revenue that cities, counties, school districts and other local governmental entities would lose.
Hegar, R-Katy, even suggested a very rapid transition to the new tax system. At a Longview tea party gathering in January, he told a man in the audience, “You just do it.”
This week, though, the governing implications of so massive a shift seem to have cooled Hegar’s jets.
Burying the property tax, after all, would require leaders to more than double the current rates of all state and local sales taxes.
Getting rid of the property tax, and replacing it with a much higher (at least doubled) sales tax would make an already unfair tax system in Texas, even more unfair. The GOP likes to call them consumption taxes, but these taxes fall much harder on consumers with low incomes then those at with higher incomes.
Think of it this way, and extra $20 when spending $100, if it’s raised to 20%…and extra $25 is it’s 25%. An extra $25 bucks on a grocery bill, it makes a $40 pair of shoes $50. Who does that hurt more the single mom or the wealthy suburban family? No property taxes will help those at the top abundantly more than everyone else. And don’t expect them to share, Half of All Income Goes to the Top 10 Percent.
A plan like Patrick and Hegar’s would also take away local control of tax dollars, as Democratic candidate Leticia Van de Putte so aptly pointed out in the debate. City and county governments would be left to rely on the state sales tax for money to pay police, firefighters, and first responders as well as all city and county employees. And during an economic downturn, where sales tax plummets, the cuts could be disastrous.
The GOP’s plan has always been higher taxes on the poor and middle class, and lower taxes on the wealthy. There is no feasible plan they will come up with that will lower taxes for Texans. All they can hope to do is pass another tax swap scheme. A scheme that will create a worse budget situation that they can then use to cut state spending on education, health care, roads and other infrastructure and speed us on our way to privatization.
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