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Texas’ Roadblock to a State Income Tax Couldn’t Have Come at a Worse Time 

  • Flickr / Erik (HASH) Hersman
Editor’s Note: The following is Current Events, a column of opinion and analysis.

With businesses shuttered and unemployment hitting levels unseen since the Great Depression, Texas is in desperate need of tax revenue. Make no mistake, political watchers warn, cuts to state services are coming.

They will be deep. They will be painful.

“When you’re talking about the state’s revenues right now, the big picture is dire,” said Cal Jillson, a political science professor at Southern Methodist University.

Texas’ Republican-controlled Legislature’s traditional approach to riding out economic turmoil is to whittle away at budgets. And the first victim is likely to be the state’s educational system, which got a badly needed cash infusion last legislative session, boosting its per-student spending from 49th in the U.S. to roughly 38th.

Be prepared for us to slide back down that scale.

“There will be blood on the floor of every classroom in the state,” Jillson said.
Too bad Texas voters overwhelmingly voted last November for an amendment to the state constitution all but eliminating the possibility for the Lege to enact one of the few available tax measures that could have stave off the most draconian cuts.

Roughly three-quarters of Texans voted for Proposition 4, which bars lawmakers from imposing an individual income tax, including a tax on an individual’s share of a partnership and unincorporated association income.
Prop 4 didn’t make a future income tax completely impossible, only damned near impossible. Under the amendment, any future income tax resolution would need two-thirds support in both legislative chambers before it could go to voters, who would ultimately decide its fate.

“To be honest, the reason we’re doing that is because we don’t know what future legislators might do, so we want to, while we have to vote, forever ban a state income tax in Texas,” GOP state Rep. Phil King told his hometown paper, the Weatherford Democrat, while working to sell the amendment to voters.
So, there you have it.

Texas’ coming budget cuts are unavoidable, experts say. But if lawmakers had the ability to institute a state income tax — something already in existence in 41 other U.S. states — they would likely be far less severe.

Oh, legislators could fiddle with closing the state’s many sales loopholes or stack on a few additional business taxes, but those aren’t likely to add up to much, experts point out.

In the absence of an income tax, Texas lawmakers’ next-best option is hiking the sales tax, which is already the 13th-highest in the nation, according to the Tax Foundation. Even a half-cent hike would nudge us closer to the top five.
Let’s not fool ourselves into thinking the recovery will be quick and that the severe cuts will be over in a matter of a few months. Revenues from big generators like tourism and the oil industry will take considerable time to come back.

The Texas Taxpayers and Research Association estimates that for every dollar decline in the price of oil, the state loses $85 million in revenue.

What’s more, Texas property owners hurt by the coronavirus pandemic are not eligible for a temporary state tax exemption created for disasters, state Attorney General Ken Paxton said in a recent letter.

Like those property taxes, sales taxes are regressive, meaning they tend to hit low- and middle-income residents the hardest. Income tax, on the other hand, forces those with the deepest pockets to shell out more while taking considerably less from the lowest wage earners.

Texans aren’t stupid, but in voting for Prop 4, they allowed themselves to be played by lawmakers such as King and its champion — State. Sen. Pat Fallon, R-Prosper — lawmakers beholden to the monied interests who stand to pay out the most under a state income tax.

Now, with the budget ax poised, low and middle-income Texans have the most to lose. The safety net that protects the poorest in the state and the public schools that educate our children are among the most likely casualties.

The sad reality is this: Texans had a potential out to those nightmare scenarios, but guided by cynical elected officials, they painted themselves into a corner.

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