GOP flirtation with a tax increase is rebuffed

This week, Texas Republicans were not successful in their attempt to raise taxes, a move that would have hit working class families hard.

The proposed tax bill sought to raise the state’s sales tax in order to, as some Republicans said, provide relief for property taxes, which GOP leadership called a “tax swap.” The bill, likely dead for now, was postponed until the 2021 legislative session following a House vote on Tuesday.

Days before the vote, Democrats escalated their contempt for the bill while citing an estimate by the state’s own nonpartisan Legislative Budget Board that calculated only Texans making an annual income of $100,000 or more would benefit.

Ultimately, the bill’s biggest enemy was Texas Republicans who could not get behind the proposal despite strong support from Gov. Greg Abbott, Lt. Gov. Dan Patrick, and Speaker of the House Dennis Bonnen.

Some Republicans opposing the bill even found themselves borrowing rhetoric from the left (and the truth), like Houston-area Texas State Senator Paul Bettencourt who took to Facebook to call the bill a tax increase on the working class and a tax cut on the wealthy.

And while the bill may be dead in the water until the next legislative session, the attempted roundabout tax cut for high earners disguised as equitable tax policy was what one leading Democrat described as a Jedi mind trick.

Meg Wiehe, deputy director of the Institute on Taxation and Economic Policy, a non-profit and non-partisan think tank that focuses on how tax policy impacts citizens told the Texas Signal she believes it was fair to characterize the tax swap as “wealth distribution, but going the wrong way.”

She said that because lower and middle-income families devout a higher share of their income to both property taxes and sales taxes, there’s just no way to design a precise tax swap where everyone pays the same.

“If you look at the distribution of Texas’ tax systems, we found that the top 1 percent [of the wealthiest Texans] pays 1.2 percent of their income in sales and excise taxes compared to 9.3 percent for the bottom 20 percent of Texans,” Wiehe said.

She said property taxes work the same way, with the top 1 percent of Texans paying just 1.2 percent of their total income on property taxes while the poorest Texans pay almost twice that at 3.7 percent of their annual income.

“If you were to map them out separately, both taxes look regressive,” Wiehe said. “The lower income you have, the higher share of income you pay on either of those taxes, but if you chart both them together, you can see how much more regressive the sales tax is.”

This phenomenon would have also been reflected in the proposed tax swap too. Of the $225.8 million the tax swap was predicted to save for Texans– a number Republicans touted —only Texans making $100,000 would break even or better.

If the Texas GOP leadership was successful in passing the tax swap, approximately 6.5 million or 60 percent of Texan households would have seen a net increase in their taxes in order to save millions of dollars for the state’s richest.

One figure circulated by Republicans even suggested that only homeowners with properties worth at least $700,000 would win under the proposal.

Ultimately, the debate surrounding the failed tax swap isn’t just about increasing or decreasing taxes– it’s about finding an equitable and fair way to fund Texas’ underfunded school system.

It’s difficult to get around the reality that Texas’ top Republicans are okay with placing that burden on working families in the state.