Texas leaders introduce sales tax hike for property tax relief

Texas

AUSTIN (KXAN) — Texas leaders are jointly supporting an increase to the state’s sales tax from 6.25% to 7.25% which, according to a release, will “result in billions of dollars in revenue to help drive down property taxes in the short and long term.”

Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen say this effort would be in addition to SB2 or HB2, bills aimed to limit property tax growth, which requires voter approval.

Here is the full release from Governor Abbott, Lt. Governor Patrick and Speaker Bonnen:

“Texans are fed up with skyrocketing property taxes. At the beginning of the legislative session, the Governor, Lt. Governor and Speaker laid out an agenda for property tax relief through the passage of Senate Bill 2 and House Bill 2 to limit property tax growth. In addition to that effort, today we are introducing a sales tax proposal to buy down property tax rates for all Texas homeowners and businesses, once Senate Bill 2 or House Bill 2 is agreed to and passed by both Chambers. If the one-cent increase in the sales tax passes, it will result in billions of dollars in revenue to help drive down property taxes in the short and long term.”

Some Republicans like the idea in part because it gives Texans a say about tax relief.

“This eventually will go to the voters. This is democracy in process. This is democracy in action, where folks can, can really have those debates and decide, you know, which route they want to go,” Rep. Brad Buckley, R-Killeen, said. 

Some Democrats immediately responded in disapproval of the proposal. State Rep. Ramon Romero, D-Fort Worth, said the sales tax would hurt working families while giving more breaks for the wealthy.

Rep. Celia Israel, D-Austin, echoed the sentiment. 

“I am not inclined to support an initiative that’s only going to hurt working families who are just trying to buy groceries,” Israel said.

Texans do not pay sales tax on most food items. But items like paper products, detergent, and diapers are subject to sales tax.

With resolution and voters’ approval, the sales tax change would go into effect in January 2020.

Impact on families

Austin Community College Professor Stuart Greenfield explained to KXAN lowering people’s property taxes can hurt local governments and school districts, so he can see why lawmakers would want to avoid that. 

“The only alternative is sales tax,” he said. “In fact, sales tax revenue in 2021, according to the Comptroller’s Office, is about the same as the local school district property taxes. So if you get an additional amount of money from sales tax, you can offset… Reduce the property tax by a similar percentage.”

However, he said the move could hurt the majority of Texas families. 

“It would turn out the only group that would benefit from the replacement would be households with incomes above $150,000,” Greenfield explained. 

He said people with lower income pay a bigger percentage of their income in sales tax, compared to wealthier families. 

Many people we talked to said they were surprised to hear about the proposal.

“Increasing the sales tax is not a solution,” one woman said. “That’s really hard because that’s something you have to pay constantly on the regular basis. It’s not helping. It’s not helping a lot of people.” 

Economist Angelos Angelou said every one cent increase in sales tax would generate more than $7 billion in new revenue for the state, but he said it isn’t fair because the proposal penalizes renters and disproportionately hurts lower incomes families. 

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