Shared from the 5/4/2019 Houston Chronicle eEdition

Texas GOP’s Big 3 still pushing tax swap

But new analysis shows households earning less than $100K per year would pay more

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Patrick

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Bonnen

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Bettencourt

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Abbott

AUSTIN — Republican Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen proclaimed Friday they will muster the votes to pass a bill to cut property taxes and increase sales taxes, despite opposition from fellow Republicans and Democrats who call the swap a bad idea.

The public display of optimism came as a new state analysis shows households earning less than $100,000 a year would pay more in taxes after the swap, while businesses and wealthier households will see areduction. In a press conference Friday, the leaders did not address that analysis, simply saying their plan would reduce property tax bills for homeowners across the board.

“I have confidence that SB 2 is going to make it to my desk and be signed into law,” Abbott said as he sat between the two other top Texas Republicans in his Capitol office.

While those three present a united front, there are key lawmakers who are not on board.

One notable opponent is state Sen. Paul Bettencourt, a Houston Republican who has authored other tax relief proposals. He has repeatedly warned that tax swaps have historically failed. On Friday, Bettencourt renewed his objection, saying that homeowners would be left paying increased taxes in the end under the plan before the Legislature now.

Weeks earlier, Bettencourt said there was not “a tremendous appetite” among members of the Senate for the idea.

Texas has the third-highest property tax rate for single-family homes in the nation, according to a study by ATTOM Data Solutions, trailing behind only New Jersey and Illinois. Texans who own a home valued at $200,000 paid an average of $4,360 in property taxes in 2018, with an average effective property tax rate of 2.18 percent per year, the study found.

Republicans have proposed a1 percentage point increase in the sales tax to raise billions of dollars to deliver promised relief for skyrocketing property tax bills. If successful, the tax swap would raise sales taxes to 9.25 percent for most Texans, making it the highest state sales tax rate in the nation. In 2020, the proposed sales tax increase is projected to raise $5 billion that lawmakers say would be used to buy down school property tax rates across the state. The owner of a $200,000 house would see a reduction of about $260 a year on property taxes.

But the tax swap would increase the tax burden on low- and middle-class Texans, the analysis found.

“You should expect the people struggling to support their families are going to have a harder time, and those who are already doing pretty well will be a little better off,” said Dick La-vine, a senior fiscal analyst with the left-leaning Center for Public Policy Priorities.

Under that proposal, households that make less $38,000 a year would pay an effective local and state tax rate of 13.8 percent, according to the analysis released Friday by the Legislative Budget Board, which calculates costs of legislation. Households making more than $149,500 a year would pay an effective tax rate of 3.4 percent.

Texas businesses would see a decrease of about $638 million in tax collections, while households would pay nearly $413 million more in taxes, the analysis says.

The analysis does not calculate savings offered in a package of bills that would would restrict property tax increases enacted by cities and counties in the future. One bill would cap property tax collections for cities and counties at 3.5 percent without voter approval. Local school districts would be capped at 2.5 percent. The bills would also provide a further reduction in property taxes collected to fund schools — the decrease of about four cents per $100 of a home’s value, would save the owner of a $200,000 house about $80 a year.

Lawmakers are grappling with two possible ways to pass the legislation. The current proposal would make the swap a constitutional amendment that voters would need to approve in the November 2019 election in order for it to take effect in 2020. However, that legislation would require approval by two-thirds of the House and two-thirds of the Senate, a difficult threshold. Making it a constitutional amendment would ensure that the sales tax money would be dedicated to property tax relief into the future.

Otherwise, the Legislature could increase the sales tax to buy down property tax rates without an election. That route would require a simple majority in both chambers to pass — but lawmakers cannot guarantee that money will continue to be used to reduce property taxes.

Abbott, Patrick and Bonnen have just 24 days left to strike a deal before the legislative session adjourns on Memorial Day.

Allie Morris contributed to this report.

“You should expect the people struggling to support their families are going to have a harder time, and those who are already doing pretty well will be a little better off.”
Dick Lavine, senior fiscal analyst with left-leaning Center for Public Policy Priorities

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