Today’s political debates could lead you to believe there are two things the Texas Legislature could do with the state sales tax next year: grow it or shrink it. The latter is more likely.
The first choice comes from Glenn Hegar, a state senator from Katy who is the Republican nominee for comptroller.
Sometimes boldly and sometimes not so boldly, Hegar advocates eliminating the $40 billion a year in property taxes that finance local governments, schools, hospital districts and some other special districts across the state. He would replace that revenue through a revised and, unfortunately, significantly higher sales tax.
It’s not a new idea. Some activists in Austin have said for years that a “consumption tax,” one that’s based on what you spend instead of what you own, is both fair and a better way to keep state revenue in step with the economy.
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Detractors say a greater reliance on the sales tax would be the opposite of fair because it would be “regressive” — meaning it would take a greater share of poor people’s incomes than it would of wealthy people’s incomes.
The fact that the debate is still around shows staying power on both sides.
Hegar has acknowledged that the idea faces significant hurdles. He’s mentioned that some of the figures bandied about for the resulting sales tax are in the neighborhood of 18 percent, up from the current 6.25 percent state share.
That might be brought down some by applying the tax to some goods and services that are not covered now. Taxes on legal services and even real estate sales and other options that are politically very difficult have been mentioned in the past.
But Hegar told a January Tea Party rally in Longview that the way to handle such difficulties would be to “just do it.”
His campaign office backtracked, saying the state is “years away” from shifting from property taxes to higher sales taxes.
Hegar hasn’t let himself be drawn out. But his campaign office is probably right: It won’t happen for a long time, if at all.
Movement toward lowering the sales tax as soon as next year’s legislative session, is far more likely.
The Texas Public Policy Foundation has produced a report recommending that option. TPPF is an Austin think tank that’s pretty influential among conservative Texas lawmakers.
“As the economy continues to expand and more people are employed,” the report says, “the Texas Comptroller reports that sales tax collections have increased for 46 consecutive months through January 2014.”
Sales taxes have contributed to a 25 percent increase in total state revenue since the 2008-09 biennium, the report says.
TPPF projects a “surplus” of as much as $2.6 billion beyond what’s needed to finance another state budget come next year. Setting that money aside in a special fund could allow the state to trim the 6.25 percent sales tax to 5.75 percent for the life of that two-year budget.
Lawmakers had more money than expected when they met last year, but they had to devote much of it to restoring previous cuts. Next year, they could be drawn to a sales tax cut instead.