Some dare to ask: Does Texas need an income tax?

May 23, 2004, Sunday, BC cycle

Some dare to ask: Does Texas need an income tax?

BYLINE: By BOBBY ROSS JR., Associated Press Writer

SECTION: State and Regional

LENGTH: 1001 words

DATELINE: DALLAS

A monster lurks in Texas’ closet – it makes voters scream and politicians hide under their covers.

But is it really as scary as most Texans seem to think?

A few brave souls – or perhaps foolhardy is a better description – want the Legislature to fling open the door and confront the state’s fears of enacting a state income tax.

As Texas deals with its troubled school funding system, a few lawmakers and business leaders dare to suggest that an income tax represents the best and only foolproof way to pay for public education while relieving homeowners’ heavy property tax load.

“It’s not going to happen today, but it is going to happen or we’re going to drive our state into a Third World-type country,” said Scott McCown, executive director of the Center for Public Policy Priorities, an Austin-based group that studies issues affecting low-income Texans.

Republican Gov. Rick Perry and most state lawmakers – Democrats and Republicans – oppose making Texas the 44th state with some form of an income tax.

But Sen. Eliot Shapleigh, D-El Paso, and Rep. Eddie Rodriguez, D-Austin, are undeterred. Both openly push for a broad-based income tax – or the “I word” as some legislators call it.

“It used to be that you didn’t even say the word. You’d go into the dark of night and whisper it,” said Jerry Polinard, a political scientist at the University of Texas-Pan American in Edinburg. “Now, it’s starting to be talked about.”

Rep. Lon Burnam, D-Fort Worth, filed a bill this month that would put a 3 percent income tax on the estimated 13,000 Texans who make $1 million or more a year.

“None of them live in my district,” quipped Burnam, who estimates his plan could generate $388 million a year.

Asked if he would support an income tax for everybody, Burnam replied, “I’m not ready to go there yet.”

He’s not alone. Political analysts agree that serious consideration of an income tax in Texas, at least anytime soon, remains about as likely as a ban on hunting rifles or a sea of Longhorn orange overtaking College Station.

“It’s an option that should be looked at like any other option,” said Mike Boone, a Republican lawyer and immediate past chairman of the Dallas Citizens Council, a business group pushing for education funding reforms. “Unfortunately, it’s in the DNA of most Texans not to have a personal income tax.”

Supporters of an income tax argue that it’s tied to residents’ ability to pay, deductible from federal income taxes and a steady revenue source.

Opponents counter that an income tax could drive away business from the state, fuel a bigger government and lead to a vicious cycle of tax increases.

Perhaps tellingly, Texas lawmakers’ recent discussion of raising the state sales tax rate – already one of the nation’s highest at 6.25 percent – drew barely a whimper of protest.

“Of course, all taxes are unpopular, but the least unpopular tax is the sales tax because it’s not a hidden tax,” said Jim Riddlesperger, a Texas Christian University political scientist.

Some say the sales tax unfairly hurts the poor because it takes a higher percentage of their income than the rich.

However, when one shopper chooses designer jeans at Dillard’s and another buys a cheaper brand at Wal-Mart, each pays the same sales tax rate, said Michael Quinn Sullivan, spokesman for the Texas Public Policy Foundation, a conservative think tank based in San Antonio.

“Try as hard as you might, you can’t buy a team of CPAs to get you out of paying the sales tax, which is what you see a lot of the time on an income tax,” Sullivan said.

Legend has it that the late Lt. Gov. Bob Bullock, a Democrat, was nearly assaulted at the Houston Galleria after he proposed an income tax following the mid-1980s oil bust and someone against the tax recognized him at the mall.

Bullock encountered criticism almost everywhere, said Tony Proffitt, an Austin political consultant who served as an aide to Bullock.

“While in theory many people would support various and sundry versions of it, there was this real strong suspicion against creating what I would call a little IRS in Austin,” Proffitt said.

In 1993, Bullock repented and led a push for the constitutional amendment that banned a state income tax unless voters approved it.

More than a decade later, an income tax still “seems off the table, even for debate purposes,” Proffitt said.

But some school finance experts and political observers say Texas eventually may have no choice.

“I don’t see how Texas can possibly provide adequate funding for education and property tax relief unless a major source of revenue is found,” said Larry Picus, a University of Southern California school finance expert. “Your sales tax is already pretty high. The obvious, and I would argue most fair, approach is an income tax.”

Shapleigh, the El Paso senator, touts an income tax in a traveling road show, using Kansas’ tax structure as an example. Kansas’ graduated income tax rate ranges from a low of 3.5 percent to a high of 6.45 percent, based on what people make.

The same system imposed on Texas would raise $34.6 billion over two years, enough to drastically cut property tax rates while putting $11.5 billion more into education, Shapleigh says.

Rodriguez, the Austin representative, has a Web site called Texastaxrelief.com. Homeowners can plug in their personal information and see how much they might save by replacing property and sales taxes with an income tax that puts more burden on the rich.

When Rodriguez’s constituents learn an income tax would cut a “chunk” of other taxes, he said, nine out of 10 like the idea.

“The other one thinks I’ve just escaped from the loony farm,” he said.

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On the Net:

Rep. Eddie Rodriguez tax site: http://www.texastaxrelief.com

Center for Public Policy Priorities: http://www.cppp.org

Texas Public Policy Foundation: http://www.tppf.org

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Associated Press Writer Kelley Shannon in Austin contributed to this story.

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Reaction from Texans on an income tax

BYLINE: By The Associated Press

SECTION: State and Regional

LENGTH: 465 words

Here is what some Texans have to say about an income tax:

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“I don’t like income tax. I don’t like any kind of tax. I’m against all taxes. I’d vote against it. … The government entities spend too much money. Way, way too much money. … No sirree. If I was the king of Texas, I would reduce the Texas budget by 50 percent the first day. I’d cut everything. … I would have adequate schools. I would have adequate roads. But a lot of people think schools should be castles.”

– Harlingen resident Tommy Bullard, 75, a retired Southwestern Bell employee and grandfather of six.

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“I’ve had the pleasure of living in Colorado, California, Wyoming, Iowa, Illinois and now, Texas. With the exception of Wyoming, all of those states have an income tax. It appears to me to be a fairly reasonable and equitable way of gathering income for public services.”

– Tim Chase, president and CEO, Wichita Falls Board of Commerce and Industry.

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“Just looking at it from a realistic standpoint, it’s going to require voter approval to implement an income tax, and there certainly doesn’t appear to be any groundswell of support statewide for an income tax. So it makes sense that … we focus on other revenue measures.”

– Bob Cook, CEO of El Paso Chamber of Commerce.

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“Of course, I pay a lot of taxes. City, school, county, and more taxes. I would support an income tax if it lowers those.”

– Daniel Diaz, 27, city of Harlingen parks crew employee.

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“It’s definitely nice at the end of the year when all you’re doing is your federal filing.”

– Pat LaRosa, manager of a Factory Connections clothing store in Texarkana.

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“I’d love it if it were totally dedicated to education, but knowing that states run a lot of things besides education, I guess I’d have to live with that.”

– Lubbock resident Clinton McDonald, 44, associate professor of cell biology and biochemistry at Texas Tech University.

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“It’s absolutely religious gospel in the Republican Party in Texas that you don’t raise taxes in general, but that you certainly don’t implement an income tax in particular. At this point, it would appear to be political suicide. Eventually, what will happen is that there will be political leadership that’s willing to go to the people and make the points about why all the other states have income taxes.”

– Jerry Polinard, political scientist at the University of Texas-Pan American in Edinburg

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There’s “serious data, serious research that it has devastated states that do it.”

– Bob Deuell, a Republican state senator from Greeneville.

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Associated Press Writers Bobby Ross Jr. in Dallas, Lynn Brezosky in Harlingen and Betsy Blaney in Lubbock contributed to this report.