Abbott, Bonnen, Patrick Propose Raising Sales Tax to Provide Property Tax Relief

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Miguel Gutierrez Jr. / The Texas Tribune

Gov. Greg Abbott, Lt. Gov. Dan Patrick, and House Speaker Dennis Bonnen appear at a joint press conference held at the Governor's Mansion in January.

Texas’ top three political leaders – Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen – threw their support Wednesday behind a proposal to increase the sales tax by one percentage point in order to lower property taxes across the state.

But that’s only if lawmakers agree to limit future local property tax increases.

The proposal would raise the state’s sales tax from 6.25 percent to 7.25 percent, generating billions of additional dollars annually for property tax relief, if voters approve a constitutional amendment. But the idea will be a hard sell to Democrats, since the sales tax is considered regressive, meaning lower-income Texans end up paying a larger percentage of their paychecks than higher-income Texans.

“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,” said a joint statement from the three leaders.

Neither chamber has passed HB 2 or SB 2, which would require voter approval of property tax increases over 2.5 percent.

The House Ways and Means Committee was scheduled to take public testimony on the House’s sales tax swap proposal this week but delayed hearing the bills. Rep. Dan Huberty (R-Houston) who authored House Joint Resolution 3 and House Bill 4621, is considering changing the legislation to use a fraction of the additional money generated by the sales tax for public schools – in order to get more Democrats on board.

The bills are intended to provide another revenue source to help significantly cut down local school property taxes, which make up more than half of the local property taxes levied in Texas.

If the Legislature approves the resolution, the constitutional amendment would go to voters to approve in November, and if voters sign on the tax rate change would apply in January 2020.

Since the tax swap would require a constitutional amendment on the upcoming November ballot, Huberty would need to convince 100 members – two-thirds of the lower chamber – to vote in favor of the resolution on the House floor. If all 83 Republicans vote yes, he’d also need 17 Democrats.

Sen. Larry Taylor (R-Friendswood) has filed Senate Joint Resolution 76 and Senate Bill 2441, which would also use an increase in the sales tax to lower school district tax rates. The Senate would need 21 votes to pass the resolution.

Raising sales taxes for public education appears deeply unpopular among voters, with 74 percent of Texans in a recent University of Texas/Texas Tribune poll reporting that the state Legislature should not consider increasing sales taxes to boost public education money. In fact, increasing the sales tax was slightly more unpopular than creating a state income tax, which 71 percent gave a thumbs down in the poll.

7 thoughts on “Abbott, Bonnen, Patrick Propose Raising Sales Tax to Provide Property Tax Relief

  1. Why does tax reform inevitably drift to the most regressive forms of taxation (lottery, sales tax)? One thing for sure, courage has never been a hallmark of our state legislature. Play to the base!

  2. Bad Idea! But, Texas Voters vote the way they Do- they (Legislature) may actually get this to pass for US to decide! Then, Urban vs Rural voters; also, watch out for other “controversial legislation/ issues” to pass or be denied.

  3. Why is no one in the legislature addressing property value inflation? If my home was still valued as it was 5 years ago, I wouldn’t be worried about property taxes because my tax rate has not changed in that time yet I’m paying over $2000 more per year…and it’s due to the inflated value of my home (an increased value of over $60,000 in the past year). Keeping tax rates low doesn’t help if county tax assessors make up the difference by saying our homes’ have increased in value.

    Also, I’ve been reading about bills that will increase tax revenue to help give property tax relief but do any of these laws require local school district tax rates to go down? Is there just an assumption that if the state gives more to school financing that the school districts will lower their rates or is this being written into these bills? I’d hate for sales tax to go up and my school district continues to tax me at their current rate giving me now property tax relief and paying more in stores to boot!

  4. Everyone “pays property tax” even if you don’t own property.

    When you rent a landlord includes it.

    When you shop the business includes it in their prices, even grocery stores have to raise prices on sales tax exempt products.

    Property tax impacts everyone and everything, not just property owners and ultimately ends up impacting lower income earners much more.

    • That is true about property taxes being passed down to tenants. But, the sales taxes disproportionately impact lower income people. There are many things exempt from sales tax that benefit higher income citizens (property transactions, stock transactions, etc). Sales tax is regressive.

      At the end of the day, even though an income tax can be more equitable- it is a non-starter with the legislature and voters. It would take too much courage for anyone to start that conversation.

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