Statewide Tax on Income May Be Gaining Steam

AUSTIN – A dozen years ago today, then-Lt. Gov. Bob Bullock made the biggest public miscalculation of his career in declaring Texas ready for a state personal income tax.

Bullock, surprising editorial writers and Gov. Ann Richards at an event in the Governor’s Mansion, vowed to lead the charge for a 5 percent personal income tax and 8 percent corporate income tax to fund public schools while driving down local property taxes.

Saying he personally disliked “any type of new taxes,” Bullock continued: “But I also know deep down in my heart, deep down in my heart, that it’s the right thing to do for Texas.”

Few heeded his call, and Bullock’s idea died, although he recovered and even won re-election after proposing a constitutional amendment approved in 1993 that requires voter approval before an income tax becomes law.

No statewide official has pushed an income tax since, but advocates – and one opponent – say it might be gaining momentum as lawmakers confront escalating property taxes and a projected state revenue shortfall exceeding $10 billion.

“No question, there is a growing movement to consider a state income tax,” said Peggy Venable, the Texas director of Citizens for a Sound Economy, which favors cutting taxes and spending.

“We have more people moving in from outside the state, of people accustomed to paying a state income tax,” Venable said. “There is certainly a property tax revolt rumbling. It’s the anything but a property tax” crowd.

But, she said, “it would be the wrong move.”

Republican leaders agree, led by Gov. Rick Perry, who said Wednesday: “The vast, vast majority of the people of the state of Texas think like I do. The smartest thing we have never done in this state is pass a state income tax.”

“The state income tax is dead,” agreed Lt. Gov. David Dewhurst. “There’s no support for it in the Legislature and throughout the state.”

Yet Dewhurst has been studying alternative education funding methods to whittle dependence on local property taxes.

“I’m working on it daily,” Dewhurst said. “It’s got to work numerically and then we’ve got to work the politics. It will require a lot of explaining all around the state.”

Among 31 senators and 150 House members, two Democrats are urging colleagues to seek voter approval of a personal income tax as the best alternative to the state’s reliance on sales taxes, corporate franchise and other taxes, which yield about $26 billion a year.

Sen. Eliot Shapleigh, D-El Paso, estimates the state could raise $15 billion more for education by levying a personal income tax of 4.8 percent, while driving down school property taxes 90 percent.

“If voters get to see the facts, their minds change,” Shapleigh said. “We can’t improve the system by increasing taxes on property. More and more people need to see the facts.”

First-year Rep. Eddie Rodriguez, D-Austin, plans legislation to progressively tax income at a rate of up to 6 percent, while eliminating local maintenance and operation school property taxes and the corporate franchise tax.

“There’s no political will to do it,” Rodriguez conceded. “We have to create that will.”

Dallas businessman Albert D. Huddleston has circulated a proposal to fund school facilities and teacher salaries, at an average of $52,000 a year, by replacing local property taxes with either an expanded or increased sales tax, a flat-rate income tax or statewide property tax – or some mix of the three.

Huddleston’s “Texas Great Teacher Plan,” which envisions giving experienced teachers a property tax exemption, would require nearly $19 billion a year, drawing from $11.2 billion in existing state education spending and $7.5 billion generated by the new tax.

Few legislators look like they’re ready to follow in Bullock’s footsteps.

Rep. Paul Moreno, D-El Paso, first elected to the House in 1966, cited voters confronting higher property taxes and said: “There’s going to be a personal income tax or there’s going to be a revolution.”

More typically, Rep. Jim Pitts, R-Waxahachie, whose district includes Bullock’s boyhood home in Hillsboro, shook his head no.

“People wouldn’t send me back to Austin if I voted for a state income tax,” Pitts said.