For those on the outside, it is important to understand that Texas has long prided itself as one of only a handful of states in the union that does not have a state income tax. Of course, for many years the flip side of this is that Texans enjoy higher sales taxes than many other states in order to support state programs that might otherwise be supported with an income tax.
It is in reality a bit of a taxation shell game, whereby people are paying taxes with their purchases rather than in a lump sum once a year on their income, this makes paying taxes less obvious and has apparently been the preference of many Texans in the past.
A good article giving the details of this plan can be found at Austin American Statesman Online
Another important detail is the high rate of property taxes in the state and what has been termed taxation by valuation. Taxation by valuation has been proposed as a problem in districts who's property taxes are already at the maximum allowable by law, in order to raise more revenue, counties have been accused of artificially inflating the value of homes in order to collect more taxes on these properties.
Schools in Texas are supported primarily through property taxes assessed on the value of homes in the individual school districts; there is a "break" on taxes of currently $15,000 off the total valuation of your property if you live in your home. This is known as the Homestead exemption. Due to the outrage over high property taxes, part of Rick Perry's solution to quiet his base is to increase this homestead exemption by and additional $7,500. In my school district, taxes are about 1.7% of the assessed value.
While schools in Texas are currently under funded, and teachers under paid, our illustrious Gov. Rick Perry has been scrambling to cut property taxes, (which have been going up dramatically in Texas, and for which he is undoubtedly being screamed at about from his republican (we aint paying no stinkin taxes) base.
At one point in order to keep taxes down, Texas citizens voted to approve a statewide lottery in order to fund schools. This money however, has managed to find its way funneled into other programs leaving schools under funded and property taxes once again skyrocketing.
It is also important to note that according to the Texas state constitution; a budget can not be passed that is not balanced. Therefore, the state of Texas unlike the United States can not run a deficit budget, so a couple of years ago when the state was facing a huge budget shortfall, Rick Perry gloated over passing a balanced budget, of course one of the primary cuts that was made to the budget was cutting funding to state universities and public colleges. This lack of funding was made up by uncapping college tuition rates. Now Texas has some of the highest state tuition rates in the country as well.
Bottom Line, Perry managed to balance the budget on the backs of people along with their parents, seeking to better themselves with a college education. This is in essence the equivalent of a tax on higher education.
Now the House Ways and Means Committee has passed Perry's bill 5-4 along party lines that would raise statewide sales tax to 7.25 cents per dollar making it the highest state sales tax in the country. Along with this increase is a proposed $1 per pack increase on taxes on cigarettes. The committee also refused to consider Democratic proposal that would close loopholes in the state business franchise tax, it is estimated that currently only 1 in 6 Texas businesses currently pay this tax. Closing these loopholes would have increased the number of businesses that pay the tax from 150,000 to 475,000 (Perry's plan only added 10,000).
I believe this will result in Texas having one of the most regressive tax plans in the country. Under Republican governance, Texas is quickly becoming a state with one of the highest rates of poverty in the nation, with the poorest public services. Texans should call their state Congressmen and Senetors requesting that they vote NO for the regressive HB2.
If Democrats are not able to use this plan to their advantage in the 06 elections in order to pick up seats on both the state and federal level, then it is time for the state party leadership to resign. Even if we are lucky enough to keep this bill from passing in the House and the Senate this bill that alienates the working poor is a gift on a platter to the Democratic state party; I can only hope they have the strategic ability to utilize it.