(Texas)House Bill 3's lopsided benefits are boosting income tax option

When the revised version of House Bill 3 was released, attention focused on the "snack tax," a steep levy on junk food. But when construction and service business groups realized they would pay for breaks given to the financial, insurance and real estate sectors, the focus of the debate changed.

And Tuesday, when the Legislative Budget Board gnomes released their analysis of whose tax burdens would change, many more Texans started tuning in.

The LLB confirmed what I had earlier reported: 80 percent of Texans would pay higher taxes and the richest would get a tax break.

HB 3 is revenue neutral. Lowering the $1.50 cap on school districts' maintenance and operations (M&O) taxes to $1 would cut $5.63 billion in taxes. But this cut would be offset by hiking the state sales tax rate to 7.25 percent, extending it to bottled water, newspapers and car repairs and washes, raising the boat and motor vehicle sales tax to 7.35 percent, adding 3 cents tax on snacks and boosting cigarette taxes to $1.41.

Yet another controversial element is to replace the franchise tax, which is almost a voluntary tax, with a 1.15 percent payroll tax on wages of $90,000 or less.

Because it would be paid directly by businesses, some readers called it "a back-door income tax" foisted in a form that will bypass the constitutional mandates that require voter approval of any income tax. Two-thirds of its revenue would be used to lower property taxes and the other third solely for public education.

When I asked Rep. Eddie Rodriguez of Austin, whose income tax bill is the only one ever given a hearing by a House Committee, if he thought the payroll tax is a back-door income tax, he said, "That's exactly what it is. It's an income tax on businesses and it will negatively affect employees.

"Businesses are not going to eat up that cost, and I don't blame them," he said. "But it's the employees paying the tax and they won't get to write it off (their federal taxes) but the employers will."

Rodriguez's simple income tax proposal, he says, would lower most Texans' taxes. And his Web site, texastaxrelief.com, has a calculator into which you plug in school district and some other information and it will figure your potential savings, if any.

"My plan eliminates the $1.50 (M&O property tax) altogether," Rodriguez says. "This will eliminate about 55 percent of your entire property tax bill permanently, and the state will get $55.1 billion more than we have now and we have to put this into education.

"We get rid of Robin Hood and replace it with an income tax that everyone pays, " Rodriguez adds, "so whether you make $25,000 or less or $200,000 or more, you will pay a percentage."

Rodriguez's plan, which would require a constitutional amendment, would levy 1 percent on individual earnings up to $25,000, 2 percent on $50,000 and so on — in 1 percent-per-$25,000 increments — to 7 percent on $200,000 or more.

The state would provide 100 percent of school funding and voter approval would be required to change any aspect of the tax.

Since this legislative session convened, the Web site has gotten tens of thousands of hits, and Wednesday, the League of Women Voters became the first major interest group to endorse the income tax concept. More endorsements are on the way, Rodriguez says.

As for the Web site, he says, "Any response that I get, via e-mail or letters, it's almost always positive now."

"That's exactly what it is. It's an income tax on businesses and it will negatively affect employees."

Call your housecritter today!

http://www.house.state.tx.us/members/welcome.htm

franchise tax, which is almost a voluntary tax

Hogwash! I have our statement sitting on my desk right now. I'm so sick of the notion that every business is a Multi-National Coroporation with hundreds of attorneys at their disposal to cheat the tax man

But this cut would be offset by hiking the state sales tax rate to 7.25 percent, extending it to bottled water, newspapers and car repairs and washes, raising the boat and motor vehicle sales tax to 7.35 percent, adding 3 cents tax on snacks and boosting cigarette taxes to $1.41.

I don't buy much bottled water. I fix and wash my cars. I don't buy many new cars and boats - boats are only a hole in the water you dump money into. The few snacks I eat won't add up to very much, and I'll give up the few cigs I smoke when I go fishing.

"We get rid of Robin Hood and replace it with an income tax that everyone pays,

Anything to get rid of Robin Hood is OK for me.

I forgot one thing.

extending it to bottled water, newspapers

A real good reason to quit buying the Austin Ultra Liberal Un American Non Statesman.

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