Texas only has low-taxes for the wealthy, the rest pay too much – Houston Chronicle

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A sign for the upcoming tax free holiday is shown at Walmart, 1118 Silber Rd., Tuesday, Aug. 2, 2022, in Houston.
Democratic gubernatorial candidate Beto O’Rourke and Republican Gov. Greg Abbott
Customer destinations such as the H-E-B-anchored Shadow Creek Ranch retail center at 2805 Business Center Drive fuel the city of Pearland’s surging sales tax figures.
The annual Texas sales tax holiday is scheduled for Friday-Sunday, Aug. 5-7. Shoppers can save about 8 percent on many school-related supplies and clothing priced less than $100.
Dickinson logged its 11th straight month of generating sales tax revenue in the seven-figure range, producing $1.34 million in February.
Texas is a low-tax state only if you make a lot of money. If you don’t, then you’re better off in California.
The biggest lie Texas politicians have ever told — and both parties have perpetuated it — is the lack of an income tax is an absence of taxation. But Texas doesn’t collect much less in taxes than other states; it only shifts the burden away from the wealthy.
Shouldn’t a tax burden reflect a person’s ability to pay? In Texas, it doesn’t, and that makes people angry. Proposed changes to Texas taxes would still not make high-earners pay their share.
When all state and local taxes are added, Texas ranks 32 out of the 50 states, the conservative think tank the Tax Foundation calculated. Texans pay taxes on the value of their real property and the price of the things they consume.
School districts and local authorities create the largest burden through property taxes, which make up 46.2 percent of the taxes collected in Texas. Texas lawmakers require people to pay higher taxes almost yearly, not because their income rises but because their real estate value has increased.
This year, property appraisals rose 15 to 30 percent in Harris County, 25 percent in Bexar County, 15 percent to 24 percent in the Rio Grande Valley, and a whopping 53 percent in Travis County.
Unless a local taxing authority cuts the rate, the bills go up. I know very few Texans who’ve received a 15 percent or more raise this year to pay their higher taxes.
Property tax rates are the same no matter your income, which is the definition of a regressive tax. The top 20 percent of earners spend half as much of their income on housing as Texans in the bottom 20 percent, researchers at Texas A&M University reported. Property taxes are, therefore, a lower burden on the wealthy.
If you are among the 38 percent of Texans who lease their home, you can count on rent going up when the owner passes the higher tax along. Renters also pay the property tax for owners without getting the benefit of equity.
Property taxes, therefore, burden lower-income Texans more than the wealthy.
The second leg of the Texas tax stool is on sales. The state and local governments can add 8.25 percent to the cost of most goods and many services. Since the tax is the same on everyone regardless of income, it’s also considered regressive.
The state collects 6.25 percent of the sales tax, which is its primary source of revenue. When inflation causes prices to rise, the sales tax also rises, adding to the burden.
Lower-income people spend a much higher percentage of their income on basic needs than the wealthy. Yes, the rich may buy fancier cars and furniture, but no one forces them. You rarely hear about a wealthy person living paycheck-to-paycheck; they invest or save a higher portion of their income.
The net effect is that Texans in the bottom 20 percent of annual earnings pay 13 percent of their income in taxes, the nonpartisan Institute on Taxation and Economic Policy calculated. Middle-class Texans pay 9.7 percent of their income to state and local taxes.
The upper middle class pays 7.4 percent, and the income bracket above them pays 5.4 percent. The top 1 percent of the highest earners in Texas? A total of 3.1 percent.
Texans making less than $21,000 a year pay 3.7 percent of their income to property taxes — those making over $617,000 pay 1.8 percent.
Not all states rely on a two-legged revenue stool. Most strike a balance with three legs: a property tax, a sales tax, and an income tax. Income taxes are fairer. In California, the top 1 percent pay 12.1 percent of their income to state and local taxes, while the bottom 20 percent pays 10.5 percent.
Replacing the school property tax with a statewide income tax could solve many problems. First, it would shift the tax burden off low- and middle-income Texans. Second, it would allow a uniform payment to schools based on attendance, not the neighborhood, correcting inequities and simplifying school finance.
Today, though, the state constitution prohibits an income tax, and neither Republicans nor Democrats are willing to propose one. Gov. Greg Abbott and his challenger Beto O’Rourke instead talk about one-time fixes or exotic sources of income, like taxes on marijuana and gambling.
A fair tax system reflects a person’s ability to pay, not how much their property appreciates or how much inflation drives up the cost of living. Our incomes just do not keep up. But Texans love the low-tax lie, especially the wealthy.
Chris Tomlinson, named 2021 columnist of the year by the Texas Managing Editors, writes commentary about money, politics and life in Texas. Sign up for his “Tomlinson’s Take” newsletter at HoustonChronicle.com/TomlinsonNewsletter.
Chris Tomlinson has written commentary about money, politics and life in Texas for Hearst Newspapers since 2014. In 2021, the Texas Association of Managing Editors awarded him columnist of the year, and the Headliners Foundation named him Texas’s Star Opinion Writer. He’s authored two New York Times Bestsellers, “Forget the Alamo: The Rise and Fall of an American Myth” and “Tomlinson Hill: The Remarkable Story of Two Families Who Share the Tomlinson Name – One White, One Black.” Before joining the Houston Chronicle, he spent 20 years with The Associated Press reporting on politics, economics, conflicts and natural disasters from more than 30 countries in Africa, the Middle East and Europe.
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