Six Things You Need to Know About Legislature’s Tax Plans

This commentary originally appeared in the Austin American-Statesman.

Don’t let the drama of the Texas House and Senate tax cut fight distract from the potential damage of both proposals.

Both chambers want to cut more than $2 billion of the business tax. Both also want a second tax cut of more than $2 billion, with the House focused on the sales tax rate and the Senate backing a higher property tax homestead exemption.

The discussion about the plans largely has focused on the tension between the two chambers and occasionally the relative merits of the two approaches. But there hasn’t been enough discussion about whether it even makes sense to permanently cut nearly $5 billion out of the revenue available for pre-K, health care for pregnant moms, services for kids with disabilities, new roads, college financial aid and other priorities.

As the Legislature reaches crunch time, here are six points to consider regarding the proposed tax cuts:

1. They’re permanent. The proposals take this revenue off the table in perpetuity, but their justification is based on temporary conditions. What happens when the economy and state revenue slow down?

2. They set up more education cuts. The tax cuts pave the way for another deep round of cuts to schools, health care and other priorities during the next economic downturn. After two months of slower sales tax revenue for the state, that downturn could arrive sooner rather than later. We need to be prepared to pay our bills when the price of oil fluctuates, the Texas Supreme Court rules on the constitutionality of school funding, and other changes inevitably occur. As 25 groups warned in a recent letter to legislators, the concern is very real for children, teachers, parents and others who experienced the deep cuts in 2011.

3. Key services and investments are still underfunded. Texas already keeps taxes low, leaving numerous programs underfunded. Appropriations for the governor’s pre-K bill don’t even match the $200 million grant program eliminated in 2011. Child Protective Services staff caseloads aren’t funded at a safe level. The comptroller and others also point to other neglected needs, from state buildings to roads to retired teachers.

4. Business leaders say tax cuts aren’t a priority. A number of the state’s top business groups have called on legislators to use the state’s limited resources to address unmet education and infrastructure needs before thinking about tax cuts.

5. You probably won’t notice your share of the tax cuts. The sales tax cut, for example, would save the average four-person family about $14 a month, or $3 and change per person, with less savings going to low-income families. That money could pay for full-day pre-K, with plenty left over.

6. It’s a big check for big businesses. One analysis estimates the Senate business tax cut provides a total of $387 million to companies making over $10 billion year. We believe abused and neglected children need that funding — and the lower CPS staff caseloads it would buy — more than multibillion-dollar companies need it. What about taxes on small businesses? About 900,000 of them don’t pay the state’s business tax and therefore won’t benefit from the business tax cut.

The Legislature should prioritize education and health care ahead of cutting the state’s already low taxes — and put an expiration date on any tax cuts it does approve.

Peter Clark is communications director of Texans Care for Children.