How Texas taxes sustain inequality


On Thursday, policy experts with the left-leaning think tank Every Texan (formerly the Center for Public Policy Priorities) held a panel discussion over Texas, taxes, and social justice.

The discussion was moderated by the Signal’s very own David Lee and joined by Cortney Sanders, a state fiscal policy expert with the Center on Budget and Policy Priorities. 

The topic of the hour, how can Texas have a more equitable tax system? 

By doing the opposite of what it’s doing now, joked Dick Lavine, a senior fiscal analyst with Every Texan.

Because Texas has no income tax, its revenue and budget largely depend on property taxes and state and local sales taxes  — taxes that affect lower-income Texans the most, Lavine said, and create a highly inequitable tax system.

A study from the Texas Comptroller of Public Accounts shared during the panel shows that working-class Texans pay a higher share of their income on taxes than wealthy Texan, a regressive tax system best illustrated by the dismal four-to-one ratio between the top and bottom income bracket: Texans earning an income below $31,951 pay almost 17 percent of their earnings on state and local taxes, while Texans earning $156,718 or higher pay only 4 percent of their total income on taxes.

“We are not taxing the right people because we know that it’s the folks on the top whose incomes are growing the fastest,” Lavine said. “We’re not taking advantage of that. We’re stumbling along trying to tax the people with the least, whose incomes are growing the slowest.”

“And that’s why we always fall behind in having enough money to do what we need to do as a state, or as cities, counties, or school districts,” Lavine said. 

The inequality from Texas’ regressive tax system disproportionately affects Black and Hispanic Texans the most. Lavine said white Texans represent 16 percent of Texans within the bottom income bracket (earning below $31,951) while Black and Hispanic Texans represent 27 percent and 23 percent, respectively. 

And that’s no accident, either. State fiscal policy has often been a part of the problem in codifying inequality. 

“Historically, racism and ongoing forms of discrimination and bias shape a few things; one, people’s income, and two, the property that they own,” Cortney Sanders said. “In short, tax policy cannot be race-neutral because of the country’s long legacy of racism.” 

Cortney Sanders explained that following the Reconstruction Era, many southern states tied restrictive property tax limits to their state constitutions to protect white, wealthy landowners from wealth redistribution policies that arrived after the civil war.

This restrictive and regressive tax system has left Texas with less money for education, infrastructure, and health care. 

The problem is worsened by Texas’ growing population and the fact that the state gives out corporate handouts for property taxes that further strain the budget. 

One solution would be to implement a “circuit breaker” for property taxes, a way to link property taxes to a homeowner’s earnings so that low-income Texans aren’t swallowed by rising property taxes. Another solution is expanding the state’s list of “taxable services,” which would allow the state sales tax to reach lawyers, stockbrokers, and other high-income professional and business service economy jobs. 

And of course, the state could always switch to a three-tax system by introducing an income tax, which would alleviate the stress low-income Texans feel from the two other regressive taxes and allow the state to progressively tax residents. 

“If we want to enact social justice policies we need to look at tax policy,” said Luis Figueroa, the legislative policy director at Every Texan. “You can’t separate the two and say, ‘I support education but I don’t want to get into tax and budget policy.” 

“Ultimately if you care about education, if you care about lives, care about health care, care about infrastructure, and if you care about social justice it comes down to tax and budget policy — otherwise it’s just rhetoric,” Figueroa said. 

Photo: Grace Cary / Getty Images

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