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On two fronts, it's suddenly income-tax season.
The other day, Green Party gubernatorial candidate Deb Shafto called for creation of a state income tax in a televised Austin debate with Democrat Bill White and Libertarian Kathie Glass. And channel flippers that night might have spotted a TV ad by GOP Texas House hopeful Jason Isaac of Dripping Springs in which the narrator says incumbent Democrat Patrick Rose of San Marcos "voted to explore a state income tax."
Isaac referred to his claim again in a TV faceoff with Rose aired live Oct. 20 by Austin's Fox News, saying: "I will not work towards investigating an income tax." Rose shot back: "My opponent is lying about a state income tax."
Their exchange reflects a sensitive political reality. Most Texas elected officials are loathe to even mention a state income tax. They've seen the idea crash and burn. Nearly 20 years ago, Lt. Gov. Bob Bullock advocated an income tax, then quickly backed down before championing a proposed constitutional amendment -- which passed -- that requires statewide voter approval of an "i" tax before it could ever happen.
Texas is among seven states that don't levy an individual income tax, according to the nonpartisan Washington-based Tax Foundation. Foundation spokesman William Ahern told us that the other 43 states require residents to report their income on a form similar to the federal 1040 and pay a certain amount on the income the state considers taxable.
So how is it that Rose voted to explore that option?
Corbin Casteel, Isaac's consultant, pointed us to Rose's 2009 vote for a measure ordering a study of "circuit breaker" property tax programs. The term "circuit breaker" refers to the programs' intent, which is to keep households from being overloaded with property taxes.
The 2009 bill was later vetoed by GOP Gov. Rick Perry. Casteel pointed out that Perry said in his veto message that the circuit-breaker tax could function like a progressive income tax. Progressive tax rates result in higher earners paying higher taxes compared to their lower-earning counterparts.
Before weighing Perry's analysis, we first confirmed that Rose voted for the cited legislation, House Bill 3983. Next, state Rep. Eddie Rodriguez, D-Austin, the bill author, told us that Sen. Kirk Watson, D-Austin, added the section mandating the study. The Senate Journal says Watson's amendment was adopted by the Senate in a May 22, 2009, voice vote. (Watson's proposal previously had been attached to a bill by GOP Sen. Tommy Williams of The Woodlands, the Journal says, but that measure died.)
Watson's amendment would have directed the comptroller to examine "circuit breaker" programs as a "means of expanding and protecting the homestead interests of low-income and moderate-income families." It says that the study should cover potential effects of various provisions, including "limiting which taxing units are involved; basing eligibility on a maximum annual income level; limiting the dollar amount of the benefit that a property owner could receive in the program; and basing eligibility on a minimum ratio of residence homestead ad valorem taxes imposed to annual income, including a progressive scale of minimum ratios based on annual income."
There's no mention of an income tax in the proposal.
Next, we turned to Perry's June 2009 veto message, which says circuit-breaker "programs are designed to provide property tax relief to certain individuals based upon their income." If "such a program were to be adopted in Texas," the message says, "it would make the distribution of the property tax burden less equitable by shifting it to middle-class property owners. This would make the property tax function more like a progressive income tax in that the tax burden would slowly be pushed upwards until only the owners of the most valuable property paid any actual tax."
As of 2008, 33 states had such programs, according to a 2009 report by the non-partisan Massachusetts-based Lincoln Institute of Land Policy, which says on its website that it looks at issues involving the use, regulation, and taxation of land. It shows Texas and Florida as the only states with neither an income tax nor a circuit breaker on its property taxes.
We asked the institute's Adam Langley, who helped research the report, to compare circuit-breaker programs to state personal income taxes.
"An income tax and circuit breaker are very different things," Langley said. "An income tax is imposed on your income. A circuit breaker is not imposed on your income. It's based on your property taxes. But the degree of property tax relief you get is related to your income. Its effects are in some ways simliar to a progressive income tax. But you don't need to collect income taxes from everyone in a state to get a circuit-breaker program up and running."
Ahern of the tax foundation said it doesn't make sense to term a circuit-breaker tax an income tax. "It's income-dependent tax relief," Ahern said. "That does not translate into income tax."
Casteel stood by his candidate's statement, saying in an e-mail that the study that Rose voted to support was "to explore basing property taxes on income. A tax based on income is an income tax. Can't get any plainer than that."
Our take: Isaac would have had a legitimate point if he'd limited himself to saying Rose voted to study a property tax mechanism that's related to income.
But his statement grossly overstates things. Indeed, we'd suggest, if Watson's proposal had even been judged the back door to an income tax, it would never have drawn legislative backing.
Pants on Fire!
Interview, William Ahern, director of policy and communications, the Tax Foundation, Washington, Oct. 27, 2010
Interview and e-mail (excerpted), Corbin Casteel, consultant to Jason Isaac campaign, Oct. 26 and 29, 2010
Interview, Adam Langley, Research Analyst, Department nof Valuation and Taxation, Lincoln Institute of Land Policy, Oct. 27, 2010
Interview, state Rep. Eddie Rodriguez, Austin, Oct. 26, 2010
Interview, state Sen. Kirk Watson, Austin, Oct. 26, 2010
KLRU-TV, Channel 18, Austin, website with video including Deb Shafto, "Civic Summit, Governor's Debate 2010" (accessed Oct. 28, 2010)
KTBC-TV, Channel 7, Austin, "Rose versus Isaac election heats up," updated Oct. 21, 2010 (accessed Oct. 28, 2010)
Lincoln Institute of Land Policy, Cambridge, Massachusetts, report, "Property Tax Circuit Breakers, Fair and Cost-Effective Tax Relief for Taxpayers," 2009 (accessed Oct. 26, 2010)
Dave McNeely, political column, Port Aransas South Jetty, "Bullock's tax idea renewed," June 26, 2008 (accessed Oct. 27, 2010)
Gov. Rick Perry, veto proclamation, House Bill 3983, June 19, 2009 (accessed Oct. 26, 2010)
Texas House, Journal, vote to adopt conference committee report on House Bill 3983, May 31, 2009 (accessed Oct. 21, 2010)
Texas Legislature Online, history of House Bill 3983, 2009 session (accessed Oct. 21, 2010
Texas Senate Journal, adoption of floor amendment No. 2 by Sen. Kirk Watson to Committee Substitute to Senate Bill 20 by Sen. Tommy Willliams, April 28, 2010, and adoption of floor amendment No. 2, offered by Sen. Watson to House Bill 3983, May 22, 2009 (accessed Oct. 26, 2010)
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