Inside Texas Politics Ch 13 Texas Takeaways

13.1.4 - What is a regressive tax?

A regressive tax, like the state's sales tax, is a tax rate that is the same for everyone.

13.2.3 - What is the Economic Stabilization Fund and when is it used?

Also known as the "Rainy Day Fund," this fund is drawn from oil and natural gas production tax revenue and leftover (surplus) unspent funds at the end of each year and interest on the balance of the fund. Because legislators are reluctant to spend the money and appear fiscally irresponsible, they ask voters to approve spending from this fund, as they did in 2019 in order to pay for state flood control and mitigation projects.

13.1.3 - Why are property taxes so high?

Consequently, local governments collect property tax to fund schools, utility systems, fire and police protection, public libraries, parks, and other services.

13.2.1 - Where does the money from fees collected from individuals and businesses go?

Fees go either to general revenue or to recoup the cost of a service provided by a program or agency.

13.2.2 - Why are penalties on unpaid fees a problem in Texas?

Nearly 1.3 million Texas drivers have an invalid license due to spiraling penalties from unpaid fees. Additionally, Texans who can't afford to pay the fees on fines may be jailed.

13.3.1 - What are some of the limitations on budget funding?

Pay as you go, the spending caps on debt spending and total spending, and revenue already dedicated to a specific policy (dedicated revenue) are all budget limitations.

13.3.4 - How do deferrals work?

State budget writers delay an approved payment in the current budget cycle to balance the budget with the expectation that they can pay it back in the subsequent cycle. These deferrals double the amount the state has to pay during the next budget cycle.

Communication: Where does Texas rank on sales tax rates?

States with the largest sales tax include Washington, Kansas, Illinois, New York, Alabama, Louisiana, Oklahoma, Tennessee, Arkansas, and California. Texas's sales tax is almost as high as the sales tax of these states.

13.1.1 - What are the Texas state government's main sources of revenue?

The Texas state's revenue is primarily tax-funded, approximately 46 percent in 2019, although other funds are drawn from fees levied on the public, proceeds from the state lottery, and receipts from the federal government. The sales tax is the state's largest single source of tax income.

13.3.2 - What is the dual budgeting process?

The dual budgeting process refers to coordination of the legislative branch and the executive branch to propose, shape, and pass a biennial budget.

13.3.3 - Who has authority to execute the budget?

The governor and the Legislative Budget Board typically have joint authority to execute the budget.

13.1.5 - What is the homestead exemption?

The homestead exemption is that part of a property's value on which Texas homeowners don't have to pay taxes.

13.2.4 - Why is the income tax progressive?

The income tax is progressive because the more a person earns, the more a person pays. So low-income Texans would pay less than higher-income Texans. Texas is one of seven states that does not have an income tax.

13.1.2 - How are sales taxes divided between state and local governments?

The state sets the base rate at 6.25 percent, and local governments can add up to 2 percent to this (and most do). The base funds are collected for use by the state, while the extra sales tax funds are returned to cities by the comptroller.

Social Responsibility: Should fines for nonpayment of fees accumulate?

Yes: Texans must act responsibly and pay their fine promptly. By abolishing the fee, Texas would be reducing the punishment and letting low-income Texans off almost scot-free. These fines deter Texans from committing infractions. Moreover, all Texans should be treated equally under the law, which would not be the case if fees were to be waived for indigent Texans. No: Since these Texans still pay a fine for the infraction, they are being punished. Moreover, charging court fees that accrue interest for indigent Texans is tantamount to debtor's prison. It prevents low-income individuals who make the same mistakes as other Texans from holding down jobs, keeping their homes, or paying child care expenses

Critical Thinking: Why these sources?

•A tax on overall income is prohibited by the Texas Constitution and is politically unsavory to politicians in the current no-tax-increase climate. •Property taxes have historically driven tax revenues for local governments. As the state's needs have expanded, the number and amount of these taxes have multiplied.

Communication: What taxes do Texans want cut?

•Property taxes are the taxes most Texans across the ideological spectrum want cut. •In general, Republicans are more likely to desire tax cuts than other groups. Democrats are less likely than Republicans or independents to desire to cut specific taxes.

Critical Thinking: Why are property taxes the villain, especially for Republicans?

•Rising housing valuations and spiking property taxes grew to a fevered pitch in 2015 and have continued through the present day, with Texans looking for relief. •Republicans believe in smaller government, so tax cuts fit naturally into that ideology. Republican political leaders have also made cutting taxes a major part of their appeal to voters, and Republicans in the state have followed. •Democrats look for ways for the state to invest in key services such as roads, education, and health care. They would rather pay more in taxes than see essential state services cut.

Critical Thinking: Why is the sales tax rate high in some states and lower in others?

•Texas has no income tax, so sales taxes are higher in order to generate revenue. This is also true for other states with no income tax like Tennessee and Washington. •Sales taxes have gone up most in states where governors have made a push to reduce income taxes, such as Arkansas. •States in economic distress have increased reliance on sales taxes, such as Louisiana and Illinois. •Sales taxes are higher in states that rely more heavily on tourism, including California and Florida.

Communication: Where does tax revenue come from in Texas?

•Texas is a two-tax state: Most revenue comes from property taxes (51 percent), which funds local governments, followed by sales taxes (27 percent) used by the state. •Property taxes are collected primarily by school districts (54 percent), but cities, counties, and special districts also levy small amounts.

Communication: What does the Texas budget look like?

•The state's 2020-2021 budget increased spending for many of the big-ticket items, including $12 billion for public education and $4 billion for Medicaid. •Many Republican candidates also promised spending for border security, which they did to the tune of about $800 million.

Critical Thinking: Why does spending increase for some programs but not for others?

•The state's Republican leadership promised more attention to meat and potato issues affecting Texans' pocketbooks like transportation and a major increase in public education. •Texas's flush financial bank account allowed additional expansion of key budget items.