Gov. Greg Abbott on Wednesday called for Texas’ first sales tax increase in nearly 30 years as Republican leaders who promised to boost money for classrooms and cut property taxes struggle to achieve both with just weeks left to deliver.
The plan would push the sales tax rate to 7.25%, tying Texas with California for highest in the U.S., an irony for Texas Republicans who for years have mocked the nation’s biggest liberal state as the wrong way to govern.
But Abbott is in a bind. He and other Republicans promised tax relief and an infusion of billions of new dollars into schools in the wake of the Texas GOP’s worst election in a generation. Those efforts, however, are in danger of stalling and the May end date for the 140-day legislative session is quickly approaching.
“Texans are fed up with skyrocketing property taxes,” Abbott said in a joint statement with the Republican House and Senate leaders. “If the one-cent increase in the sales tax passes, it will result in billions of dollars in revenue to help drive down property taxes in the short and long term.”
Lawmakers would first have to agree to limit future property taxes. The current sales tax rate is 6.25%, and local government add-ons make the average sales tax rate across Texas about 8.25%.
The proposed penny sales tax increase could bring in an extra $5 billion in its first year, which could be used to reduce local property taxes. Property taxes have taken on a bigger share of public school funding as Texas Republicans sought to satisfy conservative voters in recent years with deep spending cuts and resistance to demands for new education funding.
Democrats criticized the sales tax increase trade for lower property taxes as a reward for businesses and the wealthy, but a hit to the wallet for most Texans.
“An unfair, punishing sales tax hike on poor and working families is not the way to deliver real property tax relief,” said Rep. Ramon Romero of the House Democratic Caucus. “It’s a dangerous idea.”
Texas doesn’t have a state income tax and hasn’t increased is statewide sales tax rate since 1990.
The plan endorsed by Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen would require statewide voter approval to amend the state Constitution and calls for increasing sales taxes for public education spending have been historically unpopular.
A tax rate comparable to California is also likely to be uncomfortable for Abbott to sell to voters as he’s routinely touted Texas as a mecca for low-tax, low-regulation conservatives.
House lawmakers recently approved a measure to revamp public educationfunding with $6.3 billion in new money and another $2.7 billion to school to tamp down ever-increasing property taxes.