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Texas' Legislative Leaders Push Sales Tax Increase To Lower Property Taxes

Lt. Gov. Dan Patrick, Gov. Greg Abbott and House Speaker Dennis Bonnen hold a press conference at the start of the legislative session in January. (Jorge Sanhueza-Lyon / KUT)

By Ben Philpott, KUT

The Republican leadership in the Texas Legislature announced an agreement Wednesday to swap a sales tax increase with property tax cuts.

Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen said in a press release that in an effort to lower “skyrocketing property taxes,” they had agreed on a plan to increase sales taxes by 1 cent to buy down property tax rates for homeowners and businesses. There was one caveat to the plan: It will go through only if lawmakers pass a bill that could reduce how much municipalities could increase property tax revenues year over year.

If that legislation – House Bill 2 and Senate Bill 2 – passes, then lawmakers can tackle the sales tax increase.

“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,” the statement said.

Cutting property taxes has been a top priority for the state’s Republican leadership in the 2019 legislative session. But without large state budget cuts, there’s only so much the Legislature can do. There are only two major revenue generators in the state: property taxes and sales taxes. Lowering one of those, without cutting spending, would mean raising revenue from another.

Efforts to increase the state sales tax rate have been unpopular in the past. The sales tax is considered a regressive tax, because everyone – no matter their income – must pay it, and lower-income families pay a higher percentage of their income on a regressive tax.

If the plan passes the Legislature, it would go to voters for approval as a constitutional amendment in November.