Did the Senate pass an income tax light?

Senate Bill 855, the local option transportation tax bill adopted by the Senate last week, would allow local communities to call an election to raise taxes and fees to pay for light rail, roads, and hike & bike trails. One modification to the bill, which was praised by several newspapers, was a provision that requires counties that implement these new taxes and fees to “establish an exemption, waiver, or partial reduction for individuals of low or moderate income who demonstrate significant financial hardship.” This would apply to four of the proposed six new revenue mechanisms, including the emissions fee, driver’s license fee, mobility fee, and new resident fee.

According to this language in the bill, it appears to be the case that you won’t have to pay these fees unless your income reaches a certain threshold. This is a progressive income funding structure that has many of the elements you would see in conventional income taxes, and passage of this could create in statute a mechanism and precedent for such taxes.

By tradition, our system for financing roads has come through taxes, fees, and tolls, which are more or less proportionate to one’s use of that infrastructure. But if the fees in SB 855 are adopted in local communities, one of two people making equal use of the infrastructure would pay the government while the other would not, based on their income. That injects a means test into our public finance system for roads, which is quite a departure from Texas’ historical rejection of finance structures that are similar to a progressive income tax.

This is a slippery slope. Anyone who has spent time around the Capitol knows what would happen after this is passed. Candidates for election will play class warfare and fight to shift even more of the burden off one preferred demographic and onto another that is disfavored. Additionally, when future tax measures are debated, progressive income tax advocates will point to this mechanism as a precedent for shifting the tax burden.

For evidence of the harm in unhooking swaths of the public from the responsibilities of paying for government services, look to New York, a prime example of a state caught in a fiscal death spiral. And there is an abundance of research, including our own, that has established that Texas’ economic dominance over other states is due in large part to the fact that we don’t tax citizens based on their income. Will our legislators heed these lessons?

– Justin Keener