State leaders propose one-cent sales tax increase

AUSTIN, Texas (KWTX) State leaders Wednesday proposed a one-cent sales tax they say could provide billions in revenue to help offset property taxes.

(File)

The current state sales tax rate is 6.25 percent and local jurisdictions such as cities and counties may add as much as 2 percent more for a maximum combined rate of 8.25 percent.

The state rate hasn't been increased in 30 years.

Central Texas cities and counties charge the full combined 2 percent local rate.

The announcement was made in a joint statement issued by Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen.

“Texans are fed up with skyrocketing property taxes,” they said.

They said they’re introducing a sales tax proposal to buy down property tax rates once either Senate Bill 2 or House Bill 2, which call for a limit on property tax growth, is passed and agreed to by both chambers.

“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,” they said.

"It's a 1 percent increase, so technically it is a penny out of every dollar purchase, but they market it that way because a penny sounds trivial," said Robert Tennant, an assistant professor of accounting at Texas A&M Central Texas in Killeen.

“Sales tax is usually thought of as a regressive tax, meaning that it unproportionately, negatively impacts those of a lower income status," added John Koehler, assistant professor of political science and public administration.

The professors say because the wealthier tend to own homes, people who can’t afford them might feel more of a pinch when paying out extra for food, clothing or school supplies.

But many who don’t pay property taxes also benefit from the public education that those taxes fund.

"One of the strongest arguments for an increase in sales tax is how people who live in urban areas are going to be contributing to that when they don't contribute to the property tax," says Koehler.

Tennant weighs in, "If you believe they get more benefit from it, and that's your justification for it, then I suppose that's a fine way to go. If you think that it seems like an additional burden on them, then it may not be the optimal way to go."