TAXES

Three proposed state constitutional amendments on the November ballot would create new property-tax exemptions. All three would subsidize narrow special interests at the expense of state and local revenue that is desperately needed to maintain vital services.

Ignoring the lessons of the current budget struggle, the Legislature continues to contemplate bills that would reduce General Revenue available next session for the 2004-05 budget.

The current state budget squeeze was fueled in part by tax cuts enacted in 1997 and 1999 (see Policy Page #110). But there are also deeper structural problems with the Texas tax system that keep state and local revenue lagging behind economic growth. If tax revenues had been able to keep up with the growth in personal income since 1994, budget-writers now would have an additional $9.8 billion available to appropriate for the 2002-03 budget. Another $11.2 billion would have been available in 1995-2001.

The Comptroller has released her biennial study of the fairness of the Texas tax system, Tax Exemptions and Tax Incidence, (http://www.window.state.tx.us/taxinfo/incidence/) which confirms that low-and moderate-income Texas families bear a disproportionate share of state and local taxes.

Legislative budget-writers are warning that there will be very little money available for new spending in the state budget currently under consideration in the Capitol. This is a stark contrast to the last two legislative sessions, during which lawmakers competed over who could cut the most taxes. Unsurprisingly, there is a direct connection between the tax-cut fever of the past sessions and the tight budget scenario now. The tax cuts enacted in 1997 and 1999 have reduced the amount of state revenue available to fund the 2002-03 budget by $2.6 billion.