Senator Eliot Shapleigh - El Paso, Texas

Mooooo!

President Bush is expected to sign HR 4520, a corporate tax bill that would permit Texas taxpayers who itemize their federal income tax deductions to receive a deduction for state sales taxes. To date, the bill has been lauded as much needed tax relief for the Texas taxpayer and a correction of existing inequity in the federal tax code.

While Senators Gonzalo Barrientos, D-Austin, Mario Gallegos, D-Houston, and Eliot Shapleigh, D-El Paso, all support the need for tax relief for the working and middle class in Texas, they ask "Where's the Beef in this Tax Relief?"

Senator Shapleigh states, "this bill is more of the same: massive tax cuts for corporations and the wealthy at the expense of middle and working class Texans' household budgets. Less than one in five Texans itemize their tax returns, so almost all of these tax cuts will go to families who make more than $150,000."

Analyses by the Center for Public Policy Priorities and the Center on Budget and Policy Priorities show that of the 9.2 million returns filed by Texans in 2001, only 22.6 percent, or less than 2.1 million itemized deductions. While 80 percent of Texas taxpayers with incomes over $150,000 have enough expenses to take advantage of the new legislation, only 5 percent of those with incomes under $30,000 itemize their deductions.

In fact, the average Texas household would receive no tax relief.

Senator Barrientos commented, "I'm happy for those Texans that will see a little tax relief and fairness, but you have to ask yourself, ‘at what cost?' What we're getting from this long overdue action on the sales tax is dwarfed by the massive amount of corporate bailouts and handouts in the bill."

Barrientos also warned that Texas legislators should not view a sales tax deduction as justification for increasing the state sales tax rate for a new public school finance plan for the upcoming regular session.

"This clearly could be a ‘bait-and-switch' situation that would create more harm than good. Our public school finance will require a more long-term, broad-based approach than a 2-year sales tax deduction," Barrientos said referring to the fact that the new law is only good for two years and there is no guarantee that Congress will extend the bill.

Shapleigh echoed Barrientos' concern as he cautioned Texans to watch closely for The Great Texas Tax Shift: "What this does is give cover to those in Austin who want to add to the tax load of the middle and working class. Middle income Texans already pay 27 percent more in sales taxes than property tax, so a sales tax increase will only increase tax burdens to most Texans, not provide tax relief."

"A large sales tax increase will hurt working families even further and they won't even have the benefit of a federal tax deduction," Gallegos said.

A complete analysis of how the sales tax deduction affects Texans is available on the CPPP website.