Income Tax on Horizon for Texans

Lately, it seems that I keep getting reminded of Ayn Rand's contention that conservatives are worse than liberals. Today, I report further proof.

In the Saturday morning Houston Chronicle, I saw a version of this editorial by Matthew J. Griffing, the senior vice chairman for legislative affairs of the Young Conservatives of Texas. Their title was "Virtual income tax being inflicted on unwary Texans."

The Republican-led Texas House of Representatives has taken a big step toward doing what Democrats could not do in over 120 consecutive years in power – enacting a virtual state income tax. For many years, Texas Republicans advocated fiscal restraint, and their opposition to a state income tax was axiomatic. Those days are long over, and Speaker Tom Craddick (R-Midland) is to blame.

This session, the House Leadership led by Speaker Craddick is dumping billions of new wasteful spending into the state budget. Fiscal restraint is off the table. What is on the table is a new way to take money from the people, which will constitute a net tax increase for most Texans.

Of course, the Republican Leadership does not have the courage to call this an income tax or assess it directly against the people. Instead, they call it a “payroll tax” and assess it against employers rather than employees.

In addition to political cowardice, there are two reasons to backdoor the income tax rather than impose it directly. First, the voters have resoundingly rejected past attempts to levy a state income tax and enacted constitutional protections against it. Through semantics and technicalities, Craddick believes he has found a way to circumvent those protections, most of which he voted to enact back when he was a fiscal conservative.

Second, Craddick and his lieutenants want a tax they can raise without an immediate impact on an individual’s wages. Because the new tax is imposed on the employer, the employee (who votes) will never see it. Instead, his raises will simply be smaller and less frequent.

Texas has for a long time been able to fund its profligate budget in part due to generous taxes on oil production, but those days are over and have been for some time. Until this, the usual way to generate more tax revenue has been to raise property taxes or land appraisals, which hasn't been well-received.

One of the things I hate most about the federal income tax is withholding: Your own money is withheld, so you don't miss it at all. This blunts political opposition to the tax because most people are used to earning less money and are thus acclimated to having it taken from them. In one respect, this proposal is worse: the money taken from your employer will fail to show up on any kind of earnings statement. And I think the consequences will be worse for many than the article says they will. You will, at best, get paid less sooner or later. At worse, you will be laid off, or not hired at all. Why?

This proposal takes advantage of the unfortunate fact that your employer's labor expenses are called "wages" and so are not normally thought about as expenses that someone (your employer) has to afford. So let's toss out that silly four-letter word and examine the real meaning of this proposal vis-a-vis employment. Let's ignore the feds for a moment. What your employer must pay for your services is the total of what you will be paid plus the cost of any benefits. He will now have to pay whatever this "payroll tax" might be in addition to whatever he paid before. If things are tight, he might have to let you go, or not hire you in the first place. If you're lucky enough to have and keep your job after this, you might not get a raise your boss might have otherwise wanted to give you, but cannot afford now.

So this stupid bill will reduce incomes, but unpredictably and often much more drastically than an outright income tax. This is certainly not support on my part for an income tax. Rather, the Republicans might try cutting back on our profligate state budget instead. But oh! How silly of me! We fiscal conservatives can count on our allies, the social conservatives to back our agenda. Right.

When are the numerically superior small-government conservatives going to wake up and start acting -- as they should -- like the power brokers in the Republican party?

-- CAV