José R. Rodríguez
Monday - Friday
8:00 am to 5:00 pm
500 E. San Antonio
5th Floor, Suite 503
El Paso, Texas 79901
Phone (915) 546-2050
Fax (915) 546-2133
- El Paso County Attorney
Public School Finance
- Good Morning: I'm José Rodríguez, El Paso County Attorney. As County Attorney, I represent El Paso County, the El Paso County Hospital District, and the State of Texas in certain matters, including the prosecution of juvenile crime, child abuse and neglect cases, family violence and mental commitments.
I thank the committee for allowing me the opportunity to testify on issues pertaining to the public school finance system in Texas, including in particular the consideration of all equity issues affecting school districts such as our state system of taxation. I believe that equitable financing of public schools is offering equal education opportunities to our youth has a bearing on whether children perform well in school, whether they remain in school, or whether they lose interest in education and engage in delinquency and other forms of anti-social behavior.
I want to focus my remarks today on a state tax system that in my view fails to offer our schools adequate financing to maintain equity for our poorer school districts. It is a tax system that does not yield sufficient revenues to keep up with the present costs of services and the operation of state government, much less raise sufficient money to meet the growing needs of the second most populous state in the nation. And, as the following data demonstrates, it is a tax system that is not fair in the distribution of the tax burden. Particularly the sales tax. Consequently, any reform of the school finance system requires a review of the Texas structure and how it impacts communities like El Paso where the average per capita income is approximately $17,000.
TEXAS TAX SYSTEM
Fifty (50) percent of the State's revenue is derived from taxes. (Exhibit
1). The taxes come from a variety of sources, the more commonly known being the general sales tax; motor vehicle sales tax; motor fuel tax; corporate franchise tax; and the gas & oil tax. Notice that the general sales tax represents 57% of the state tax revenues(Exhibit
2). State and local sales taxes and property taxes represent the major taxes paid by taxpayers in Texas. (Exhibit
3). The average Texas family with an income of $42,000 pays $1,311.00 in sales taxes and $1,274 in property taxes, by far the largest portion of their tax bill. (Exhibit
4). As we all know, school districts in Texas rely principally on the property tax to finance the costs of education for our children.
We can see that this State's major tax revenues are obtained from the state and local sales tax and from the local property tax. Unlike other states, Texas does not impose a personal income tax and therefore is less able to distribute the tax load. While Texas must pay for it's services and growing needs with high sales and property taxes, states with a personal income tax spread their tax burden by approximately 33% among the sales, property, and personal income tax.(Exhibit
5). And while the personal income tax is considered a progressive tax - a tax
that takes a higher percentage of income from upper-income families than lower-income
families---, sales and property taxes in Texas are more regressive, meaning lower-income
families pay a larger share of their income in tax than do those with higher
TEXAS' STATE AND LOCAL TAX SYSTEM IS VERY REGRESSIVE
As a percentage of income paid in taxes, the sales and property taxes, upon which Texas relies to raise its revenues, are very regressive. Let's look at the sales tax first. The current State Comptroller's tax incidence report shows that families in the lowest quintile of earnings, those bottom 20% of families earning less than $17,000.00, pay 6.7% of their income in sales taxes whereas the 20% of families earning over $82,000, pay only 1.9% of their income. (Exhibit
6). The property tax is almost as regressive as the sales tax, taxpayers earning less than $17,000 pay 6.9% as a percentage of their income towards property taxes compared to 2.3% paid by those earning over $82,000. (Exhibit 7). Thus, when we compare the sales and property tax burdens, it is evident that the lower and middle income families bear a heavier load than upper income families. In other words, families like those in El Paso with the least ability to pay, pay more in taxes, as a percentage of their income, to support state programs, including public education. (Exhibit 8) . The inescapable conclusion is that Texas' state and local tax system is very regressive. (Exhibit
The State can no longer rely primarily on the sales and property tax as the principal means to raise revenue and expect to meet the growing needs of the state, including financing of our schools. Given the regressivity of our tax system, especially the sales tax, we should not in good conscience consider raising the sales tax rates to fund our schools. Instead, we should support a tax system based on people's ability to pay. There are, after all, other fairer options. Eliminating current exemptions from the corporate franchise tax, sales tax and property tax is one possible source of additional revenue. Another option is a progressive personal income tax. But, increasing sales taxes is NOT an option. Thank you.