Medina tax plan draws opponents



Posted on January 19, 2010 at 7:47 PM

Updated Tuesday, Jan 19 at 7:59 PM

DALLAS — With Republican candidate for governor Debra Medina surging in the latest poll and getting on The Belo Debate, she's getting more scrutiny now, too.

One of her top issues is ending local property taxes to pay for government and using a broader sales tax that would let Austin decide how to spend on cities, counties and schools.

Local property taxes, controlled by locally elected leaders, help pay for the basics like public safety and schools. But Medina, who’s running in the GOP primary against Gov. Rick Perry and Sen. Kay Bailey Hutchison, wants them gone.

"The answer is not more property tax reform;  the answer is the elimination of the property tax in Texas," Medina said at last week's debate.

To make up for that lost revenue, Medina would rely on the sales tax as outlined in a study by the Texas Public Policy Foundation. The current state and local sales tax is 8.25 cents on the dollar.

"Texas will benefit from a broad-based sales tax to fund the essential elements of government service," said Medina, citing that study. "We will see a $3 billion increase in net personal income and add 150,000 jobs."

But what Medina didn't explain during the debate is that the study she relies on would raise the sales tax rate to 9 percent and would also begin to tax home and commercial property sales to offset the end of property taxes.

The Texas Association of Realtors opposes the idea, pointing to the burden on first time buyers. TAR says homeowners would also lose the property tax deduction on their federal taxes that might not be equaled by a sales tax deduction.

The Realtors group says the sales tax deduction was extended through this year, but was not made permanent by Congress in 2008.

The average priced home in Dallas, as listed by the Dallas Central Appraisal District, would go up in cost from $188,000 to $205,000 with the 9 percent  sales tax charge.

The study Medina points to would double the number of goods and services taxed. But the Austin-based Center for Public Policy Priorities -- which is an advocate for low and moderate income citizens on social and economic issues --  claims that would hurt low-income families.

CPPP says the data show a higher, broader sales tax is regressive, and would consume a higher percentage of a low-income family’s income compared to a higher-income household.

At a 9 percent sales tax rate, $100 of goods or services would jump to $109.

But Medina disagrees with the CPPP evaluation about a higher sales tax. "That is the least burdensome tax to the society, the least burdensome tax to the economy,” she said.

Of course, state lawmakers would need to go along with any proposed change. And with powerful business forces and advocates for the poor opposing such a structural shift in the way we pay for public services, Medina would find ending local property taxes very difficult.