A current proposal to “reform“ school finances in the Texas Legislature will transfer a substantial portion of school taxes from federally deductible property taxes to nondeductible taxes like sales taxes.
Dallas County Appraisal District says I will owe $2,410.07 to Dallas ISD for tax year 2004. At this time in my life I am able to deduct the full amount of this tax from my income taxes. The true cost of this tax to me is only $1606.71 due to the tax deduction.
If the $1.05 per $100 tax rate sticks, I will only owe $1543.50, or a true cost to me of $1029.00.
If I pay Dallas ISD $2,410.07 in year x but only pay $1543.50 in year x+1, the difference of $866.57 has to be made up with new taxes. I am not a fool; I know that no matter where the new taxes are levied—payroll, video gambling, additional sales tax, whatever—all this $866.57 is still coming out of my wallet in the end. Businesses will pass on the payroll tax in the form of higher prices or employ fewer people, video gambling will inevitably increase poverty and therefore increase the usage of social services and law enforcement (which Dallas already does not have enough of!), and sales taxes are just simply more nondeductible taxes. And that doesn’t even count snowball effects like the higher crime and higher ignorance that come from poverty, the increased poverty from potentially reduced payrolls, etc.
If that’s not bad enough, I lose the deductibility of this $866.57!
Because all these fancy new taxes will eventually hit me in the pocketbook anyway, and because I lose the deductibility of that $866.57, even if net receipts to Texas school districts stay exactly the same, my net school taxes will increase by $216.64 per year. In essence, removing the deductibility of our school taxes is a huge giveaway to the IRS because all of that $216.64 goes straight to Uncle Sam. And this $216.64 doesn’t even begin to take into account the snowball effects!
My high school band director called himself a “radical Republican.” He advocated ripping out the current school financing system and replacing it with an income tax. Back in high school I thought he was crazy, but now I completely understand where he is coming from. I am very willing to pay a well-implemented, simple income tax as a replacement for the current school financing system if that means I can deduct that tax.