HB3 - Conservatives Must Stop the "Payroll Tax" Now!

by Matthew J. Griffing, Esq.

Senior Vice Chairman for Legislative Affairs

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.

As expected, Republican activists within the State Republican Executive Committee initially opposed the Leadership’s plan. However, most of them have capitulated under Craddick’s pressure and are either supporting the plan or being silent on it.

When the smoke cleared after a late-night session, seventy-seven Republicans voted for the new tax, and nine voted against it. Sixty-one Democrats voted against the new tax, and one voted in favor of it. (One Republican, and one Democrat were absent.)

Those Republicans who voted in favor of the new tax will likely face significant consequences in their respective primary elections next year, as well they should. Not only have they blatantly disregarded their party’s platform (which opposes a state income tax), they have defied the will of the electorate on a major issue.

In addition, they have handed their Democratic opponents a potent campaign tool. On the floor, Democrats led the charge against the tax and were virtually unanimous in their opposition. In 2006, they will be in a position to attack Republicans for raising taxes on most Texans and creating a new way to take their money – and they will be right.

It seems that every session, Craddick bullies through a major piece of bad legislation against the will of his party, his membership, and most of all, the people of Texas. In 2003, it was a tuition deregulation scam. In 2005, it is a backdoor state income tax.

Hopefully, the 2006 election will be a wake-up call to those Republicans who relented to Craddick’s pressure. Too many of them have forgotten that they answer to their constituents, not Tom Craddick. In fact, as Speaker, he answers to them, and it is time for him to be reigned in, and if that fails, then it will be time for a new Speaker. Still interested in the job, Pete Laney?