Tax Relief

Tax breaks from the GOP in Texas use Biden’s Covid funding

Republican leaders in Texas are proposing billions of dollars in COVID aid should be used for a voter-enjoyable tax cut – all thanks to President Joe Biden and the Democrats in Washington.

Plans are still in flux, but bills running through state law would result in roughly one-fifth of the $ 16 billion in U.S. Rescue Plan Act (ARPA) being used to offset Texas property tax reduce.

That would give the GOP a big campaign theme for the upcoming midterm elections, but it would be a drop in the bucket for most real estate owners in Texas – and nothing for the 38 percent of Texas households that rent, critics say.

In one version, checks would go to homeowners by September 1, 2022, or “as soon as possible thereafter”. In other words, just before next year’s fall elections.

“I don’t think this is a fiscally responsible or prudent way to use ARPA dollars,” said Senator Nathan Johnson, D-Dallas. “We’re taking COVID money and spending it on stimulus checks for re-election.”

Using federal funds, directly or indirectly, for tax breaks has the added benefit of allowing Republicans to spend generously on tax cuts as well as another costly but politically popular initiative – mass arrests of migrants crossing from Mexico to Texas and a border wall without being irresponsible for tax purposes.

The funds are part of a $ 1.9 trillion aid package passed by Congress in March that was passed without the support of a Republican legislature.

That’s because the U.S. dollars don’t count towards state spending ceilings, so Republicans are actually helping subsidize their pet initiatives with generosity from Washington, Johnson said.

Calls and messages to the offices of Senator Jane Nelson and State Representative Greg Bonnen, the Republican chief budget clerks in every chamber that carries the COVID funding bill, were not immediately returned. A spokesman for House Speaker Dade Phelan referred inquiries to Bonnen.

Johnson, the Democratic Senator, said federal money was not intended “to give us leeway over a constitutional spending cap that we encountered because we appropriated money on political grounds” – an indication of the approved spending package for the Border security of $ 1.8 billion last session.

The marginal financing, Paying for Governor Greg Abbott’s plan to jail migrants suspected of illegally crossing the border and erecting barriers along the southern border on charges of state charges, was paid for the use of state revenues that was paid for by Auditor Glenn Hegar in the summer newly identified, allowing Republicans to roughly triple government spending on the border.

Two plans, one goal

The House of Representatives and Senate approaches are different, but both appear to be geared towards circumventing an outright ban on using the COVID money for tax cuts, critics say. Under the direction of the Treasury Department, states cannot use the funds to “directly or indirectly offset” reduced tax revenues from a change in the law. Republicans in both chambers have avoided calling their proposals “tax cuts,” with House lawmakers arguing that the spending is justified by federal guidelines that allow states to respond to the “negative economic effects of COVID, including aid.” for households ”.

The Senate plan is using approximately $ 3.5 billion of federal COVID money to free up state tax dollars already allocated to the Texas Department of Public Security and the Texas Department of Criminal Justice. The two agencies were at the forefront of Abbott’s border initiative known as Operation Lone Star. A separate bill then uses state tax dollars to provide $ 2-4 billion in property tax breaks for homeowners, businesses, and businesses.

The house’s plan calls for a direct provision of COVID relief funds to send a $ 525 stimulus check to any Texan property owner with a homestead exemption. As the Senate bill extends to include tax rates that affect all property taxpayers, the average homeowner would get about $ 200 to $ 400 in one-time relief, officials estimate, depending on how the state’s economy fares over the next year.

State Senator Paul Bettencourt, a Houston Republican who drafted the Property Tax Act, SB 1, did not immediately respond to a request for comment. He has said in the past that “a key principle of SB 1 is that part of it should be returned to taxpayers when the state has excess funds”.

“I think it’s a fantastic bill for property taxpayers of all kinds. Wherever people work, wherever they sleep, it will help everyone,” Bettencourt said in the Senate last month.

House MPs are due to debate property tax and COVID relief laws on Friday, then members of both chambers will likely spend the weekend ironing out the differences in their proposals. The last day of the special session convened by the governor last month is Tuesday.

A “financial swap”

When the Senate COVID Aid Spending Bill was tabled in committee, Eduardo Rodriguez, an analyst on the Legislative Budget Board, called the move to pay state police and prisons salaries with federal COVID funds a “method of financial swap” and said, this had been permissible with the past coronavirus aid packages.

“The state prepaid for these services or expenses. And the released (total government revenue Funding) was then returned to the Treasury Department, ”said Rodriguez.

Nelson, R-Flower Mound, admitted in the same hearing – while speaking to Johnson – that no new money is pouring into these agencies.

“We are freeing up (government revenue) and there is pressure to do so … this state is currently under financial pressure,” Johnson said.

“Yes, I agree,” said Nelson.

State Senator Roland Gutierrez, D-San Antonio, said Republican leaders found a “pretty brilliant” way of taking federal funds from a government they routinely beat up and then using them on something they can campaign on.

“On the one hand masterful. On the other hand, it’s a little worrying because the ARPA money was obviously meant to help critical industries and frontline workers as well as small businesses that have been negatively affected, “he said. “Under no circumstances was this the intended use.”

The House version of the law stipulates that the checks will be made out in the fall of 2022.

“It’s a transparent trick,” said Richard Lavine, senior fiscal analyst at Austin’s liberal think tank Every Texan. “The information needed to send the checks is now available. The timing is more politically advantageous for them as the excuse that this is to help the people who are now suffering from the pandemic is being lied to.

State Rep. Gene Wu, a Houston Democrat who sits on the House Appropriations Committee, said he feared the Biden administration would withdraw the money if the legislature went through either version of its tax break plans.

“We fear that it might be a sleight of hand. And we fear that this will only be a political game. And there is a significant possibility that the Feds will not really like our approach and claim the money back, ”Wu said. “At least that’s a real fear in my head.”

Otherwise, the House of Representatives and the Senate were largely in agreement on their plans to distribute the $ 16 billion in COVID aid, with both chambers proposing to use nearly half of the money to replenish the state fund used to pay out unemployment benefits was used.

The state’s reserves were drained by an explosion in claims from Texans laid off during the pandemic, creating a budget hole that, without the aid, would likely be addressed by higher taxes for business owners.

Both chambers also propose spending about $ 500 million on broadband infrastructure, $ 325 million on construction projects at various universities, $ 300 million on building an operations center for the Emergency Management Department, and $ 238 million on the construction of a state hospital in Dallas; and $ 75 million in grants for rural hospitals.

The Senate version would allocate nearly $ 2.5 billion to cover hospital staffing, therapeutic drugs such as monoclonal antibody treatments, and the cost of running regional infusion centers. The house would allocate approximately $ 2 billion for these uses.

jay.root@chron.com

jasper.scherer@chron.com

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