Monday, September 11, 2017
Washington Post op-ed: Low-Tax Texas Should Pay Its Fair Share Of Harvey Costs, by Peter A. Barnes (Duke; Caplin & Drysdale) & H. David Rosenbloom (NYU; Caplin & Drysdale):
As the floodwaters from Hurricane Harvey recede, the humanitarian need for federal aid to help Texas and its residents is starkly evident. Lots of aid. Right now, or as soon as Congress can approve an appropriation.
Although members of Congress from New York and New Jersey complain about the hypocrisy of Texas requesting federal aid, given the fact that the Texas congressional delegation almost unanimously opposed the federal aid package for Hurricane Sandy in 2012, the grousing amounts to nothing. With the suffering in Texas visible on every news show, America is too good to withhold support as political payback.
But that doesn’t mean funding should be a gift. Not at all. The bulk of the federal money to help Texas residents rebuild their lives and communities should come in the form of a loan — perhaps a long-term loan at a favorable interest rate, but definitely a loan.
Here is why: Texas is avowedly a low-tax state.
There is no personal income tax. There is no corporate income tax (although there is a surrogate tax on corporate receipts). There is no state-level tax on estates or inheritances. Texas ranks No. 46 out of the 50 states in state and local tax burden per capita, according to recent data from the Tax Foundation. It ranks 43rd in state tax revenue per capita.
Texas wants and needs federal help to rebuild from Harvey, and the federal government should provide significant financial aid. But it is grossly unfair for Texas to accept funds from all of America’s taxpayers to allow it to continue its exceptionally low-taxed ways. Unless Texas is willing to bear a reasonable share of the Harvey costs through increased state and local taxes, then the rest of the United States would just be giving Texas a handout. Better for the federal government to offer Texas a “hand-up” in the form of immediate cash support with the requirement that Texas generate tax revenue to repay that help. ...
There is no single correct answer for how to split the aid to Texas between loans and grants. But the generosity of Americans outside Texas will be severely abused unless Congress requires Texas to raise the tax burden on itself to help pay the costs of Harvey.