Texas residents are expected to approve a constitutional amendment on Tuesday's ballot that would require voter approval before a personal income tax could be adopted in the state.
The amendment, called Proposition 4, is supported by some income tax proponents and opponents.
"Some think the amendment will make it easier to pass a state income tax, and some think it will make it harder. The only thing for certain is that someone has to be wrong," said Bill Allaway, executive vice president of the Texas Association of Taxpayers.
The ballot proposal would not only require voters' approval before adoption of an income tax, but would require their consent before the income tax rate could be increased. Currently, a majority vote in the state Legislature and the governor's signature are required to adopt an income tax.
In addition, the amendment requires that one-third of the revenue from an income tax be used for education and two-thirds be used for property tax reduction.
While political analysts agree that Proposition 4 will pass, citing the amendment's revenue requirements, they disagree on whether that will pave the way for an income tax in Texas or help assure its continued absence. Some said the provision tying property tax reduction to an income tax could make such a tax more palatable, while others expect many Texans will continue to oppose the tax.
Like many states, Texas has been searching for additional sources of revenue to help balance its budget and provide funds for education, prisons, and other services. The state now relies on a sales tax -- Texas has one of the highest in the nation -- as well as business franchise taxes, gasoline taxes, and taxes on oil and gas production.
The idea of a personal income tax and other new taxes, such as a value-added tax for business products and services, crops up periodically as a way of bolstering state revenues.
In this case, Lieut. Gov. Bob Bullock, a supporter of a state income tax, was a driving force behind the proposition.
"Looking into the future, it's likely that Texas will need additional sources of state revenue," said Claire Cohen, executive vice president of Fitch Investors Service.
Texas, one of seven states without an income tax, is considered a good credit risk by rating agencies. The state's general obligation bonds are rated double-A by Standard & Poor's Corp. and Moody's Investors Service and AA-plus by Fitch.
Analysts said the passage or failure of the personal income tax amendment probably would not have credit implications.
"We do not see passage or failure changing our ratings," said Peter D'Erchia, director of municipal finance at Standard & Poor's. Analysts at Fitch and Moody's had similar comments.
Sen. John Montford, the Democratic chairman of the Texas Senate's Finance Committee, has been quoted as saying he sponsored the income tax amendment to find a better revenue source for education and relieve some of the state's property tax burden.
Property taxes in Texas are expected to continue rising as expected changes are made to equalize school funding between rich and poor districts.
"There is growing pressure to relieve property tax burdens," said Allaway, who added that property taxes in Texas are going up faster than in most states.
