The Texas Republican plan to use federal COVID relief money for tax cuts

The money is not supposed to be used for that purpose, but lawmakers have found loopholes through the property tax system and something called “assistance to households.”

By Wells DunbarOctober 18, 2021 10:49 am, , ,

The Biden administration’s American Rescue Plan was an historic, $1.9 trillion response to the coronavirus pandemic, and it famously passed both chambers of Congress without a single Republican vote.

But now, GOP leaders in Texas plan on sharing in the spoils of the program. Plans being hammered out in the final days of the Texas Legislature’s special session would use billions of federal dollars to offset voters’ property taxes – and just in time for the 2022 elections.

Investigative reporter Jay Root has been following the money for the Houston Chronicle. Listen to the interview with Root in the audio player above or read the full transcript below to learn about how one version of the plan would send a check to any homeowner who pays property taxes, regardless of their property’s value.

This interview has been edited lightly for clarity.

Texas Standard: The American Rescue Plan, and the approximately $16 billion allotted to Texas, is supposed to offer COVID relief. There’s specific federal rules about how Texas can use the money, right?

Jay Root: Right. You’re not supposed to use it for tax cuts. But there is a way around it. They’re calling it “assistance to households,” and that is allowable. And that’s on the House side. The ink is not dry on this idea yet. The House passed a version and the Senate passed a version, and now they have to be reconciled. And there’s quite a lot of difference between these two approaches. The House side just makes a direct appropriation of this money, and then everybody would get a stimulus check. Basically is what it amounts to [is] $525. I say “everybody,” but it would only be homeowners; renters in both plans get completely cut out of this. But get this: the timing on the checks would be September of next year. Now, what happens right after September of 2022? The fall elections.

I thought that this money can’t be used to offset taxes, either directly or indirectly. You’re saying that this would apparently clear some kind of legal hurdle?

Root: There are critics who believe it could be clawed back, that the feds will say, no, this doesn’t pass muster. But there is a provision that says you can provide “assistance to households.” The Senate does it a different way: the Senate version basically would, it’s kind of a little bit of a shell game. It would be kind of like your mom saying you can’t use your debit card at McDonald’s, so you go to the cash machine and you get money and then the next thing you know you’re sitting in front of a Big Mac. What they do is they pay salaries of the state police and state prison employees that has already been paid, and they just change the method of payment to the federal government and say, well, this was COVID relief. And then boom, voila, you free up $3.5 billion for tax cuts.

And on the on the Senate side, businesses, homeowners, everyone, anyone who pays property taxes would get a cut because they compress rates with that money. Whereas on the House side, like I said, that’s just a check. You’re going to get a check if you have a homestead exemption, and that includes people that are making that whose homes are worth a million, $2 million, $3 million, whatever, it doesn’t matter, it goes to everyone who has a homestead exemption.

What are you hearing from lawmakers, and how does support for this break down among the political parties?

Root: There was a there was an amendment in the House to means test it so that people that are high earners or people with really expensive houses wouldn’t get it. And then that failed on a party-line vote. But once that failed, they pretty much all voted for it. And the sense that, what I’m hearing is nobody wants to be seen as voting against tax relief, particularly right before the election. But this was a plan that was cooked at a very high level without a whole lot of Democratic participation. But the real question is, will it pass? Because the business groups want their tax cut and they don’t want it to just be this check to homeowners. So that’s where it could fall apart. And we’ll know very soon because this special session is wrapping up and they’ve got to get it done by Tuesday or it won’t get done.

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