No state income tax - no surprise

State House Speaker Tom Craddick says there will be no state income tax adopted this year.

"I would not think that there's any chance we'll pass an income tax," said Craddick, noting that a provision in the Texas Constitution requires voters to ratify an income tax. "I just don't see that happening."

Imagine my surprise.

[Rep. Kent Grusendorf, R-Arlington] created a stir in the House after the Associated Press reported Monday that he said a state property tax and state income tax are among options lawmakers might consider to replace the system that relies heavily on local property taxes.

Grusendorf said later that he didn't highlight those options but just said that "everything should be on the table."

"Most experts have concluded we cannot get a permanent solution without some type of tax restructuring," said Grusendorf. "Everything should be on the table, and we should have an intellectual debate about the issues."

Gov. Rick Perry and Lt. Gov. David Dewhurst have repeatedly said that they would not look to replace local property taxes with an income tax.

He's referring to the so-called "Robin Hood" system of school financing, which is based on local property taxes and which transfers funds from rich districts to poorer ones. It was adopted in the early 90s when Ann Richards was governor, and though it's better than what we had before, it's never been a good solution or a popular one.

I give Grusendorf credit for wanting to take a serious look at all plausible options. Whether or not a state income or property tax would ever be a likely solution, a reasoned discussion of their pros and cons could only help. Too bad Perry and Dewhurst don't agree.

UPDATE: Just saw this story about a study that concludes that Texas' tax system is hopelessly outmoded and should be completely revamped:

Most state tax codes need substantial revision, and tax laws in 11 states -- including Texas, California and Florida -- are so outmoded and inefficient they need to be scrapped and replaced, according to the study released Monday by Governing magazine.

Although Texas is one of only a few states without a state personal income tax and has a per capita tax load smaller than many other states, Texans consider themselves "overtaxed" because of high sales and property taxes, the magazine reported.

Despite a $9.9 billion revenue shortfall facing lawmakers, Gov. Rick Perry and legislative leaders insist they can balance a new state budget without raising taxes. They vow to limit spending, reorganize priorities and renew efforts to root out governmental waste.

They already have asked state agencies to cut spending by 7 percent and to freeze hiring and lay off workers, if necessary.

But Governing said its yearlong, national study concluded that there isn't enough fat in most state budgets to cure revenue shortfalls. And, the magazine warned, most citizens won't tolerate losing services they think are important.

[...]

One problem with tax overhauls, Governing admitted, is that "virtually every tax reform means shifting burdens." The study pointed out that the sales tax -- Texas' main source of state revenue -- isn't keeping up with the changing economy because Texas and most states aren't sufficiently taxing services.

The study concluded that an ideal revenue base would be a "balance" among the four primary sources of state revenue -- sales taxes, personal income taxes, property taxes and corporate taxes.

Here's the whole report. I hope to give it a thorough read in the next few days.

Posted by Charles Kuffner on February 04, 2003 to Budget ballyhoo | TrackBack