March 04, 2005
And here's that promised Democratic HB2 alternative

It's a start.

House Democrats countered Thursday with a school finance plan that they said would do more for homeowners and schools than a Republican-backed plan, but they did not detail how it would be funded.

Rep. Jim Dunnam, D-Waco, said the Democrats' plan, which will be offered during House floor debate next week, would give greater school property tax relief to owners of homes valued under $170,000.


"Our plan extends greater tax savings to more Texans," said Rep. Scott Hochberg, D-Houston.

To accomplish the tax savings, Democrats would reduce local school property taxes for maintenance and operations by about 16 percent, and would triple the homestead tax exemption from $15,000 to $45,000 but only for school property taxes.

Business property owners would not get that exemption.

I approve of that. It's progressive without putting a straitjacket on future revenues.

Compare and contrast this:

Republicans, including [Beverly] Woolley, said in a written response that the Democrats' proposal would require a tax hike, while the Republican plan is revenue-neutral.

"Our plan puts $3 billion more into education and cuts spiraling property taxes by one third, and we get more education for each dollar by asking districts to spend money more efficiently," said House Public Education Chairman Kent Grusendorf, R-Arlington.

To this:

Don Green, director of budget and policy for Speaker Tom Craddick, said an error in drafting HB3, an $11 billion tax bill, that didn't include newspaper sales will be corrected next week when the bill is debated on the House floor.

If HB3 passes, newspaper sales would be taxed along with bottled water, motor vehicle repairs, car washes and billboard advertising.

The bill also would increase the state sales tax from 6.25 percent to 7.2 percent and replace the franchise tax with a 1.1 percent tax on a business's payroll. Additionally, HB3 would raise the cigarette tax by $1.

Information released by Craddick's office during a briefing with reporters showed that consumers will pay the bulk of new taxes under HB3. That contradicted statements Wednesday that the proposed business payroll tax would provide most of the new revenue.

See, that's the thing about "revenue-neutral". It doesn't mean that everyone pays the same amount. It means the pie is the same size, but you may or may not get the same size piece as before. An awful lot of people - a majority, even - can be losers under a "revenue-neutral" scheme. Look at that last paragraph and see who you think might be the losers with the Republican plan.

Although the Democrats didn't offer a specific tax plan to pay for the $8.6 billion in lost property taxes, Hochberg said the Democrats would be studying the tax package in HB3.

Having an alternative would be nice, especially since it would get to be compared to the godawful mess the Republicans have proposed, but not strictly necessary, since after all, it's not like anything the Democrats propose would ever be brought up for debate, much less a vote. What will determine whether this little exercise is a political success or a one-day story in the Chronicle is whether or not it gets communicated to voters, and if those voters like what they hear. The Dems have their work cut out for them on this score, since at the very least there will be many other things competing for everyone's attention. Talk it up, hammer on the points that need to be made, and maybe you'll get somewhere.

UPDATE: PinkDome notes that HB2 has received raspberries around the state, so the more that alternative gets talked up, the better. One thing I didn't highlight here but mentioned before is that the Dems' plan would have room for more school spending. That should be emphasized as well.

Posted by Charles Kuffner on March 04, 2005 to Budget ballyhoo | TrackBack

I wrote a whole post taking HB3 apart yesterday and my computer froze up before I could post it. It is a godawful piece of legislation. It would do the following:

-Put a 1.1% payroll tax, a backdoor income tax, on the first $20,000 per employee per quarter on all employers. It is a job killing tax. We put a tax on cigarettes to keep people from smoking, we put a tax on booze to discourage drinking, why would we think that a tax on jobs wouldn't discourage job creation? Plus, any tax where a decently paid IT guy has the same tax exposure as Roger Clemens is disgusting.

-Raise the state sales tax from 6.25% to 7.2% giving us far and away the highest state sales tax in the country (though some places have higher combined state/local sales taxes than the 9.2% we'll have) and expand it to auto repairs, car washes, bottled water, newspapers and billboards. So if your car breaks down a lot (calling poor folks), it gets dirty, you get thirsty for some Evian, want to read the paper or you are a small business that depends on billboard advertising, you are screwed doubly.

-Raises the Auto Sales Tax from 6.25% to 7.35%, the only progressive tax in the whole bill (the more money you have, the more expensive car you are likely to buy), but it means that every Texan who was planning on selling their car will get less money now.

-Raises the cigarette tax by $1 a pack. I'll have to quit it looks like (dread...).

The poorer you are, the more likely you are going to be hit by this bill. The Democratic alternative is far more fair and I think there's a chance that it'll have a better chance once rural Republicans, whose constituents benefit more from the Democratic plan and who have expressed ambivalence towards the GOP plan, jump on board.

Posted by: Andrew Dobbs on March 4, 2005 12:43 PM

That is the great thing about any tax debate. Because someone always gets screwed you can always lambaste the proposal. D's have been bitching forever that business should pay taxes, but now it is a job killer. The claim that Texas will have "far and away" the highest sales tax is demonstrably false and can be disproven by 5 seconds of research. Your logic is also a great argument against an income tax, it discourages income creation.

If the sales tax is going to be a substantial part of the base, it makes sense to end some of the exemptions. It should probably be extended to some other areas as well, but as structured it is not nearly as "regressive" as claimed because it exempts essential items.

The D proposal is an interesting one but will fail because 1) they are a minority 2) it is a tax increase 3) it doesn't do much for the urban/suburban areas where most of the population lives. Also, their proposal uses the same revenue sources as the R proposal so it is just as "regressive", but they really haven't had time to respond to HB 3. Though I'm sure when they do it will suck. They will get a vote on it though when they try to sub it on the House floor and lose.

Posted by: snrub on March 5, 2005 12:01 PM

Snrub has gotten down a lot of the points. Republicans want revenue-neutral. They aren't budging. No doubt that will draw fire from the education community, which expected real change and new money. (Duh) The rest of issues on HB 2 are secondary.

Posted by: Kimberly on March 6, 2005 1:29 PM