It's all down to the sales tax

I admit, I didn't think it would be possible for a school finance agreement to get hammered out in this special session, but apparently I've underestimated David Dewhurst's willingness to sell out his principles. Now that all pretense of ever creating a fair and responsible method for taxing businesses has been dropped, the only hurdle left is how high to raise the sales tax.

Early Monday, the Senate approved a $4.8 billion property tax cut bill after eliminating a proposed tax on partnerships. The Senate and House bills both close loopholes used by about 10,000 corporations to avoid paying the franchise tax.

The Senate version also increases the sales tax by a half-cent per dollar and raises alcohol and cigarette taxes. It provides about $2.7 billion less in property tax relief than the House bill, which includes a penny per dollar increase in the sales tax and an expansion of the tax on motor vehicle repairs, computer repairs and bottled water.

House Speaker Tom Craddick and Lt. Gov. David Dewhurst now must name a small group of lawmakers to try to negotiate a final version of the tax plan — all before the session ends in nine days.

Gov. Rick Perry supports closing the loopholes but has been opposed to new business taxes, saying they might hamper job creation.

"I feel relatively comfortable that the House and the Senate are not that far off now. These two bills are pretty close," Perry said Monday.

It would seem that Governor Perry is completely unconcerned about how the forthcoming increase in sales taxes, which amounts to an across the board price hike on consumer goods, will affect the Texas economy. There used to be an argument against imposing costs (like, say, a loophole-free franchise tax) on businesses on the grounds that they'd just pass those costs onto the public. Here we've eliminated the middleman, which I must admit is impressive in its efficiency, if nothing else.

There's still details to be worked out, and I remain unconvinced that all this tinkering and buck-passing will survive the joint committee process, but as of today the odds are indeed much better than I'd have expected that Governor Perry will be able to declare victory on school finance. He'll have done it by raising taxes on most people while cutting them for a few, thus making our system even more whacked out than before. Some victory.

Posted by Charles Kuffner on July 12, 2005 to Budget ballyhoo | TrackBack