March 22, 2006
Perry speaks about TTRC

And believe it or not, he's saying the right things, at least for now.

Gov. Rick Perry on Tuesday solicited business support for an overhaul of state taxes and said it would be a mistake for legislators to simply use a $4.3 billion surplus to provide limited cuts in school taxes when they convene April 17.

"I say let's not substitute speed for substance," Perry told the Texas Association of Manufacturers, a new business group that offered support for the concept of a broad-based business tax that the governor is expected to offer to lawmakers.


Perry noted that a number of legislators would rather use a $4.3 billion surplus, forecast by Comptroller Carole Keeton Strayhorn, as a "ticket on a fast train" out of town.

But, he said, that approach would provide for a lower, one-time-only cut in school taxes that could soon disappear.

"It may be more of a challenge to reach an agreement on comprehensive tax changes, but it is a challenge we should take head-on because it is the right thing to do," Perry said.

I've expressed plenty of skepticism about Rick Perry's willingness to actually push the concept of a broad-based business tax in the past, so I'll give credit where it's due. This is what he needs to be saying going into the special session. Good on him for that.

It's just a start, of course. There will be plenty more pressure from the "don't tax me, I'm special!" forces, and it remains to be seen how Perry reacts to that. There are still forces that favor shifting more of the burden to sales taxes, despite the utter inequity of such a shift and its abject (and well deserved) failure last time around. And just because Perry may have finally gotten religion on the need for a saner tax system doesn't mean he's serious about properly funding schools. His fixation despite all reason on the idiotic 65% rule, plus other ideological agenda items like vouchers, leave him plenty of room to continue being the bad guy that we've known since 2001. This may be a good start, but there's a long way to go.

UPDATE: In the Pink adds just the right touch to the discussion.

UPDATE: A twofer from Eye on Williamson.

Posted by Charles Kuffner on March 22, 2006 to Budget ballyhoo | TrackBack


As for the "don't tax me, I'm special forces"--going down the slippery slope of taxing professional services is just going down the road of a state income tax.

What is the difference, other than it playing into the biases that people have against lawyers? Their income is already federally taxed, all lawyers in Texas have a small tax assessed against them just because it is their profession--why not just call it what it is: a state income tax against some Texans.

Personally, I feel that whatever they do about Texas taxes, it should be simple to collect and that it just doesn't contribute to a economy devoted to tax collection. It amazes me how much it costs to do property evaluations on a yearly basis.

Some of the previous tax plan suggestions seemed too complicated to enforce properly--like the tax on junk food.

Posted by: Steph on March 22, 2006 2:03 PM

Some of the previous tax plan suggestions seemed too complicated to enforce properly--like the tax on junk food.

Ah, yes -- the "Twinkie Tax." We had that for a while in California when I lived there. It confused a lot of people because it seemed so arbitrary. For example, unpopped popcorn was not taxable and popped popcorn was. Iced tea in bottles and cans were taxable; iced tea mix was not. And so on.

Anyway, whatever tax replaces some of the property tax collected -- and make no mistake, Texans do need property tax relief -- needs to be easy to collect, broad based and not regressive. And preferably, it won't seem arbitrary.

Posted by: Tim on March 22, 2006 7:02 PM

... taxing professional services is just going down the road of a state income tax. What is the difference...?

The difference is in who pays it. Free-market theory says that shouldn't matter: whether I pay a tax to hire, say, a lawyer, or the lawyer pays it herself, the market price will supposedly adjust so that it works out the same. But in practice, that doesn't happen.

And, of course, employees aren't affected by a professional services tax - only independent contractors are. That may actually be a good thing, since it would encourage employers to hire people outright, rather than "contracting" with them to get around paying minimum wage and/or Social Security taxes.

Posted by: Mathwiz on March 24, 2006 5:31 PM

Ah, yes -- the "Twinkie Tax."

In theory, a "Twinkie Tax" shouldn't be that hard - just impose a small tax on a food's caloric content. If you wanted to get fancy, you could limit the tax to sugars and saturated and "trans" fats. Either way, the info needed to figure the tax is already on the nutrition label - and it wouldn't matter what form the food was sold in.

But I have yet to see a "Twinkie Tax" done so sensibly. Texas already has a "lite" version: we tax soft drinks (regular or diet), but not fruit juices - even though the latter usually have as much or more sugar! As you said, completely arbitrary.

Posted by: Mathwiz on March 24, 2006 5:39 PM