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2019 election results: State

Nine out of ten Constitutional amendments are on their way to passing.

Amendments to the state constitution that would make it harder to enact a state income tax, stabilize funding for state parks and allow retired law enforcement animals to be adopted by their handlers received wide support from voters Tuesday.

Supporters of one of the most contentious issues on the ballot — Proposition 4 — proclaimed victory within hours of the polls closing, with about three fourths of voters supporting the proposal in early voting returns.

[…]

The only item on the ballot that looked as though it might not pass was Proposition 1, which would permit elected municipal court judges to serve multiple municipalities at the same times. With votes still being counted late Tuesday, returns indicated that it had received just over one-third of the vote.

The other propositions were poised to pass easily. Proposition 5 would stabilize funding for state parks and received overwhelming support. The proposition allows money accumulated from existing sales tax on sporting goods to be used for the Texas Parks and Wildlife Department and the Texas Historical Commission. Current law allows the Legislature to allocate that money however they see fit.

Proposition 10, which had the highest level of support, amends the state constitution to allow retired service animals, such as dogs or horses, to be adopted by their handlers or other qualified caretakers. These animals are currently classified as surplus property or salvage and can be “auctioned, donated or destroyed.”

Prop 4 is terrible, but that usually doesn’t stop us. I just hope it’s not as bad as I fear it may be.

Meanwhile, in Fort Bend:

Eliz Markowitz

A Democrat and a Republican were leading in unofficial returns Tuesday night in a nationally targeted special election for a historically Republican Texas House seat.

Democrat Eliz Markowitz — the only Democrat in the race — was in first place, while Republican Gary Gates was in second, according to unofficial returns. The race will head to a runoff if no candidate gets over 50%.

Gates was one of three serious GOP candidates out of six total. The two other viable Republicans in the race, Tricia Krenek and Anna Allred, were third and fourth, respectively. Allred appeared to concede at about 10:30 p.m., saying she was “disappointed with the results” but “pleased with our campaign.”

The race for House District 28 — where former state Rep. John Zerwas, R-Richmond, stepped down at the end of September — was one of three contests Tuesday to fill state House seats. The two others happened in solidly Democratic districts where runoffs were also looking likely, based on the early vote and initial Election Day results.

In House District 100, where former Rep. Eric Johnson, D-Dallas, vacated his seat earlier this year after becoming Dallas mayor, Democrat Lorraine Birabil had a wide lead over three Democratic rivals but had not clinched more than half the vote. James Armstrong III, Daniel Davis Clayton and Sandra Crenshaw were in a close race for second place and a spot in an expected runoff.

Here are the results from Fort Bend County for HD28, and Dallas County for HD100. The SOS election night results webpage is bizarre and not up to date, so skip it for now.

Markowitz got 39.1% of the vote, with Gates getting 28.5%, Tricia Krenek 18.1%, and Anna Allred 9.3%. While I expect Republicans to unite for the runoff, I can’t help but feel that Gates was their third best choice in this race. His main asset is that he’s loaded and willing to spend on himself, which I figure helped him in this race. How much he’ll excite voters as that kind of candidate in December is the question. I feel very certain he won’t have a clear path to the GOP nomination in the March primary. Here’s the Chron story on this race.

I’m saving the HD148 race for last, because of the delay in Harris County results (see here for why that happened.) As of 5 AM, we still didn’t have full results. The best I can tell you at this time is this:


Eastman     1,870  17.87%
La Rotta    1,818  17.37%
McConnico   1,266  12.10%
Garcia      1,261  12.05%
Leal          904   8.64%
Shaw          853   8.15%
Watt          667   6.37%
Camarena      473   4.52%
Carmona       433   4.14%
Block         311   2.97%
Nunez         185   1.77%
Denson        165   1.58%
Trevino       140   1.34%
Mundy          71   0.68%
Isaacson       49   0.47%

There’s still a lot of votes out as of this post, so things can change quite a bit. My initial speculation that some people may vote for Adrian Garcia based on the belief that he’s the County Commissioner appears to have had some validity. Beyond that, we’re just going to need to wait and see what the final tally says. Note that the total Republican vote is 34% – Ryan McConnico got 32% against Jessica Farrar a year ago. Put a pin in this one, we’ll come back to it. Oh, and as with the Republicans in HD28, I don’t think Anna Eastman (assuming nothing weird happens between now and the final count) will have a clear path in March, either.

Endorsement watch: Constitutional amendments

As you know, there are ten constitutional amendments up for a vote on the November ballot. They will be on everyone’s ballot, and depending where you are may be the only things on your ballot. The Chron makes their recommendations on them. I’ll highlight three of the ten:

Vote no on Proposition 1. To allow certain municipal judges to be elected to more than one office at the same time. We urge voters to reject the amendment. Even in small communities, candidates running for local office ought to be local residents. Existing law already allows for elected municipal judges to be appointed to serve in another court, but expanding that laxity to elected positions as well is unnecessary and unwise.

Vote no on Proposition 4. To ban outright an income tax for Texas.

There’s a big difference between mostly dead and all dead, as any fan of the cult classic Princess Bride knows well. If you’re mostly dead, Miracle Max the Wizard can work up a chocolate-covered pill to bring you back to life. If a person is all dead, the wizard says there’s only one thing to do: “Go through his pockets and look for loose change.”

Proposition 4 was designed to make sure that the wildly unpopular notion of a statewide personal income tax in Texas is not just mostly dead but all dead.

Voters already approved a constitutional amendment in 1993 that prevents lawmakers from enacting an income tax unless voters agree to it.

Proposition 4 would ban an income tax outright.

Yet, while that sounds awfully final, Miracle Max could still find a way around it. Say Prop 4 passes and becomes part of the Constitution. Any constitutional provision can be changed by a two-thirds vote in the Legislature and a popular vote.

In the end, though, it’s unclear why a change is needed. What’s more, some argue Prop 4’s wording of “individual income tax” is vague enough to draw a court challenge that could extend the ban to businesses, which could cost the state billions in revenue. Why take that risk?

We say vote “Against” and leave dead enough alone.

Vote yes on Proposition 9. To create a tax exemption for precious metal stored in the Texas Bullion Depository. Texas is the only state with a state-run metal depository, but some legislators thought allowing property taxes on precious metals puts the state at a competitive disadvantage. In one way, the amendment is superfluous, in that counties already don’t enforce property tax on precious metals. But by putting that exemption in law, it could boost the chance of the Texas depository joining COMEX, the leading marketplace for precious metals exchange. That’s a good thing and we urge voters to support this proposition.

See here for further discussion of the amendments. The Chron recommended a Yes for the rest; I agree with that, and with the No on Prop 4. I lean towards a Yes on Prop 1, and I’m a definite No on Prop 9. The whole Texas Bullion Depository thing is ridiculous, and I refuse to legitimize it in any way. The vast majority of these pass, usually with a strong majority, so to some extent this is just an expression of one’s feelings more than an exercise in democracy. But you never know, and some of these really do matter. Read up and do your duty.

More on the Constitutional amendments

I found this while answering a question from a reader, and figured it was worth publicizing to a wider audience.

Ten proposed constitutional amendments will be on the November ballot. The Texas League of Women Voters has compiled a nice list of the amendments along with important voting deadlines. Compare the pros and cons of each proposed amendment, and prepare to cast your vote on Election Day, November 5, 2019.

Proposed Constitutional Amendments

  1. Municipal Judges

  2. Assistance for Water Projects in Distressed Areas

  3. Tax Relief for Disaster Areas

  4. Personal Income Tax

  5. Sporting Goods Tax to Support State Parks

  6. Cancer Prevention & Research

  7. Funding Public Education

  8. Flood Control

  9. Tax Exemption of Precious Metals

  10. Law Enforcement Animals

See here for previous blogging on the topic. The links above go to League of Women Voters of Texas pages, each with For and Against arguments for each item, and a video explaining it. I’d have gone deeper on the reasons to vote against Prop 4, and I’d definitely have mentioned the “individual” versus “natural person” loophole that may make this thing a whole lot more expensive than it looks, but overall the LWV did a good job. In the meantime, the Trib and the Chron have written about the proposed amendments, Prop 5 is being pushed by environmentalists, and the latest edition of the H-Town Progressive podcast features Andrea Greer and host Rob Icsezen discussing them. Read – or listen – up and know what you’re voting on.

A look at the Constitutional amendments we will see this November

There are ten of them, including a couple I will vote against as hard as I can.

House Joint Resolution 4 would let the Texas Water Development dole out dollars from a flood infrastructure fund — created by Senate Bill 7, which would spend $1.7 billion from the rainy day fund — to be used for planning, seeking permits for or constructing flood-related projects. SB 7 is awaiting Gov. Greg Abbott’s signature.

If approved by voters, the flood infrastructure fund would be created at the start of next year.

HJR 34 would let the Legislature temporarily lower tax rates on property damaged during a disaster declared by the governor. House Bill 492 would set the initial tax exemption rates, up to a full exemption, according to the extent of the damage.

HJR 38 would ban the creation of a state income tax, doubling down on a constitutional amendment approved by voters in 1993 that requires voters’ permission for the Legislature to create a state income tax.

[…]

HJR 95 creates a tax exemption for precious metals held in the Texas Bullion Depository, which opened in North Austin in June 2018 with its permanent location in Leander expected to open in December.

While that depository made Texas the only state to have a state-operated depository, HJR 95 author Rep. Giovanni Capriglione, R-Southlake, said it is at a competitive disadvantage because it is also the only state allowing local property taxes on precious metals.

HJR 72 intends to ease the pressure put on smaller communities to find municipal judges by allowing one person to be elected to multiple cities’ judgeships. Currently a person can only hold multiple municipal judgeships by being appointed to each one.

Senate Joint Resolution 32 would let police dogs and other law enforcement animals retire in their old age to live with their handler or other caretaker. The state constitution currently prevents law enforcement from transferring valuable property to a private person or organization for free.

The other four are HJR12, HJR151, SJR24, and SJR79, all of which are financial in nature. As you know, I’m going to cast an enthusiastic but almost certainly futile vote against HJ38, the double secret illegal anti-income tax proposition. HJR95 also looks ridiculous to me – the whole Texas Bullion Depository thing is ridiculous, so it comes with the territory, while HJR72 and SJR32 seem reasonable. The rest I’ll figure out later. The ballot wording should be set in August. What do you think about these?

We’re going to vote on making an income tax double secret illegal

It’s definitely time for sine die.

Sen. Pat Fallon

Texas voters will decide in November if they want to bar the imposition of an income tax, following approval of the constitutional amendment by the state Senate on Monday.

The Texas House had approved House Joint Resolution 38, which prohibits the imposition of an individual income tax, earlier this month.

The seemingly anodyne proposal ran into pushback Monday from some Senate Democrats who suggested the bill could cut business taxes, a major source of state money.

There appears to be no threat of an income tax currently — no such bill appears to have been filed, let alone have reached the floor of either chamber, where it would be political kryptonite. And a 1993 constitutional amendment already holds that Texas can adopt a state income tax only if voters approve and that the money would go for the “support of education.”

But Senate Democrats on Monday sparred with Republicans over a seemingly arcane bit of language that could carry big budget implications.

The resolution says that the Legislature may not impose a net income tax on “individuals.”

Democrats, pointing to an analysis by the state’s nonpartisan Legislative Budget Board, said that could be interpreted by courts to apply to businesses, especially because the measure’s language uses that term rather than “natural persons,” which is often used in statutes.

The business levy, long a target of Republicans eager to shave taxes, brings in about $8 billion per biennium, helping to fund public schools.

“The term ‘individuals’ is not defined and could be interpreted to include entities that are currently subject to the state’s franchise tax,” the Legislative Budget Board analysis reads. “To the extent the joint resolution might exempt some entities from the franchise tax, there could be a loss to state revenue.”

[…]

Earlier during the debate, [author Sen. Pat] Fallon said the constitutional amendment would firm up the state’s opposition to income tax.

“I’m always in fear of an income tax,” he said. “Every day I wake up, the thought of Texas having an income tax makes me shudder. Physically shudder, not metaphorically.”

Seriously? Mere words cannot adequately express my reaction to Sen. Fallon’s delicate sensibilities, so mark me down as being somewhere between here and here. I do hope you sleep better tonight, Senator, and if not I recommend warm milk and a bedtime story, preferably one with a happy ending. As for my reaction, here it is:

“Why would pesky LBB fiscal facts be any help when discussing a major source of state revenue for schools?” Eva DeLuna Castro, a budget analyst with the left-leaning Center for Public Policy Priorities, wrote on Twitter. “I mean, it’s not as if major business conglomerates have highly paid tax lawyers waiting in the wings to explain why they are ‘individuals’ too.”

What could possibly go wrong? The Trib and the DMN have more.

The games our tax system plays

I find this just fascinating.

BagOfMoney

It’s been described as bribery, taxation without representation and a shady political maneuver. Others have called it an innovative way to deal with budgetary problems and get things done.

Ever since Texas lawmakers made it more difficult for cities to absorb suburbs into their boundaries 15 years ago, Houston has been quietly cutting deals with municipal utility districts to levy a 1 percent sales tax on purchases in neighboring communities.

The agreements for “limited purpose annexations” now generate tens of millions for Houston and for the utility districts, which split the revenue. But some question the appropriateness of the deals.

Houston seems to play off suburban fears of annexation to demand taxes in exchange for promises to leave them alone, said Paul Lewis, a professor of local politics and urban development at Arizona State University.

“It’s a kind of bribery,” he added.

Some local officials wonder whether the agreements lead to wasteful spending that lacks transparency. The revenue is not subject to the voter-approved revenue cap that has forced the city to lower its property tax rate and slash budgets. Critics also note that Houston provides no services to most of these suburban areas, whose residents can’t vote in city elections.

“It’s unconstitutional,” Fort Bend County Judge Bob Hebert said. “I thought we fought a war back in the 1700s on ‘taxation without representation.’ ”

Utility district leaders defend the agreements, noting that they take half the money collected and receive a contractual promise they will not be fully annexed for 30 years.

City officials agree that the agreements are fair. Census figures show that nearly two-thirds of those who work in Houston live outside of the city limits. City officials note that suburban residents attend plays in the Theater District, watch free concerts at Memorial Hermann Park and put wear and tear on city property.

“It is the primary tool we have to deal with the growth that goes on outside the city and the burden put on infrastructure by suburban citizens without our property tax,” Houston Finance Director Kelly Dowe said.

You can read the story and decide its morality and/or constitutionality for yourself. Personally, as a resident of Houston, I have no problems with it. What occurs to me in reading this is that it’s a natural outcome of our overall system of taxation in Texas, which is heavily dependent on sales and property taxes, and also on legal ways to minimize one’s sales and property taxes. There’s one way we could avoid all the problems associated with a tax system designed around political boundaries, and that’s to switch to one that is primarily dependent on income taxes instead. Of course, there are plenty of ways to game an income tax system, too, so it would most likely substitute one set of shenanigans for another. But at least it would be something different for us to argue about.

Hall’s tax troubles, again

This isn’t new news, but it’s getting a lot more play now.

Ben Hall

Ben Hall

Top mayoral challenger Ben Hall agreed to pay the IRS more than $680,000 in back taxes and penalties earlier this year, court documents show.

On Jan. 16, less than a week before Hall made his first campaign expenditures as a mayoral candidate, the challenger and his wife signed a document in U.S. Tax Court agreeing to pay $520,782 in back taxes and about $160,350 in penalties to cover four years of deficiencies, from 2005 through 2008.

The amount was a little more than half of the $1.28 million the IRS claimed the Halls owed when it issued a formal “notice of deficiency” in June 2011.

Over the four years in question, the couple’s combined taxable income was reported as $1.71 million; the IRS alleged the correct figure for that same period was $5.45 million.

Hall said he did at least as much as any reasonable taxpayer would do, hiring an outside accounting firm to handle his returns and employing a qualified bookkeeper in his law office. At tax time, he said, the accounting firm gathered the bookkeeper’s data, crunched the numbers and told him what to pay.

[…]

Taxpayers receiving a notice of deficiency from the IRS have 90 days to protest the amount in U.S. Tax Court, which Hall did. He disputed all or part of $2.3 million of the IRS’ $3.75 million in adjustments to his income, saying the government was trying to tax him twice on some bank deposits and that he was entitled to some deductions they had denied, among other claims. The IRS, in a court filing, rejected Hall’s denials, and the case was set for trial last January. Two days after the trial had been slated to start, the parties signed the settlement agreement.

Of the $160,350 in penalties the Halls agreed to pay, about $103,800 stemmed from a law that docks taxpayers for not taking sufficient care in preparing their returns, said South Texas College of Law Associate Dean Bruce McGovern, one of two tax law experts who reviewed the court documents for the Houston Chronicle. The penalty can be assessed for negligence on the part of the taxpayer, or for “substantially” understating the tax liability. The latter is easier to prove, McGovern said, adding the understatements of tax liability alleged by the IRS in Hall’s case meet the “substantial” standard under the federal tax code.

In Hall’s case, McGovern said, the penalty was levied at 20 percent of the tax owed, the most common level. The remainder of the penalties were for filing the returns late, he said.

News about the IRS case first came to light back in August. The details seem to be a little different in the later version, but my eyes crossed before I could work through it all. What is clear is that Hall has also had issues with his property taxes. Whatever you think of the one or the other, the fact that there’s two of these examples doesn’t look good. The Parker campaign has understandably jumped all over this – I saw their attack ad last night while watching “Castle” – and I’m sure we’ll be hearing a lot more about it over the next four weeks or so. Look, having tax problems isn’t a disqualification for office. Lots of people have had them – mistakes happen, nobody’s perfect, you get the idea. One could even build a narrative around one’s tax troubles, as a story of redemption and overcoming adversity and so on. That’s not the story Hall has been telling, of course. He’ll have to come up with something else to work around this. PDiddie has more.

No, we can’t eliminate the property tax

The latest wingnut economic fantasy is that we can completely eliminate the property tax and replace it with an increased sales tax. Debra Medina was a champion of this during the 2010 GOP gubernatorial primary, which should give you some idea of where this lies on the spectrum of mainstream policies. Former Deputy Comptroller Billy Hamilton pens an op-ed explaining just how dumb this concept is.

The property tax produces more than $40 billion a year. All of that revenue goes to fund the state’s 4,000 local governments, including cities, counties and school districts. Because Texas doesn’t provide local governments with many other tax options, the property tax is their most important tax source, providing 80 percent of all of local taxes.

It would take a whale of a sales tax to replace that much revenue. Based on state estimates, a sales tax on the current tax base of 25 percent would be needed to replace the property tax and still provide revenue for the state, which relies on the tax for more than half of its total tax revenue.

That means a $100 purchase would cost an extra $25 in tax, rather than the $8.25 charged now in most places. It also means that the Texas sales tax rate would be more than double the current highest sales tax nationally and far higher than states like New York, which typically are viewed as high-tax states. You can see the problem.

Supporters of this idea suggest that this problem could be overcome by expanding the sales tax base. The question is to what? Many of the big-ticket items that aren’t taxed now aren’t taxed because they don’t make sense in a sales tax – items like raw materials used in manufacturing. Or they would put a heavy burden on families – like taxing groceries, water, medicine or home sales. There’s certainly room to expand the sales tax base, but what we are talking about here is replacing twice as much revenue as the state sales tax brings in now.

Even if it could be pulled off, this tax swap would have other undesirable effects. It likely would undermine local control of funding for cities, counties and schools. The decisions about who gets how much of the tax would likely have to be made in Austin, and there would be losers – particularly rural Texas, which doesn’t have the population to generate much sales tax.

The swap might be revenue neutral, in the sense that the same amount of money would be raised, but it wouldn’t be tax neutral for taxpayers. Depending on whether you pay a lot of sales tax or own land, you could see a large swing in your tax bill. The plan also would give an immense tax break to out-of-state property owners who would get a massive property tax cut but wouldn’t necessarily pay anything in sales tax.

Supporters sometimes promise that the change would produce an economic boom in Texas, but it’s hard to see how that could be true. What business would locate here and face the prospect of a 25 percent tax on the goods and services it buys? Tax avoidance such as shopping on the Internet or in surrounding states would increase dramatically. The one economic boom that is likely from this swap is in the construction of large shopping malls just over the Texas border in Louisiana, Arkansas, Oklahoma and New Mexico.

One thing Hamilton fails to note is that the Lege has considered the idea of swapping property taxes for sales taxes before, in 2005. This was a much smaller swap, which would have raised the state sales tax rate from 6.25% to 7.25%, with some other bells and whistles in there. The Legislative Budget Board studied this proposal, and concluded that it would benefit the rich at the expense of everybody else. One can only imagine what a huge boon a complete swap would be for the one percent crowd.

There are other issues – Hamilton correctly notes the effect of border-crossing and online shopping, but doesn’t mention the black market that would quickly burgeon in this scenario – but this is a pretty long list already. But let’s be clear about something: The purported reason for wanting to find an alternative to the property tax is that one’s property taxes can rise faster than one’s ability to pay them, and through no fault of one’s own one can find oneself unable to afford one’s house. If only there were some other kind of tax that could be substituted for the property tax. You know, a tax that was proportionate to the amount of money one made in a given year, so that one’s annual tax bill rose or fell in direct relation to one’s ability to pay it. I don’t know what you’d call this kind of tax – maybe the “Annual Earnings Tax”, or the “Tax On How Much I Made This Year”; I’m sure there’s a snappier, pithier name for it if only I could think of it – but I’m sure if we thought about it we’d realize that it could well achieve the aim of substituting for most of the property tax without suffering from all the problems that a 25% or higher sales tax would have. Maybe that’s the tax we should talk about implementing instead.

Lawsuit filed against business margins tax

Allstate Claims Service, L.P., which is based in Boerne, has filed a lawsuit alleging that the business margins tax is an illegally-passed income tax in Texas. Oh, boy.

Nikki Laing, a CPA and third-year Baylor law student, studied the structure of the tax for a Baylor Law Review article titled “An Income Tax By Any Other Name is Still an Income Tax.” She believes it’s just what the plaintiffs say it is: an income tax.

“Despite the name being a margins tax, if you look at it closely, it is in effect an income tax. You start with your gross revenue and you deduct certain statutory deductions,” Laing said. “It fits the comprehensive definition of an income tax, which is revenue less expenses.”

Rep. Jim Keffer, R-Eastland, said it’s not an income tax because businesses can get hit with it even in years when they don’t have net income (one of the chief complaints critics leveled at the tax when it was created).

“This is not an income tax per se; this is a gross receipts with deduction capabilities,” Keffer said. “And you’re taxed whether you have income or not, or profits so to speak.”

It’s not an academic proposition. Under a provision in the Texas Constitution, known as the “Bullock Amendment” because it was championed by the legendary former Lt. Gov. Bob Bullock, no income tax can be passed in Texas without voter approval. The 2006 overhaul was not submitted for approval by Texas voters.

That’s the basic contention in the lawsuit — that the Legislature passed an income tax without getting the necessary voter approval. The lawsuit asks that the state stop all “attempts to enforce, collect, and assess this unconstitutional tax.”

[…]

What surprises some tax experts is that it has taken so long for someone to sue on the ground that it’s an income tax. Perry angered many fellow conservatives when he signed the “margins tax” into law, but he fought for exemptions in the law and resisted all attempts to raise taxes to deal with a huge budget shortfall earlier this year.

“I think all the tax practitioners in the state have been waiting for this shoe to drop,” said tax attorney William Grimsinger, who blogged about the lawsuit in a recent column. “The ability [to sue] has has been out there for a while. This is really the first time anybody has done it.”

Osler McCarthy, a spokesman for the Texas Supreme Court, said that under special provisions in the 2006 law, any challenge of its constitutionality goes straight to the high court. He said the court will be required to render a ruling by late November, almost six years to the day after the court ruled that the current school finance system was unconstitutional.

“The filing is direct in the Supreme Court, so you bypass the trial court and the courts of appeal,” McCarthy said. “That makes this one different.”

Here’s Grimsinger’s blog post, which mostly recaps the story of the margins tax and the timeline for the Supreme Court; he thinks they’ll rule before Thanksgiving. As we know, the margins tax has helped create a structural deficit in the state’s budget, since it doesn’t collect enough to pay for the 2006 property tax cut. If it gets thrown out, then as was the case with the West Orange-Cove lawsuit that led to its creation, the Court will presumably give the Lege a deadline for addressing the problems of the margins tax, or to come up with some alternate source of revenue to replace it since the budget would then be out of balance. Can you imagine how much fun that will be?

Time for a corporate income tax?

Maybe, but don’t hold your breath waiting for it to happen.

Senate Finance Chairman Steve Ogden, R-Bryan, said legislators should consider a constitutional amendment that would clarify that an income tax could be assessed on corporations but not individuals.

The objective would be to use the corporate income tax to replace the current franchise tax that is considered unfair by many businesses.

“Even if you lose your shirt, you still may be liable for paying the business tax because it isn’t an income tax,” Ogden said. “That business tax is a mess.”

Overcoming the visceral objection to an income tax will be tough — even if it would apply only to businesses.

“I think at least it’s something we should consider,” Ogden said. “I think the voters are reasonable people. If we propose reasonable solutions, I think they will give it serious consideration.”

If they can hear your reasonable proposals over the screeching and caterwauling that would be sure to accompany it, then sure, they’ll consider it. Good luck with all of the zombie lies that will be told. The point of this is that the much-reviled business margins tax, in addition to its other flaws, may be assessed on a business that lost money in a given year. This is because it was explicitly designed to not be an income tax, because that would be unconstitutional and Just Plain Wrong. Yeah, I don’t get it, either. Anyway, Ogden’s plan isn’t going to go anywhere because tax legislation must originate in the House, and House Ways and Means Chair Harvey Hilderbran has said no new tax bills will be forthcoming this session. So, barring anything unusual, we’re stuck with the system we have for at least two more years.

Fixing school finance, the neverending story

Work on dealing with the state’s revenue shortfall and what it will mean for the schools is already underway.

Senate Education Committee Chairwoman Florence Shapiro, co-chair of the 15-member panel, acknowledged that the funding system is in trouble and needs change – particularly with a massive revenue shortfall facing the Legislature when it convenes in nine months.

“The truth of the matter is there is no money,” the Plano Republican said.

She added that lawmakers are working with an “antiquated” system for financing education that has been in and out of legal trouble in the courts for several years.

“Rather than rearranging the chairs on the Titanic, which we have been doing all these years, why don’t we take them off the deck and look at things from a completely different perspective?” she told the committee, made up of eight House and Senate members and seven citizen appointees.

She asked for proposals for an entirely new system of funding schools. Currently, local school districts levy significant property taxes on homes and businesses, the state provides tens of billions of dollars in funding every year, and districts get a small amount of federal money.

If you really want proposals, there’s always a state income tax. It would better and fairer system in so many ways, not the least of which being that unlike property taxes, income taxes won’t go up beyond your ability to pay them. That isn’t going to happen so I won’t waste any more time on it. There’s also rolling back at least some of the unaffordable 2006 property tax cuts, and fixing the business margins tax to make it fairer. Do those two things and you can at least fill in the revenue hole that we dug back then, and most of these problems go away. Yeah, I know, it’s too easy.

What if you made property taxes a little more like income taxes? By that, I mean add in higher rates for properties valued above, say, a million dollars. Not for the whole thing, of course, but for the value of it above that level. Put in a bump at a million dollars, and another one at five million, and see how much that brings in. Maybe you can make the homestead exemption a little bigger as well, to ease the burden a bit for folks on the lower end. Assuming this passes constitutional muster – I have no idea if it would or wouldn’t, I’m just brainstorming like Sen. Shapiro asked – why not give it a try? Yes, I know the answer to that question, too. If you keep shooting these ideas down like that, we’re not going to get very far. Anyway, that’s my brilliant yet stupid idea for the day.

Alternately, there’s the Dan Patrick approach.

Patrick thinks Texas has to stop relying on property taxes, a move he sees as ultimately lethal to the state’s economy. He’s suggesting increasing the sales tax by 2 percentage points and eliminating some sales tax exemptions while reducing property taxes by 30 percent to 40 percent.

He estimates that someone who makes $60,000 a year would pay about $200 more a year in sales tax under his plan.

“I have not talked to a homeowner or a business owner that would not swap $200 a year more in sales tax for lower property tax,” he said.

Of course they would. They’d be paying less in taxes. But let’s be clear on what that means: Either Patrick’s proposed tax swap means a net decrease in revenue for schools, which isn’t going to help anything, or it means a higher tax burden on some other people. In particular, it means a higher tax burden on people who aren’t homeowners, or whose property taxes are already low. In other words, it would mean higher taxes mostly for poorer people. That will be the case even if Patrick’s proposal is a net tax cut, since obviously not everyone pays property taxes. We know from the last time the Lege proposed a property tax for sales tax swap that it meant a significant tax increase on the poorest Texans. And that was for a one cent rise in the sales tax – Patrick wants to double that increase. Any way you slice it, this is a great deal for a small number of people who don’t need the help, and a terrible deal for the vast majority of Texans.

Schieffer announces

State Sen. Leticia Van de Putte is out. State Sen. Kirk Watson may or may not jump in. Tom Schieffer is in.

After a rally in front of the Fort Worth elementary school he attended, Schieffer plans stops in Houston and Austin as he seeks the Democratic nomination for governor. He’ll be in San Antonio and the Rio Grande Valley Thursday.

“People know there is something wrong – they know that Texas is falling behind. They are worried about it,” Schieffer said in an interview last week with the San Antonio Express-News and the Houston Chronicle.

“They want better than what we’ve got now,” Schieffer said. “They’re worried about kind of a sense that state government is going through a know-nothing phase of you don’t have to be thoughtful, you don’t have to be serious, you just have to mouth the buzz words that appeal to people’s prejudices and not to their hopes and dreams.”

Schieffer cited concern over school dropout rates, saying young people are “going to fall behind, and they’re not going to wind up being taxpayers, they’re going to wind up being tax consumers.”

If that continues, he said, “no level of taxes … will support the services that you have to have in this state, and I’m afraid we’re literally on the road to disaster.”

[…]

Schieffer said in the interview that many decisions – including failure to expand the Children’s Health Insurance Program and draw down more federal money – have been shortsighted.

“That’s great political rhetoric in a Republican primary, but it’s not good public policy, because what happens is that kids still get asthma. They still get sick. And when they’re not covered by health insurance, and they don’t have a doctor who is providing an inhaler to ‘em or that they’re seeing on a regular basis, they wind up in the emergency room in the county hospital,” Schieffer said.

“The kid is out of school. The parents are out of work to take care of the kid. It is the most inefficient, most unproductive way to deliver that health care to those kids – and by the way, it’s not the right thing to do, either,” Schieffer said.

Among other areas, Schieffer also noted the rise in college tuition rates after they were deregulated, saying the state should set rates to ensure higher education is “as economical as possible.”

While addressing the concerns he identified would appear to require an infusion of state revenue, Schieffer didn’t address such specifics when asked in the interview. He said wants to have a thoughtful discussion about public policy with all interested parties at the table to come up with solutions. He said he’ll lay out more detailed plans as the campaign unfolds.

Schieffer did say that property taxes “have pretty well been exhausted’ and that he doesn’t like an income tax.

“I think sales taxes work better than anything else at the state level, but I think you have to sit down and you have to talk about things and you have to do it in a serious way,” he said.

Schieffer said that Perry “talks a lot about a good business climate. I want a good business climate. I’ve got more business experience than Rick Perry and Kay Bailey Hutchison combined. But a good business climate is not just having low business taxes. It is having an educational system that can produce the workers of the modern world.”

You’re not going to get there on sales taxes, which I hope Schieffer will realize when he has that serious sit-down with whoever he’ll be talking to about it. Other than that, I’d call this a good start. If Schieffer’s definition of “centrism” is about supporting CHIP and education and casting opposition to those things as being extreme, that’ll help alleviate some doubts about him. He still has a lot of work to do, and I still hope for some more options in this race, if only to ensure a better primary, but I feel like the Democrats at least have a reasonable fallback position in Schieffer. Now we need to go from there.

Other reactions: Greg has some advice for Schieffer. Campos says “As long as the frontline of Lone Star statewide Dems candidates is made up of Anglo fellas, I don’t see a scenario where the Dem base gets revved up – sorry – no se puede.” RBearSAT thinks Sen. Van de Putte made a wide decision, and hopes she runs for Lite Gov. David Mauro considers the repercussions in Travis County if Sen. Watson aims statewide. Phillip has three quick reactions to Schieffer’s announcement. Gardner Selby lists five ways Schieffer could stand or stumble. Martha likes the idea of Sen. Watson running for Governor.