November 26, 2008
Business tax: Still short

Same as it ever was.

Texas' new business tax is $1.2 billion short of what it was expected to bring into state coffers its first year, even after adding extension payments made so far, the comptroller's office said Tuesday.

The shortfall means lawmakers will have to rely more heavily on other revenue sources to help offset the cost of subsidizing a cut in local school property tax rates.

Officials said higher-than-anticipated sales, oil-and-gas and cigarette tax collections will more than make up the gap -- but lawmakers also face new demands, including costs associated with damage from Hurricane Ike and the impact on Texas from the national economic downturn.

"What we thought was a surplus very well may not be a surplus at all," said House Appropriations Committee Chairman Warren Chisum, R-Pampa, referring to $10.7 billion in unspent revenue that lawmakers have been expecting when they return in regular session in January.

Comptroller Susan Combs won't issue a new revenue estimate until Jan. 12, the day before the Legislature convenes, said her spokesman, R.J. DeSilva.

Well, you can't say we weren't warned. I'm glad to hear that other revenues made up the difference this time around, but with the economy in recession and oil prices back below $50 a barrel, we should not expect that trend to continue. Of course, the "surplus" of which Rep. Chisum speaks was always more mirage than reality. It's just now the fig leaf is disappearing as well.

"I think we're pretty much on the verge of putting the first year to bed," said Dale Craymer, chief economist for the Texas Taxpayers and Research Association and a member of the state's Business Tax Advisory Committee.

"We'll know a lot more in year two," he said, when businesses are more familiar with the tax and transitional provisions expire.


Chisum and House Ways and Means Committee Chairman Jim Keffer, R-Eastland, agreed with Craymer that the tax's true yield won't be apparent until at least the second year.

"Really, we won't know till next cycle," said Keffer. "It's certainly not what some in the business community and some of the right-wingers were saying -- that we're going to be killing business" with higher-than-projected tax collections.


Chisum said it may take three years of tax collections "before you get a real good feeling of where you are."

I've said it before and I'll say it again: It sure would have been nice to have known at the time that the revenue projections for this new tax that were used during the 2006 special session were not to be taken seriously. How can you budget like that? Those huge property tax cuts, for which this was supposed to pay, look even more irresponsible now. Honestly, how can these guys claim with any credibility at all that they were fiscally conservative and prudent if we couldn't say with any real confidence how much money we were going to have? Unbelievable.

Sen. Kirk Watson, D-Austin, however, voiced concern that lawmakers have so little information now, with the legislative session looming.

"It was supposed to be money that we could count on meeting a basic promise, but yet here we are on the eve of a session and we have so little data about why it may be failing to live up to the promise that was made," said Watson, a member of the state's Business Tax Advisory Committee.

He said the fact that it's a new tax can't be used to avoid action this session, because that means the Legislature could turn to "old practices of the past, which are to compromise already compromised programs," such as transportation and the Children's Health Insurance Program to bridge budget gaps.

Yes, that's precisely my fear as well. I've seen this movie before, and I know how it ends. There's no possible way that the Republican leadership will admit that we cannot afford that ginormous property tax cut, so the poor and the children can expect to take it in the shorts again. I'm so lookng forward to this next session, let me tell you.

Posted by Charles Kuffner on November 26, 2008 to Budget ballyhoo

As an incorporated (in TX) small business with a sucky bottom line right now? I'm not surprised.

Amen to your last line.

Posted by: Julie Pippert on November 26, 2008 12:52 PM
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