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House kneels before its masters

Remember those halcyon days of, um, yesterday, when Tom Craddick could say things like this?

The expansion of the sales tax is designed to tap into the growth in the service sector of the Texas economy.

“The idea of broadening it, that’s where the growth in the economy is,” said Craddick. “If you broaden it, you pick up that growth.”

Yeah, well, it was all a load of crap. The corporate overlords have spoken, and there will be no expansion of the sales tax into the service economy, with the minor exception of auto repair and car washes. As there’s not much variation in today’s coverage, I’ll just point to the stories: Chron, Morning News, Express News, Statesman, Star Telegram. Here’s a brief summary of the changes, from the Statesman:

* Providing a larger payroll tax: For-profit businesses would pay 1.25 percent of their wage base or $125 per full-time employee each quarter, whichever is less, compared with 1 percent or $100 per employee under the original proposal.

* Keeping the residential and business property tax collections at the local level instead of creating a statewide property tax.

* Raising the general sales tax rate even higher, from its current 6.25 percent to 6.75 percent. Heflin’s plan had proposed a 6.5 percent rate.

* Eliminating the proposed sales tax on all but two of 19 services. Auto maintenance and repairs and car washes would still be taxed.

* Increasing the motor vehicle sales tax from the current 6.25 percent to 7.75 percent — compared with 7.5 percent under Heflin’s proposal.

The new version still calls for legalizing video lottery terminals, adding a $1-per-pack tax to cigarettes and charging sales tax on items currently exempt, such as newspapers, magazine subscriptions and coin-operated services.

In addition, the state would put a $1 surcharge on amusement tickets, including those to movie theaters and professional sporting events.

One committee member said the committee is considering lowering the school property tax rate from $1.50 per $100 of value to $1.05 per $100 — 5 cents higher than what was originally proposed.

I’ll get to some of the implications in a minute, but first, one piece mentioned only in the Express News:

Creating a new tax on cigars that would generate almost $6 million a year.

So we’ve got increases in the cigarette tax and smokeless tobacco tax, plus a new tax on cigars. I had no idea we had such a powerful pipe-smoking lobby in this state. How else to explain how they and only they got off tax-free?

Points to ponder:

1. Leaving property tax collection at the local level may mean no need for a Constitutional amendment. I’m guessing the Attorney General will have to rule on this, but if so, it means that the proposed property tax reductions can be passed by a simple majority in each chamber, so Democrats could not block it so easily. The 2/3 rule in the Senate could still come into play, but as David Dewhurst has already indicated that he’s not bound by tradition, I wouldn’t bet the farm on it.

2. Whatever increase or expansion of the sales tax goes through, the expectation of revenue from gambling is what’s allowing there to be more money for the schools (which, remember, was the original reason for this session) in conjunction with property tax reductions. What happens if the opponents of expanded gambling, such as Sen. Jane Nelson, carry the day? Will the Lege simply go forward with the current tax proposals and not take any action on school funding issues? Surely this wouldn’t be seen by the courts as providing a Robin Hood replacement with sufficient funding equity.

3. I’m sure the Democratic caucuses have some strategy in mind over there on the sidelines. I hope I’m not reading anything about it because they’re biding their time and waiting to see what gets proposed before they start making noise. They’ll need to be clear about why they’re taking whatever obstructive action they may pursue, which is that proper funding for schools takes precedence over giving Highland Park homeowners a tax cut. I’ve said it before and I’ll say it again – thanks to the gerrymandered State House districts, they have little to fear from Republicans at the ballot box.

One last item, from the Chron:

The governor visited a home in Pflugerville, in suburban Austin, to renew his call for the Legislature to cut and limit future growth in local property taxes. His proposal includes a 3 percent cap on the annual growth of property tax appraisals.

David and Tammy Odom were recently notified that the appraised value of their house, which they purchased about 18 months ago for $165,000, had jumped $8,000 during the past year, meaning their tax bill this year could increase by $240 or more.

Perry said his proposal, if enacted by the Legislature, would cut the Odoms’ potential tax increase almost in half.

Raise your hand if you think the retail sales price of the Odoms’ house didn’t increase by at least as much in the last 18 months as well. So why should I care about the increase in their appraisal? Cap or no cap, when they sell that house the new owner will be taxed on the market value of the house. Why should they be treated any differently?

UPDATE: Sadly, the answer to point #2 appears to be as I feared: no new money for schools. You’re damn right I expect the Democrats to vote that down.

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  1. Tim says:

    I’m not quite sure how things work here in terms of appraised values in Houston.

    We bought a house here last July. At the time, the assessed value for tax purposes was about $33,000 less than what we paid for it.

    Yet we just received a notice about the assessment for 2004…and it was unchanged — still $33,000 less than our purchase price. So now, I’m more confused than ever.

    I see your point about different people paying different taxes based on when they bought the property — regressive property taxation in a sense — but at the same time, most people don’t have incomes which rise 10% a year. I’m not sure what to do about it. How can we prevent property taxes from spiralling well above the inflation rate and beyond the ability of homeowners to keep up, yet keep it fair for future generations who buy (and get screwed in so many other ways already)?

    And finally, as much as I’d like lower property taxes, it is downright STUPID to finance the cut of a federally deductible tax by raising one that’s not deductible. All you’re doing is sending more Texas money to Washington, and there’s less Texas money available to keep the Texas economy stronger.

  2. Patrick says:

    And finally, as much as I’d like lower property taxes, it is downright STUPID to finance the cut of a federally deductible tax by raising one that’s not deductible.

    Very true. But probably less than 10% of the people in this state have even the faintest idea of what you’re talking about.

    Besides cuts in property taxes are politically advantageous. An incumbant can point to a property tax cut “savings” of hundreds of dollars in a nice big chunk, while shifting that tax burden to different sources. It makes for great ad copy. A few pennies per transaction is much easier sell come election time.