The several billion dollars in new revenue that the state’s strong economy has generated offers the Legislature a great opportunity, but even before the session convenes that opportunity already is in jeopardy.
Leaders who want to move Texas forward would use the money, or at least part of it, to increase the state’s investment in education and other critical services without raising anyone’s taxes. The two top state leaders who were elected last week, however, seem poised to keep Texas in neutral – or drive it into a ditch – by limiting the debate to tax cuts.
Lt. Gov.-elect Dan Patrick is promising to cut both local property taxes and the state’s main business tax, the so-called margins tax, both major sources of revenue for public education. Some legislators already have pre-filed bills to abolish the margins tax by phasing it out. Gov.-elect Greg Abbott is being more cautious but has indicated he will support cuts in either or both taxes because he also is placing a priority on “tax relief.” The goal, Abbott said, is to generate job creation.
The single biggest job creator, however, is education. So, what about school relief? Relief from things like crowded classrooms, rising health care premiums for educators, below-average teacher salaries and cutbacks in pre-K and other critical programs? There has been nothing but silence from Abbott and Patrick on those concerns.
The margins tax was engineered by Gov. Rick Perry as part of a partial tradeoff for lower school property taxes back in 2006. Its under-performance as a revenue-raiser contributed to the financial emergency that resulted in the legislative majority cutting $5.4 billion from public school budgets in 2011. But many businesses, particularly professional and service-oriented companies, resent the margins tax because it slapped them with tax bills they didn’t have to pay under the old franchise tax.
These businesses are pushing for significant cuts in or an outright repeal of the margins tax, even though repealing the tax would cost state government almost $5 billion a year in revenue, according to an article in The Dallas Morning News this week. That loss would dig deeply into the state’s anticipated surplus.
One notable exception to the attack on the margins tax is the Texas Association of Manufacturers, which represents property-heavy industries that prefer the margins tax to the former franchise tax because they paid more taxes under the franchise tax. This group, instead, is pushing for reductions in the property tax.
The best way to reduce local property taxes is for the state to increase its share of education funding. In essence, though, the tax-reduction debate being promoted by Patrick and Abbott has become a debate over greed within the business community, boiling down to how each individual industry believes it can benefit from specific tax cuts.
Lost in this debate is the future of Texas’ public schools. Texas spends less on public education per student than most states, and it is spending less per child now than it did before the 2011 budget cuts, even though enrollment continues to grow by 80,000 students a year.
The future of Texas schools will determine the future of Texas, including the future of the business community. School districts should not be forced to continue cutting corners when state government is enjoying a multi-billion-dollar surplus, both in general revenue and in the Rainy Day Fund.
A state district judge has ruled the school finance system inadequate, unfair and unconstitutional, and the state has the resources to fix it – now. But politicians who are driven by ideology, such as Patrick and Abbott, don’t want to have that conversation. Neither do business leaders who are eager to sacrifice the quality of their future employment pools in exchange for some short-sighted tax cuts.