Shoving the wagon over school children

The Texas Legislature misses a lot of opportunities – usually intentionally – and it looks like it may be getting ready to miss another one.

A Texas Supreme Court ruling earlier this week gives the Legislature a prime opportunity to begin fashioning a revenue system to more adequately meet the state’s 21st century needs, including enhanced educational opportunities for our children. But, as the story linked below indicates, that is not the priority of the current legislative majority.

The same legislators who only recently slashed $5.4 billion from public school funding now apparently want to just tinker with, rather than truly reform, the state’s new business franchise tax, following a Supreme Court decision that the tax is constitutional.

The tax, which Gov. Rick Perry convinced the Legislature to enact in 2006 when lawmakers ordered deep cuts in school property taxes, has been underperforming from Day One. Part of that was by design. The governor and the legislative majority wanted to claim credit for “tax cuts” in an election year, so they intentionally created a new tax that would not raise as much new state revenue as the schools lost in the local tax cuts. The recession also took a toll on franchise tax receipts to the point that the “structural deficit” in the school finance budget (about $10 billion this biennium) accounted for more than onethird of the $27 billion revenue shortfall that lawmakers confronted last January.

We already know that they bridged that canyon with budget cuts, even while leaving at least $6.5 billion unspent in the Rainy Day Fund.

Now, with uncertainty over the franchise tax’s constitutionality cleared up, legislators have a chance to overhaul the tax so that its revenue can grow with the economy. Such reform, however, would most likely require some businesses to pay more, and many business people don’t want to, even though they give a lot of lip service to how important a quality educational system is to the state’s future.

“We’re pulling the wagon,” said Bill Hammond, president of the Texas Association of Business, claiming that Texas businesses already pay 60 percent of all state and local taxes.

According to the state comptroller’s Tax Exemptions/Incidence report, businesses initially will pay an estimated 51 percent of most state and local taxes in 2013, with individual consumers paying 49 percent. After businesses pass on those taxes in the form of higher prices for their products and services, Texas consumers will end up paying 77 percent of the ultimate tax load, the report estimates.

Businesses are pulling the wagon?

In reality, every time the business lobby blocks an opportunity to improve the state’s tax structure, it is shoving the wagon – right over the school children of Texas.


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