Tax reform commission gets started

The long-awaited Tax Reform Commission, appointed by Governor Perry and chaired by John Sharp, is finally getting down to business, and already they're making me question why they're bothering.

At its first meeting Monday, the governor told the commission to focus on lowering school property taxes, ensuring greater tax fairness and providing a long-term, reliable source of funding for public education.

"The way in which Texas chooses to construct a new tax system will have a tremendous impact on every aspect of our future, from our ability to attract jobs and economic growth, to the prosperity of our families, to the quality of education our children receive in tomorrow's public school classrooms," he said.

The commission was appointed in anticipation of a pending Texas Supreme Court ruling in a lawsuit challenging the constitutionality of the current school finance system, which is heavily dependent on local property taxes. The high court decision is expected any week now.

Much of the commission's work is likely to center on a new, broad-based business tax, since Perry and Sharp have removed a personal income tax from consideration.

"We're not considering an income tax because it's a bad tax," Sharp said. "An income tax ought to be labeled for what it is, a tax on the middle class."

On what basis is Sharp proclaiming that an income tax is "bad"? Does he have any economic analysis at hand, or is this a faith-based pronouncement. We know that the Perry Plan from earlier this year, which came perilously close to passing, would have raised taxes on 90% of Texans. How does an income tax, one that meets the other criteria that Perry set out ("lowering school property taxes, ensuring greater tax fairness and providing a long-term, reliable source of funding for public education") compare to that? Would it have hurt to ask Ray Perryman that question?

I can't think of any reasonable purpose for this commission if it is unwilling to consider all viable options. Don't tell me that an income tax is an impossible sale. The evidence from our endless legislative summer should make it clear that any substantive overhaul of business taxes was impossible as well, and yet here we are with two dozen bidnesspeople talking about how best to tax businesses. You think whatever scheme this group comes up with is going to sail through the Lege without a fight, even if it's a clear win for most everybody? Dream on. Changing the status quo is always a battle. If this commission is going to do a thorough job, it needs to focus on the numbers, and let the politicians worry about the ensuing sales pitch. Otherwise, we're just buying new lipstick for the same old pig.

I've mentioned before that folks like State Rep. Garnet Coleman have expressed concerns about the makeup of this commission. Chris Bell is taking a similar tack by pointing out that most of the panel's members are Perry campaign contributors. This is a legitimate thing to worry about, but I think we need to see what direction these guys go before we get into that. For now, at least, I think Marc Campos is correct: This is the only game in town, so let's make sure we're in it for as long as it's being played fairly.

Rico Politico attended this meeting and liveblogged it. In doing so, he points out another way in which this panel could have been more representative:

11:15AM - Demographics in Texas - Since the 2000 census, Texas has grown about 8%, the Valley being one of the fastest growing areas in Texas.

[...]

On a side note, there is a member on the Committee from the Valley; Mr. Alonzo Cantu. He only introduced himself and his profession but offered no questions for the panel or for the committee itself.

If Mr. Cantu is the only member of the committe from the Rio Grande Valley, then the Valley is underrepresented. It can be hard to balance all these things out with only 24 people to work with, but still. Just keep that in mind.

UPDATE: Naturally, as soon as I hit "Publish", I refresh the front page of Chron.com and see this.

The Texas Supreme Court today struck down a key part of the state's public school funding system and gave the Legislature until June 1 to correct the problem.

The ruling, which partly upholds and partly reverses a state district court decision issued last year, means Gov. Rick Perry will have to call still another special session of the Legislature to tackle the problem.

Most likely, the session will be held after the March party primaries, when he and many lawmakers will be on the ballot in contested elections.

[...]

The high court held 7-1 that the $1.50 per $100 valuation cap on local school maintenance taxes amounts to an unconstitutional statewide property tax because many school districts are at or near the limit.

In the majority opinion, Justice Nathan Hecht noted that the Supreme Court, in a previous school finance case, ruled that an "ad valorem (property) tax is a state tax ...when the state so completely controls the levy, assessment and disbursement of revenue, either directly or indirectly, that the authority employed (by local districts) is without meaningful discretion."

The court noted findings by state District Judge John Dietz, after a trial in Austin last year, that districts statewide are spending more than 97 percent of the revenue that would be available if every district taxed at maximum rates, up from 83 percent in 1993-94.

It also noted that only about one-third of the districts with about a fifth of the student population exceed minimum accreditation standards, a marked declined from 2001, when more than 60 percent of districts exceeded the minimum standards.

Justice Scott Brister dissented, while the newest member of the court, Justice Don Willett, who joined the court while the litigation was pending, abstained.

The high court's ruling was less far-reaching that Dietz's decision. Dietz also had held the school funding system inadequate and cited a widening inequality between wealthy and poor districts.

Nothing like a bigass court ruling just before the holidays. Look for much more on this soon.

Posted by Charles Kuffner on November 22, 2005 to Budget ballyhoo | TrackBack