Wednesday, March 15, 2006

John Sharp Floats A/His Plan (So Far)

Here's the story from the DMN, Sharp foresees no change to sales tax rate:
The state can reduce school property taxes by a third without an increase in the sales tax, a key component of plans considered by the Legislature last year, the chairman of the governor's tax reform commission said Tuesday.

The panel is heading toward a recommendation to use $1 billion from the state's budget surplus, overhauling the business franchise tax and raising taxes on cigarettes to fund the property tax cut, said its chairman, former state Comptroller John Sharp.

Speaking in an interview a day after the 24-member panel completed a series of 16 public hearings across the state, Mr. Sharp said his commission is ready to start drafting its recommendations for a special legislative session that Gov. Rick Perry is expected to call for next month.

"We believe we can safely use part of the state's budget surplus, and we intend to recommend the use of $1 billion of the surplus to buy down property taxes," he said.

That will help avoid an increase in the state sales tax – already one of the highest in the nation - and will still leave enough surplus funds to handle other expenses the Legislature chooses to pay for, Mr. Sharp said.

"Why increase the sales tax when you don't have to?" Mr. Sharp said, asserting that use of the surplus to buy down property taxes represents real tax relief rather than a tax swap.
Come now Mr. Sharp. You may not be swapping taxes not to raise the sales tax but I'm sure you're aware that most of the "surplus" was created by cutting benefits to the neediest among us. But, of course, your whole plan is a tax swap and I'm not really sure why the business lobby will accept it, this time. You must have something really horrible you're using to threaten them. Here are the particulars:
Cut local school property taxes by one-third.

Base the business franchise tax on gross receipts of most businesses after either salaries or the cost of goods are deducted.

Increase the cigarette tax $1 per pack.

Spend $1 billion from the state's surplus to help offset property tax cuts.
Now we know this isn't a fix. It's just a short-term fix to get us through until the next crisis. The article also mentions an even shorter-term fix that is circulating around the capitol:
Meanwhile, as the special session approaches, a group of House Republicans has been trying to drum up support for a temporary fix that would use more than half the budget surplus to reduce property taxes by about 20 cents per $100 of assessed valuation. Supporters say that would allow lawmakers to avoid a big tax bill in the special session and finish the job in the 2007 regular session.

Mr. Sharp, a Democrat, said that would be a big mistake and could leave the state with a deficit ‚– especially if lawmakers can't agree on a new tax system in 2007.

"That's how you wind up getting yourself in big financial trouble," he said.
Shouldn't that say a more temporary fix? Leave it to a lame duck legislature to put off today what it can fix tomorrow.

The other thing to remember about this plan and what the TTRC has, or hasn't as the case may be, done. This is revenue neutral, meaning it puts NO NEW MONEY INTO PUBLIC SCHOOLS. This does nothing to fix the school finance problem it just lowers property taxes, for now.

[UPDATE]: Found this little snippet from the Texas Weekly RSS feed:
While former Comptroller John Sharp and the rest of Gov. Rick Perry's tax reform commission works on proposed revisions to the state's business taxes, they're starting to hear more noise from lawmakers and lobbyists. That's not unusual with a special session approaching, but it's dangerous for tax bills: An unprotected tax bill lasts about as long as free pot at a rock concert and isn't nearly as much fun.
Which I believe means that as of right now a sales tax hike is off the table and business will bear most of the burden for the TTRC plan. But this plan is being put ouf for scrutiny and is not being backed by anyone outside the TTRC, most notably the governor, at this time.

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