January 22, 2015

Needed in Texas — a goods and services tax

Houston Chronicle columnist Chris Tomlinson is right that Texas' franchise, or margin, tax, is flawed, even fatally so. He's also right that rearranging the deck chairs on the Titanic won't solve the problem.

(He could have been right a third time, if he'd dipped his column's toes more explicitly into Texas GOP talking points and noted that neither the current arrangement of said deck chairs nor any revamp is likely to be very "transparent.)

There's several issues here.

First, all the lobbyist carve-outs on the current franchise tax, to dip this blog's toes very explicitly into Texas GOP talking points, raises one big one:

If Texas is such a great state in which to do business, then why does state government need to engage in so many business handouts?

Shorter answer: That's why, in the minds of Texas GOPers, it is such a great business state — precisely because of such handouts.

Now that that's been answered, let's tackle one other issue in his column.

Chris wants to kill the franchise tax. I'm there.

And replace it with more "fees."

First, if one looks at things like car registration renewal, and the various fees it adds on, including a "convenience fee" for online renewal, I'd say the last thing we need is the Lege nickel-and-diming us with yet more fees.

Second, fees are often regressive within the broader world of taxation.

Ideally, we'd amend the Texas constitution to allow an income tax, if more and more of the Joe and Jane Six Packs who vote tea party would realize they're the ones already getting stiffed by fees, fees, fees.

Of course, that ain't happening.

So, what about a New Mexico-style gross receipts tax? I'd argue it's not an income tax. But, I could structure it in a way where it covers a lot of the territory that Texas' current business margins tax does, and in a way that makes it a lot harder for lobbyists to loophole it, especially if we made it more explicitly like a European-style value added tax.

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