Replace the Texas franchise tax ... with what, #txlege?

Houston Chronicle business columnist Chris Tomlinson wrote earlier this week that it's time for the state of Texas to get rid of its state franchise tax on businesses.

I respectfully agree, as I Tweeted him back, because he said "get rid of" instead of "replace." (The same holds true for the inventory tax, as loophole-ridden and as badly designed as it is.)

The answer is: A state income tax. Well, that's the obvious answer in a state that's not as tax-phobic as Texas, even as schools struggle for money and roads fall apart under current funding.

Unless the Texas Legislature can craft a corporate income tax to replace the above state taxes, getting rid of those above taxes will mean even more suckitude in state services (except to lobbyists), yet higher sales taxes, or both.

This reminds me of President Lincoln. Radical Republicans in Congress demanded that he replace George McClellan as commander of the Army of the Potomac well before Lincoln puled that trigger.

"With whom?" he asked.

"Why anybody," Ben Wade said.

"I must have somebody," he responded. Change "somebody" to "something," and that's where we are now. We need to have columnists propose, and legislators adopt, a "something" to replace these taxes.

As for raising the state sales tax? Scrooge McOilDuck, otherwise known as The Comptroller Who Can't Understand Commodities Trends, Glenn Hegar, want to let businesses with less than $5 million in revenues pay no sales tax.

And, I'm sure Scrooge McOilDuck and the GOPers in the Lege have not put pencil to paper, or fingers to calculator, to figure out just how much money this would cost the state.

Actually, they probably figured supply-side economics would turn this into a magical new bonanza for the state.

In reality, if the Wingnuts of Wingnuts steamroll stuff like this, Texas will be the new Louisiana.

Texas: Heading to hell in a handbasket, but now, maybe twice as fast.

And that reminds me of another Civil War hero: Phil Sheridan, who famously said:

“If I owned Texas and Hell, I would rent out Texas and live in Hell.” 

He would surely still live in hell first, but might find fewer and fewer out-of-state takers wanting to rent out Texas.

Texans should prepare for another franchise tax screwing

It seems like the Texas GOP, and Tricky Ricky Perry in particular, really like to apply their warm but unfriendly yellow trickle-down economics to the state's franchise tax.

Per a business email:

Gov. Rick Perry today announced a four-point plan to provide nearly $1.6 billion in tax relief to all Texas businesses currently subject to the state’s franchise tax. The governor was joined by lawmakers, the Texas Association of Business (TAB), National Federation of Independent Business (NFIB) and Texas Conservative Coalition Research Institute for the announcement.

“By cutting taxes for Texas businesses, we are helping job creators in our communities and promoting economic growth across the state,” Gov. Perry said. “Businesses that keep more of their money can pass savings on to consumers, hire more workers, offer greater employee benefits or reinvest it into their companies and grow their business – all of which are good for Texans and our growing economy.”

Gov. Perry’s plan would reduce business taxes by:
•Reducing the franchise tax rates by 5%
•Providing a $1 million deduction for businesses with revenue up to $20 million
•Lowering the rate for EZ Form filers
•Giving companies relocating to Texas from out of state a one-time deduction of moving expenses in the first year they pay the franchise tax

Gov. Perry’s business tax relief plan would also have the effect of making permanent the current small business tax exemption. That exemption currently impacts 29,000 businesses and is set to expire in 2014.

This means, of course, that:
1. Schools will again be told to "lump it" on any chance of getting back the $5 billion cut two years ago.
2. There's going to be yet another school finance lawsuit in the works eventually, or, if this passes, it may become evidentiary in the appeal of the current suit, perhaps?

And, of course, this is part of Tricky Ricky's new "Chicago ads," especially that last bullet point, but somewhat No. 2. The ones promising, you know, well-trained employees. No mention of whether or not that includes the tops-in-the-nation percentage of people on Medicaid.

Fortunately, of course, Perry can't unilaterally cut taxes. This all has to be approved by the Lege. And, I'm sure the Legislative Budget Board's going to be asked to give some honest input.

Franchise tax hot-button issue for 80th Texas Lege

Texas business owners could be facing changes in the state’s franchise tax in the 81st regular session of the Texas Legislature next year.

State Rep. Jim Pitts, the speaker in the fourth and final TGIF legislative breakfast sponsored by the Best Southwest Chamber of Commerce — which represents the Dallas suburbs of Cedar Hill, DeSoto, Duncanville and Lancaster — talked about this and other issues at DeSoto’s Thorntree Country Club Aug. 29, as originally reported in the full story, part of the top news source for south suburban Dallas, Today Newspapers.

He continued in the footsteps of the series’ previous speakers — state senators Royce West and Bob Deuell — in speaking to a fresh series of topics.

Pitts, whose district covers exurban Ellis and Hill counties as well as a slice of southern Dallas County, serves on the Texas House’s powerful Ways and Means Committee and is vice chair of the Government Reform Committee. So, he was well placed to address the franchise tax, education spending and transportation issues.

Franchise tax
The franchise tax was reformed two years ago, in part to close loopholes and in part to find money for the state to take on a greater share of local education costs from local school districts. Pitts spoke about the changes.

“We’ll see who was hurt and who was helped,” he said. “We have to see if we created more loopholes.”

He later tied this to education funding.

“There are some Hill County school districts who said they could not pay their August bills. They’re going to have a really hard time if we don’t change the method we use to finance schools,” Pitts said.

Pitts promised to work on new legislation next year, including addressing current state funding levels for school bus transportation costs. That said, other than addressing loopholes, he did not indicate whether or not he would be looking to find more net revenue from franchise tax changes.

In a recent constituent newsletter, state Sen. Royce West also addressed the franchise tax.
“Regardless of whether we stand pat, tweak the tax further, scrap it altogether, or adopt the homestead exemption increase … $15,000 to $30,000 or $45,000, the plan that prevails should levy a tax rate that spreads the financial burden as fairly as possible,” he said.

Transportation
Next, Pitts went to more general transportation issues.

“Transportation is a huge issue for this area,” he said.

He pointed out that the Texas Department of Transportation is under review by the Texas Sunset Commission. Every 12 years, on a staggered basis, almost all state agencies come before the appointed commission, which reviews them and recommends to the Legislature whether or not their existence should be renewed, and if so, what changes, if any, should be made.

“TxDOT is up for really hard scrutiny this session,” Pitts said, adding that in the past, in the legislature, “TxDOT was the industry you loved to hate.”

Pitts then covered another controversial educational issue.

That was the state’s Top 10 law, whereby top 10 percent graduates of public high schools automatically qualify for admission to state universities. Pitts said he opposed changing it.

“Kids that graduate Ellis and Hill counties would not be able to attend The University of Texas and Texas A&M. It has done what it was supposed to,” he said.

Royce West speaks
That was also a topic of powerful State Sen. Royce West earlier in the cycle of legislative breakfasts.

West, whose district covers most of southern Dallas County, is most passionate about is the top 10 percent rule, which he was instrumental in getting passed in 1997. Under the current rule, students who graduate in the top 10 percent of their high school’s graduating class are granted automatic acceptance into any public university in Texas.

“The issue of the top 10 percent rule will be front and center again,” West said. “I don't care what anyone says, the statistics show that the students, regardless of the color of their skin, are very successful. If you look at their numbers it shows that the program has been successful and it is not based on race, it is based on merit. If those high school students are successful in the environment they are in, they will get an opportunity to get an education at any institution of higher education in the state of Texas.”

The law has been controversial, with critics saying students from competitive high schools are being denied spots in Texas universities. Both the Texas House and Senate considered amendments to the law in 2007, but no changes were made.

West also talked about the importance of getting programs in place to help combat the high dropout rate of African-American and Hispanic males.

Bob Deuell
State Sen. Bob Deuell, a physician, spoke between Pitts and West Aug. 22. He has had a practice in Greenville for more than 20 years and has been in the senate since 2003.
It was these qualifications that he brought to the Best Southwest Chambers of Commerce TGIF Legislative Breakfast Aug. 22.

Deuell, with his professional background, spoke about health care as well as the transportation needs facing the state.

The Republican Deuell, generally a social conservative, talked about the difficulty in providing health insurance for everyone, but had no immediate solutions to the problem.

“What is the main problem with health care? Many of the uninsured get health care. Many of the insured do not,” he said. “My goal is not to insure 23 million Texans. My goal is to get 23 million Texans health care. Insurance is a tool, but it is just one tool.”

From there, he touched on Medicaid’s role in the process.

“When people think of Medicaid, people think the typical patient is people who have children they shouldn't have had. That is really only 28 percent of the Medicaid budget. Close to 70 percent of the budget is elderly and disabled care, and nobody wants to cut that.”

Deuell said that because of Medicaid's low rates, many Medicaid patients don't have access to health care because they can't find providers. He said many physicians refuse to see Medicaid patients due to the low re-reimbursement rates. This results in hospitals being swamped with patients, which they then have to turn away, he said.