More on the Great Texas GOP Tax Hike

More details on the Senate version of HB3 headed to conference, via Quorum Report. Basically, the problem before us is that taxes which are deductable on federal tax returns are being cut, while non-deductable taxes are being raised. Also, the tax burden for Texans rises while the extent of the taxes borne by those out-of-state is cut.

I mean, jeez, does this make sense to anyone? ... in Texas?

Here's the specs:

Since businesses have no taxpaying capacity apart from their owners, workers, and customers, where these parties reside, in-state or out-of-state, has an impact on who ultimately bears the burden of a tax. Whether a tax is deductible on federal returns also impacts the burden of a tax. Taxes that are deductible in determining one?s federal tax liability will result in reduced federal tax payments and thus part of the tax will be borne by all federal taxpayers. The table below shows the proportion of taxes paid by residents and the proportion exported out-of-state.

Since both the House and Senate bills have a greater reliance on consumer taxes (sales, motor vehicle sales, cigarettes) to fund property tax reduction, less of the tax will be borne by out-of-state taxpayers. For example, the $1 increase in the cigarette tax will generate $750 million (in 2007) in revenue, which will be used to lower property taxes by $750 million. However, given the final burden, residents will pay $729 million of the cigarette tax increase, with $21 million being paid by those from out-of-state. The corresponding decrease in property taxes will result in residents paying $611 million less in property taxes, while out-of-state payments will decline by $140 million. Part of the overall reduction in out-of-state payments is accounted for by the loss of deductions from federal tax liability. The $750 million reduction in property tax will result in Texan?s federal tax liability increasing by around $100 million.

Kronberg concludes with a rather naive "Should one hope the conference committee does better?" Yeah, considering that Dewie and the Senate posse pretty much flip flopped beyond possibility to make their views more in line with the House version of the bill, I'd argue that the tilt towards giving tax cuts to out-of-staters and tax hikes to Texans is only going to get worse.

Slightly related to the above ... Gonzalo Barrientos attempted to clarify one of the more befuddling contradictions in the Senate bill by maintaining his amendment increasing the homestead exemption (ie - about the only truly progressive aspect of property taxes). Back on the 11th, Barrientos' amendment passed 21-8. But when Barrientos brought up a motion to instruct on the same amendment yesterday, it lost 14-15. So who the hell flipped and who the hell flopped? If I didn't know any better, I'd say there's at least 7 Senators who have a campaign issue waiting to be used against them.

UPDATE: OK, one more note on the whole flip-flip angle. Let's draw a timeline on the State Senate's stance on sales tax in particular. Back about, oh, let's say a nice even month ago, they were against it. Flat out against. Remember, they favored an income tax on business instead. Something happened. And when they vote on their version of HB3, they decide that a half-cent is fine and dandy (the House having decided that a full cent more is peachy). So, the now that the conference committees have been named, the motions to instruct are flying hot and heavy. One such motion was introduced by Eliot Shapleigh to honor the half-cent rate as non-negotiable. How did that go? Here's Kronberg again:

Sen. Eliot Shapleigh (D-El Paso) moved to instruct the conferees to remain within the boundaries of the sales tax rate set out within the Senate bill, which is only one-half cent. Ogden said he needed some negotiating room with the House and asked whether Shapleigh would vote for the bill if he held the sales tax to one-half cent.

The motion to instruct failed on a vote of 11-18.

Wow, 18 Senators vote to preemptively flip-flop on what will now certainly be a higher tax rate. I mean, last I checked, when the other side has a higher number and you just voted on a lower number, that means the "negotiating room" tends to inch upwards, not downwards. Or, put another way, there's just nothing sacred for GOP State Senators. Whatever they say today is negotiable tomorrow. Whatever they pledge today, they'll sell out tomorrow. What we're witnessing is the most amazing display of caving in on matters of what were, up till last week, principles.

Put me down as being in complete agreement with Kuff when he says: "I admit, I didn't think it would be possible for a school finance agreement to get hammered out in this special session, but apparently I've underestimated David Dewhurst's willingness to sell out his principles."