Two interesting points here - first, if you run a surplus, you could actually cut taxes without driving up deficits and future interest payments. Second, Texas Republicans are pretty much incapable of getting anything done except gerrymandering their districts to stay in office - to do what, I have no idea.
WSJ Editorial
Texas-Sized Tax Revolt
April 4, 2006; Page A22
If Republican politicos are wondering how they can crawl back into the good graces of the electorate, they might want to study the primary results from last month deep in the heart of Texas.
In one high-profile GOP primary for a state senate seat in Houston, radio personality Dan Patrick sent shock waves through the political establishment by promising serious property tax relief. He won a 69% rout over three elected officials seeking higher office. Also on the primary ballot was an initiative asking voters whether they support a directive to all GOP officeholders to push a spending and tax limitation measure. It won with 89.9% of the Republican vote.
Across the country, the hottest money issue at the state and local level is property taxes. Tax collectors are reaping giant windfalls from the national housing boom, as the average property tax on an American home has climbed to just shy of $3,000 a year. The National Taxpayers Union reports that Texas is one of at least 20 states -- including Arizona, Idaho, New Hampshire, Nevada and South Carolina -- where homeowners are rebelling against soaring assessments that in some cases are taxing people out of their homes. The discontent is reminiscent of the anxiety that led to California's famous Proposition 13 property tax cut 27 years ago.
Texas is the epicenter of this backlash, because property tax bills in some localities have doubled in seven years, according to the taxpayer group Americans for Prosperity. But Republicans have had a devil of a time doing anything about it, thanks in part to court-ordered school funding disputes.
The Texas Supreme Court last year ordered the legislature to cut the state's school property tax -- which reaches as high as $1.50 for every $100 of value -- and come up with a new way to fund the state's public schools. So last week Republican Governor Rick Perry embraced a tax plan that cuts the property tax by one-third in many localities and eliminates the state's hated business franchise tax, which is a disguised business income tax on capital-intensive industries.
If Mr. Perry had quit there, he'd be the second most popular man in the state behind Longhorn quarterback Vince Young. Instead, he fell into the trap of proposing to "pay for" these cuts -- in this case with a new 1% business tax on gross receipts that will raise the tax liabilities of small businesses by an estimated $800 million, according to fiscal analysts in Austin.
His proposal also shifts the burden of paying for schools onto employers from local homeowners. Bad idea. That further severs the connection between those who pay for local schools and those who use them. And it is a proven formula for adding power to the education bureaucracy by eroding schools' responsiveness to the communities and parents they are supposed to serve. This is also dangerous politically. When then-Governor George W. Bush flirted with a similar "spread the pain" tax plan 10 years ago, he was nearly tarred and feathered by the state's small employers. He might never have made it to the White House if he hadn't abandoned the proposal.
In Texas, as in most other states, there's a better way to cut property taxes. The latest data indicate that overall state revenues rose 10% last year, and that the combined state surpluses could reach $25 billion this year. Rather than allowing these revenue surpluses to get spent, politicians could claim them to finance installment reductions in property taxes.
Texas already has a $4 billion surplus (expected to grow to $6 billion by year's end) and if that money were used to buy down property taxes, the rate could be cut by an estimated 25 cents per $100 valuation. If the politicians in Austin were then to adopt a tax limitation law capping taxes at population growth plus inflation -- which nine of 10 Republican voters in the state just said they favor -- another 20 cents could be trimmed from property tax assessments within two to five years.
Critics will claim that using surpluses to cut taxes is fiscally shortsighted because good times don't last forever. But returning surpluses to taxpayers is the only way to ensure that they don't get spent on new or expanded government programs that end up breaking the bank during the lean years. That was how many states went nearly belly-up in 2001-02.
Mr. Perry tells us that his goal is to make Texas "the top performing economy in the nation" and to "create a world-class tax system that is a magnet for businesses to come here from coast to coast." He's right that cutting the stampeding cost of property taxes will help accomplish that goal. But raising taxes on the very businesses that he's trying to attract surely won't. |
