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Another state, similar issues re property taxes and funding support for public education, different approaches, differenet results...still stymied. "Most local tax rates have reached that limit, and in November the state's Supreme Court ruled that the school financing system amounted to an illegal statewide property tax because districts no longer had discretion in setting their rates..."
March 28, 2006
No Easy Solution as Texas Must Revisit School
Correction Appended
Try it in a contentious election year with statehouse leaders feuding, the governor and comptroller on opposite sides of just about everything, and a 30-day deadline, all while staring down the barrel of a gun.
That describes Texas as it faces a court-threatened shutdown of its public schools for violating constitutional limits on local property taxes.
The state's problem is that its schools, growing by up to 80,000 students a year, desperately need more money, but finding that money is nearly impossible with no state income tax and strict limits on how high property taxes can rise.
Most local tax rates have reached that limit, and in November the state's Supreme Court ruled that the school financing system amounted to an illegal statewide property tax because districts no longer had discretion in setting their rates.
The court gave the state until June 1 to come up with a financing plan that would lower the taxes to discretionary levels or face an end to state financing that would shut the schools.
Now, as state lawmakers prepare to gather in Austin on April 17 for a fifth try in two years to wring more money for schools from the tax system, a state panel of 24 business and civic leaders plans on Wednesday to introduce a tax-tradeoff plan that would lower property taxes on individuals and businesses, but only by collecting far more tax payments on business receipts.
The plan, prepared by the Texas Tax Reform Commission, has already created an uproar. Some tax opponents say the state should instead tap a multibillion-dollar surplus in the state treasury — although no one yet knows the size of it. Others insist on widening the legislative agenda beyond taxes to teacher raises and other thorny school issues, which could provoke major fights.
"There's a Super Bowl under every rock," said Glen A. Rosenbaum, a partner at the powerful law firm of Vincent & Elkins and spokesman for 18 top
Gov. Rick Perry, a Republican whose re-election prospects in a busy field of rivals are tied to a solution, may eke out a settlement, but many political veterans are hedging their bets over the third special session called by him.
"There are too many people who want to see it fail to be wildly successful," said Bill Miller, a leading
As outlined by the tax panel's chairman, John Sharp, a former Democratic comptroller, the state would reduce property taxes by one-third, largely by broadening the commercial-receipts tax, which is now paid at 4.5 percent by only one out of every 16 businesses in
As one of only seven states without a personal income tax,
Governor Perry is facing not just a Democratic opponent, former Representative Chris Bell, but also probably two independents, the comptroller, Carole Keeton Strayhorn, and Kinky Friedman, the gadfly country singer and humorist. Mr. Perry has been calling in political chits, lobbying hard for the tax panel's plan and has called it "a rare opportunity to significantly reduce property taxes, make substantial reforms to the franchise tax so it is fairer and broader and ensure our schools have a reliable and constitutional stream of revenue."
Mr. Sharp agreed in an interview in
"This is the last shot the people of
The system badly needed fixing, he said, since the Legislature in 1988 made it easy for tax-paying corporations to turn themselves into untaxable partnerships, costing the state billions.
Lowering the property tax would cost about $5.8 billion a year, Mr. Sharp said, but the new business tax would raise $4 billion of that gap, and the remainder would mainly come from the surplus and higher cigarette taxes.
The new business tax would cost service providers, including legal and medical firms, about 1 percent of their gross receipts, less personnel costs. This has drawn fire from a coalition of 18 top
While maintaining that they were willing to be taxed for the first time, Mr. Rosenbaum said, one way of making the plan fairer would be to raise the deduction per lawyer to at least $500,000 from the proposed $300,000.
Mr. Sharp ridiculed the lawyers' opposition. "They think God sent them here not to pay any taxes, and by God, they want to do what God wants and that is not tax themselves," he said.
The comptroller, Ms. Strayhorn, long a Republican who left the party to challenge Mr. Perry as an independent and is collecting signatures to get on the ballot in November, said she would not comment on the tax plan until it was formally presented, or quantify the surplus before providing the figure to lawmakers next month.
But laying the blame on the governor for the school financing crisis, she said Mr. Perry had arranged "to punt it past the March 7 primary" and was now "trying to cram it up against the deadline."
"You don't need to study the problem, you need to fix the problem," Ms. Strayhorn said, maintaining that electronic gaming at racetracks could underwrite raises for teachers and other new money for education — issues she said should be part of the special session.
Ms. Strayhorn, a former mayor of
Testifying to the tax commission in
"I am not here to testify that God is opposed to the sales tax," said Rabbi Brenner Glickman of Congregation Beth Israel, before adding, "but I believe it is true."
Dr. David Teuscher, an orthopedic surgeon on the tax panel, could not resist a question. "Does God have an opinion of the cigarette tax?"
The rabbi demurred. "Let me consult," he said.
Correction: March 29, 2006
An article yesterday about efforts by
