For years the battle cry for almost all politicians, Republicans and Democrats alike, has been, “No New Taxes.” Actually, Gov. Briscoe from Uvalde, a Democratic, coined the phrase. At the time Gov. Briscoe made that commitment, Texas’ economy was booming, sales taxes were bringing in more money than ever expected and oil and gas was still large enough to produce a significant amount of revenue. Things have changed. I have always maintained the pledge of no new taxes was silly because such a pledge kept us from examining the old taxes for fairness, adequacy or any other reason.
When I went to the Legislature in 1962, Texans who owned property paid some of the lowest property taxes in the nation and the sales tax had been in place for only two years. Texans had relied for many years on taxes on our natural resources but were forced to take a new course of action in 1960. Since 1962, property taxes in Texas have risen from fifth from the bottom to near the top. The primary reason has been that the Texas Legislature has continued to shirk its responsibility to public education. The state has done less and less, handing over more and more of the responsibility to local property owners. A dramatic shift in the responsibility for funding public schools has occurred in Texas since 1949. At that time, the state provided the majority of funding for public schools. It was truly a state system of education. Unfortunately, what we have lapsed into is a state system in name, funded by local property taxes. The reason for this, in my opinion, is current politicians’ dedication and pledge of no new taxes. They seem to turn a blind eye to the fact local property taxes are new taxes, increased tuition is new taxes, and increased charges for every license imaginable in Texas is a new tax.
The protests of homeowners, business owners and property owners finally motivated the state to try and address this problem. Gov. Perry’s effort and pledge to significantly reduce property taxes and improve the fairness of business tax led to the repeal of the corporate franchise tax in Texas. The franchise tax was replaced by a business margin tax dreamed up by Perry and his Democratic buddy, John Sharp, a former state comptroller. Severe cuts in property taxes were announced, but have rarely been truly realized by property owners in Texas. Even worse, the leadership in Texas at the time ignored the warnings from State Comptroller Carole Keeton Rylander, who predicted the new business tax was wholly inadequate to provide for the needs of public education and its growth in Texas. Rylander said the tax would come up about $5 billion a year short. Gov. Perry dismissed the warning, saying an economic boom would take care of the estimated shortfall. (It appears to be the same kind of argument Gov. Perry now puts forth in support of his flat tax, saying the $250 billion shortage in revenue would be taken care of by economic growth).
Because of the miscalculation, Texas faced a drastic shortfall, particularly in education, during the 2009 legislative session. Luckily, the shortfall was alleviated by the federal government’s $16 billion, which was used to balance our budget and hold cuts in education to a minimum.
Unfortunately, during the 2011 session, Texas was not so fortunate as to receive a windfall from the federal government. The fallback position was to tap into Texas’ rainy day fund, which at the time contained about $9 billion. At the governor’s insistence, only a portion was used. And our leaders have chosen to balance the budget at the expense of Texas school children, cutting school funding by $4 billion. The legislative leadership and the governor maintain if Texas does as well economically as they forecast, the $4 billion can be made up in a year or two. What seems to be forgotten in this process is that in a worldwide race for quality education and all that it brings, our state cannot afford to spend a year on the sidelines.
Recently, Rep. Joe Strauss, Speaker of the Texas House, has recognized and publicly announced that some attention needs to be given to gaining enough revenue, or making enough cuts elsewhere, so that the state budget is balanced and that Texas will be able to provide for public education and projected growth thereof. This will call for very hard choices. Texas and its citizens have chosen to place in our constitution a provision that there cannot be the imposition of an income tax without a vote of the people. I do not believe Texas’ taxpayers will tolerate any substantial increase in the taxes on their small businesses or homes. Couple these facts with the reality of lawsuits pending in the Texas Supreme Court to challenge the constitutionality of the level of funding for education, and the challenge filed to declare the current business tax an unlawful income tax. Texans are then left with even harder choices: legalize gambling; increase the business tax, if constitutional; increase the sales tax, or remove many of its exemptions; or opt for some new and innovative tax not yet presented to the public.
Another black cloud on our state’s fiscal horizon has to do with funding for highways. Our highways and bridges are getting older. Demands on our transportation system are growing. Population in Texas is exploding. And traffic in our bigger cities is beginning to be clogged.
Our highway system is funded, in theory, by a “user” system. A tax on each gallon of gasoline is divided between funding for highways and a small portion for education. The growing problem is that pressure to conserve energy has caused the auto industry to make better and more fuel efficient automobiles. We are looking forward to more and more hybrids or pure electric vehicles running on our highways. Even though the Texas constitution provides against bonded debt, the current leadership in Austin has persuaded Texans to amend our constitution to allow bond issues so we can borrow money to build new highways or improve those we have. Unfortunately, that debt has now grown to more than $170 million. Our governor has basically given away state property to a Spanish company so that several toll roads could be constructed, all of which are far behind their projected revenue production. With growing highway needs and shrinking revenue, something must be done in the very near future; otherwise, Texas will face transportation gridlock. A paralyzed automobile and truck transportation system in the state would quickly translate into devastating results on our local economies.
It is essential that Texas and its leaders begin very quickly to change the whole attitude and idea about revenue. For more than 100 years, the Texas Legislature has lurched from crisis to crisis, addressing whatever short-term need there was concerning revenue shortfalls, and never has addressed a long-term policy of taxation adequate to fulfill the needs of a modern and rapidly growing state. The most logical and fairest revenue gathering measure is a state income tax. A state income tax taking only a small percentage of your net income relieve most of our state’s problems. To ever impose such a tax will require responsible leaders of our state to demonstrate to Texans that a state income tax would be far less onerous than other choices such as increasing the tax on your home that you have already paid for. For such a drastic change to be made, it will take examination by thoughtful citizens of this state as to whether or not we want to be a modern, vibrant state or one patterned after some Third-World country.