Texas School Financing

[Updates below.]

Looks like there may be some movement to do something close to what I've advocated in the past: rely more on the sales tax rather than property taxes.

Several ideas buzzing around fixing school finance

Dan Branch, R-Dallas, laid out an idea that would decrease property taxes for homeowners and institute a payroll tax on businesses. Many small business would be exempt, but the idea is to get rid of certain tax loopholes while broadening the current base to pay for education.

"We're trying to get this load as low as possible, but also have a broad support from the business community for our future work force," Branch said.

[...]

Speaker Tom Craddick on Tuesday announced the House is rolling out a plan that would increase the sales tax and broadens its base.

Under the House plan:

• Property taxes would become a statewide tax and would be reduced from the current cap of a $1.50 per $100 in appraised value, to $1 -- with a 10-cent local enrichment option.
  
• The plan also would eliminate the state's franchise tax and impose a 1 percent payroll tax on businesses [or $400 per employee, whichever is lower...].
  
• A $1 per pack cigarette tax and state-taxed video gambling at horse and dog race tracks also are in the House plan.
  
• The state sales tax would increase 0.25 percent, to 6.5 percent.
  
• The tax on motor vehicle sales would increase from 6.25 percent to 7.5 percent.
  
• The House plan also imposes a $1 "amusement ticket surcharge'' for tickets to movies and other such activities.
  
• The sales tax would be broadened to capture some services, including barber and beauty services, legal services, accounting services, veterinary services, interior design and others.

Copyright ©2004TWEAN News Channel of Austin, L.P. d.b.a. News 8 Austin

In the post I linked to above, I stated I'd support a greater reliance on sales taxes rather than property taxes. I no longer feel that way and I'm annoyed I ventured in that direction. Even if the legislature took up my half-assed idea...

Of course, the better idea would be to both kill the property tax and then impose a sales tax of 5% on all retail sales totalling $20 and up. I dig that idea of killing the franchise tax. Leave healthcare and grocery sales out of the tax's reach. Easy to compute, places a dramatic restraint on government spending, and doesn't impact the millions of small everyday sales people engage. Even though I have fundamental problems with taxation, such a scheme would be far, far preferable to what we have today.

...there is no guarantee the state would find a way to jack taxes back up. And such a plan wouldn't pay for public schools, the whole point of this special session. A statewide property tax is an even bigger problem. It'd be a gleaming new toy for politicians to tamper with.

The single biggest fraud built into this discussion is this, from the News8Austin article:

"First decide how do we make this the best educational system possible, first. And then once we decide what needs to be done to make us the most competitive, then we decide how to fund it. But you got to get there first in my opinion," [Richard Raymond, D-Laredo] said.

[...]

Gov. Rick Perry responded to the ideas discussed in the House committee by saying: "I will judge any bill based on whether it provides real and lasting property tax relief, improves our schools and funds education equitably without jeopardizing Texans' jobs.''

They want to build a better public education system, found it on funding equity, fund it without destroying the economy, and reduce property taxes. Why don't they realize no plan will do all of these things effectively or easily? Each goal conflicts another and won't solve the Texas public education problem. The title of this Houston Chronicle article says it all: House plan shifts Texans' tax burden

Texans would save about one-third on their property taxes but would pay higher sales taxes and face new taxes on services such as oil changes, haircuts and visits to the vet under a plan unveiled Tuesday before a House committee.

The long-awaited plan of the House leadership was surprising in its breadth, offering a comprehensive way to lower property taxes and fund $1 billion in new education spending. The plan would raise enough revenue to replace $5 billion in lost property taxes plus the new spending.

Except for provisions on video gambling and cigarette taxes, House Speaker Tom Craddick's plan is vastly different from one offered by Gov. Rick Perry, who called lawmakers into special session to devise a new school finance system and provide property tax relief.

Perry's plan offers less property tax relief and relies on revenue from "sin" taxes rather than sales and business taxes. Perry said the House proposal merits "thoughtful and thorough consideration."

Politicians discussing which areas of the economy to tax is a disgusting spectacle. It shines the light on the lie that we have decent property rights protections in this country. They see your wealth as fair game for any needs the government puts forth.

Heflin, chairman of the House Appropriations Committee, said the proposal tried to reach a balance between business and consumer taxes.

"We tried to be sensitive to the business community when they said, `We don't mind paying our share if it's fair and uniform,' " Heflin said.

Businesses would pay some of the new sales taxes on services such as management consulting, research and development, and computer programming. But other new sales taxes, including on coin-operated laundry machines and car washes, will fall heavily on consumers.

If some businesses want to contribute voluntarily, then why don't they set up a fund to donate to? Make it open for anyone who wants to toss in whatever they feel is a good amount. Make that the Public Education Fund for school districts to utilize...after they've charge students for tuition. Put the question straight to the faces of those cowardly Texas voters who say they support taxes for education but won't put up their own money voluntarily for it.

"The franchise tax is in decline anyway; more and more companies are converting out of it. You're having fewer and fewer businesses pay," said Craddick. "You need to look at a base where everybody pays on an equal basis."

The expansion of the sales tax is designed to tap into the growth in the service sector of the Texas economy.

"The idea of broadening it, that's where the growth in the economy is," said Craddick. "If you broaden it, you pick up that growth."

Copyright 2004 Houston Chronicle Austin Bureau

Mr. Craddick wants to do essentially the same thing as Representative Eddie Rodriguez's income tax plan: tax a wider number of Texans at a slightly lower rate to increase revenue.

I wish more Texans would understand why I oppose things like this. HB 1 - in any incarnation - isn't going to fix the state education problem because of the nature of public education. As long as the state is providing educational services and taxing citizens to cover the costs, public education will remain immoral and ineffective.

UPDATE(4/29/2004 9:55am)
The bill in front of the House Select Committee for Public School Finance has changed slightly. It doesn't contain a statewide property tax, the payroll tax is increased to the lower of 1.25% or $500 per employee, the sales tax would increase half a percent rather than a quarter, the motor vehicle sales tax would increase 1.5% rather than 1.25%, an unspecified "tax cut" of 45 cents, and a local school property tax capped at $1.05.

This last tax proposal would allow districts to increase the rate up to 10 cents over the next five years. However, there would still be some "Robin Hood" revenue sharing.

Note that in newer plan, we'd be getting a de facto income tax in the name of a payroll tax, a bad idea all around.

UPDATE(4/30/2004 1:25pm)
From the Department of the Bleeding Obvious: School finance plan could be costly to consumers

UPDATE(2:15pm)
There are other bills working their way through the system and TASB's been tracking them. Not all have school finance as their main purpose.

UPDATE(5/3/2004 1:10pm)
A modified version of the bill has passed the House committee and will now go on to the full House for voting.

UPDATE(5/4/2004 9:07am)
I did some quick 'n dirty educational cost calculations of my own.

UPDATE(5/8/2004 12:28pm)
What is the Proper Way to Run a School?

UPDATE(5/10/2004 1:25pm)
Another bad idea: a universal curriculum.

UPDATE(5/18/2004 12:20pm)
The special session has ended and no bills were passed.

UPDATE(6/3/2004 12:55pm)
The Socialist Disease: More Education Money Won't Solve Problems, by the Texas Public Policy Foundation's Michael Quinn Sullivan, while not quite coming out and being honest about what needs to be done, does say this:

Consider this: we've tripled real-per-student spending in less than 30 years, and built monuments to fiscal mismanagement with athletic and administration complexes rivaling college facilities; we have superintendents with multi-year contracts valued in the millions of dollars.

Meanwhile, scores on the SAT, ACT and other national indicators of academic achievement have shown no improvement in the quality of education for kids surviving the system. Drop-out rates, especially for minorities, are an embarrassment.

[...]

Let us set aside reason and pretend more money might actually, finally, for the first time, make a positive difference. Why not prioritize state spending? Is there nothing to cut in the state budget to provide more money for education? Nothing less important?

We have a commission to encourage government employee productivity; there are at least a dozen river authorities with billions in assets. Texas has a commission on acupuncture. There is nothing to cut? Nothing to change? No way to save money?

In the religious pantheon of the left, government agencies and programs are wrathful gods to be fiscally appeased - never questioned - on a regular basis, regardless of the economic effect.

Call for the elimination of wholly unecessary government departments, much less cutting their budgets by 10% or more, and you'll be demonized and remembered as a hater of all that is needy for years.

UPDATE 1/14/2005 2:24pm
Just take a wild guess what the Texas Senate's solution to public school finance is.

Posted by Drizzten at April 28, 2004 09:16 AM