R.G.’s Take: No budget joy in Mudville
Senate Finance Chairman Steve Ogden stands like Casey at the Bat, fully wanting to score.
And nothing but a base hit, or a walk, perhaps, will get him to the floor.
As this week ended with the scoreboard showing naught, Ogden admitted he lacked the stroke to bring his budget up for Senate debate. He described his position in baseball terms: The right foul line is the conservatives who want no additional money taken from the rainy day fund to balance the next two-year budget. The left foul line is the liberals who want to increase taxes to avoid deep cuts in public education. Neither side has the votes to prevail, Ogden said today. “I don’t have a bill between the foul lines yet, but we’re working on it.”
The dilemma for senators on both sides is they hold the most power now because the vote to debate requires two thirds vote of those present, while a House-Senate conference committee report requires a simple majority to pass. But to pay for the Senate plan, 21 votes also are required to spend money from the rainy day fund. So both votes require a combination of Republican and Democratic senators. Ogden said those holding out for more spending should give up because the Senate bill is as good as it is going to get. And as bad as his proposed two-year budget would be for Texas, politically, it probably is the best that can be passed by the current Legislature.
Other than a redistricting bill, there is nothing more political than the state budget. Deciding how to spend the taxpayers’ dollars may seem like a noble task of stewardship. But it is really about chasing campaign dollars and votes. And that is what derailed the Senate budget plan this week. First, look first at the inside fight of what senators called “twosies versus threesies,” Article II Medicaid versus Article III education. Senate Republicans decided to fund nursing homes and doctor’s reimbursements ahead of higher and public education. That erased the specter of nursing homes closing across Texas. It also cooled opposition from the health care industry, which pours about $7 million into legislative campaigns every cycle. But that meant less money for education, important to Democrats.
Second, let’s set aside the myth that the Texas House cannot pass a tax bill. It already has: HB 2403 won House approval this week 122-23 to force Amazon to pay state sales taxes. Based on my purchases last year, that bill would have cost me an extra $111 in sales taxes. There is a fairness issue about giving online retailers an tax advantage over local businesses, but don’t pretend this was not a tax increase. And proposals to eliminate the August sales tax holiday means the poorest among us will pay more in taxes for clothes and supplies to send their children to school. If the Legislature can raise those taxes, they also can raise taxes to help balance the budget. By some estimates, a half-cent increase in the state sales tax would produce $3 billion, and that would be the kind of consumption tax often promoted by Republicans. Just as the House voted to close the Amazon loophole, watch for the Senate to vote—possibly as early as Friday—on closing a natural gas drilling loophole that could bring as much as $2 billion into the state coffers.
Let’s be honest, this fight is not about balancing the budget; it’s about shrinking government. And the real debate is not over taxes, but over how much of the $9 billion rainy day fund to spend to avoid deep cuts to Medicaid and education. And that’s where those pesky outside pressure groups come into play.
“One of the strengths of the Senate has always been that it was pretty hard to penetrate the club, but these outside groups have done it, and it’s making it harder to pass a bill,” Ogden told reporters. “There are people both on the right and the left that want to see the Senate fail, and if the Senate fails it advances their political agenda. Both the right and the left can see some advantages in a Senate meltdown.”
On the right, the Texas Public Policy Foundation (TPPF), Empower Texans, Americans for Prosperity, the Liberty Institute, and Grover Norquist’s Americans for Tax Reform began running television ads in Austin opposing the Senate budget, and Texans for Fiscal Responsibility, which is affiliated with Empower Texans, sent senators a memo that a vote for the current budget proposal would be used against them in next year’s election.
Last year TPPF vice chairman Tim Dunn, of Midland, published a paper of the group’s website calling for free-market reforms of public schools to create competition: “Do school districts need more money? Perhaps: But not to keep doing the same thing, the same way with the same people.” But Dunn is also chairman of Empower Texans, vice chairman of the Liberty Institute and the found of the Bible-based Midland Classical Academy, where five of his six children attended high school. Is his argument more about creating more cost-efficient education, or is it an opportunity to downsize secular public schools?
On the left, a meltdown could create a special session during the summer, when teachers could flood the Capitol to lobby for more spending. Passage of the House budget, with its deep cuts to Medicaid and education, also could create an opportunity for the Democratic party. Democrats won’t speak openly about it, but they clearly remember the backlash after the draconian budget cuts during the 2003 session that doomed the 2004 election campaigns of TPPF Executive Director Arlene Wohlgemuth and fiscal policy director Talmadge Heflin. And for the “educrats,” don’t be surprised if angry school board members across Texas enter House GOP primaries to take on incumbents, much like when former Arlington school board member Diane Patrick defeated House Education Chairman Kent Grusendorf in the 2006 GOP primary.
School districts also are fighting for their funding. Cypress-Fairbanks ISD, near Houston, has an entire website dedicated to debunking the education claims of the right, especially Americans for Prosperity. Fort Bend ISD has a brochure that says the House budget would push the district back to its operating budget for 2005-06, “prior to the opening of 13 new campuses.” Plano ISD Superintendent Doug Otto called the Senate plan the “best case scenario” and the House plan the “worst nightmare.” Otto on the district’s Web site says, “Plano ISD will lose a generation of students who are under-funded because the state legislature couldn’t put together a tax plan to generate enough funds to pay for its most precious resource, and that’s our students.”
I asked Republican representatives Charlie Howard of Sugar Land and Van Taylor of Plano how they squared their votes for the House bill with what their school districts are saying. Both recited the conservative mantra that the districts can use some of their reserves, find efficiencies, and reduce administrative overhead to keep from having to cut teachers in the classroom.
In fairness to the conservative groups, the left-leaning Center for Public Policy Priorities is not without its own Democratic connections. The board includes former Lieutenant Governor Bill Hobby, whose family foundation is a donor. Another donor is Naomi Aberly, an active fundraiser for the Democratic party and Planned Parenthood. CPPP’s influence is limited mostly to Democrats. But that influence could be felt this week when Lieutenant Governor David Dewhurst waffled this week on supporting a contingent raid n the permanent school fund to pay for education in the Senate bill, CPPP Executive Director F. Scott McCown withdrew support for the Senate bill: “There is no reason to support a budget that the Lt. Governor won’t help defend in conference.”
So here we are ending the week in Mudville, with the mighty Ogden at the bat. Lonely is he at the budget plate. Just because you build your field of dreams, it does not mean they will come.
By R.G. RATCLIFFE
Tagged: Americans for Prosperity, budget, Empower Texans, Steve Ogden, texas public policy foundation, Tim Dunn
Anonymous says:
Regarding Amazon: it’s not a tax hike if you already owe the tax. The fact is, Texans are already liable for the use tax on purchases from Amazon. Your past failure to meet your tax obligations doesn’t mean you owe more in taxes even if you pay more because of a better collecion method. Get your facts straight.
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Anonymous says:
RG is really nailing since he’s left the confines of the chron. Good reporting.
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Tim says:
The 2/3 rule is very crafty. It allows them to keep blaming Democrats for their mistakes. Brilliant gamesmanship.
We’ll see if it works this time, or if they take down the state economy with them.
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Harry Reply:
April 28th, 2011 at 9:47 pm
They already have…we just haven’t realized it yet. Just wait until business begins leaving because it can’t find literate 20 year olds to work.
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Stix says:
Great and incisive column that reads as though it is written by someone on the inside. Nice job.
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Julie says:
To the first anonymous,
You’re wrong.
While the state comptroller contended that Amazon owed the taxes, the bill recognizes that state law had a legal loophole that allowed companies like Amazon not to be legally obligated to pay sales tax.
So Amazon did not owe any taxes, based on the bill. So by passing the bill that R.G. mentioned, the Legislature has imposed a tax for the first time on Amazon and companies in a similar situation.
In effect, it’s a new tax for Amazon.
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Anonymous Reply:
April 29th, 2011 at 8:04 am
Wrong. RG was talking about what the consumer owed. Whether Amazon legally could argue about whether they had to collect it is irrelevant. The consumer still owes the use tax and has since 1963 because of a law related to catalogue sales.
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anon-p Reply:
April 30th, 2011 at 8:38 am
Anon> This doesn’t change your personal tax obligation one bit. It’s just you can’t get away with not remitting it as easily.
Pssh. An effective lawyer could argue that so many years of the state by and large NOT enforcing that law means the law is not binding.
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WUSRPH says:
WOULD YOU ALL PLEASE STOP TALKING ABOUT THE STATE LEYING A NEW TAX ON AMAZON. THAT CLAIM IS TOTALLY WRONG!!!
The Amazon tax bill has nothing to do with increasing taxes ON Amazon. Amazon WILL NOT HAVE TO PAY A SINGLE PENNY OF TAX TO THE STATE. The tax is paid by those who make purchases thru Amazon. Amazon’s role is TO COLLECT the tax for the State, just as all other business in Texas must do. It then passes what it collects from us, its customers, on to the State (and gets to keep a small amount to help cover its costs). Amazon’s problem with the law is that, if it starts collecting the tax, it will make its customers feel that it costs more to buy thru Amazon and that will undercut the built-in advantage it has over Texas companies selling the same goods, who now do collect the sales tax. In effect, what the bill does is put Amazon on an even field with Texas business (all of whom also pay property taxes and other local taxes in Texas). At the heart of the dispute with Amazon is that it is a firm believer in the motto of the modern American conservative businessman, which is “All I want from government is a FAIR ADVANTAGE.”
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Julie says:
WUSRPH,
Try telling Amazon it’s not a new tax on Amazon; it won’t buy that argument.
The state expects to collect $6 million in the first year from this new tax legislation, with $10 million in the following year. The amount the state will collect is expected to rise each year.
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WUSRPH says:
AGAIN….AMAZON WILL PAY NOTHING OUT OF ITS OWN FUNDS…THE TAX IS NOT ON AMAZON…IT IS PAID BY THE CUSTOMERS WHO BUY THINGS THUR AMAZON. Amazon’s only role is to collect the tax…just like every other business in Texas. I am sorry that you do not understand Texas General Sales & Use Tax…BUT THAT IS THE WAY IT WORKS. The Comptroller, for whom I have absolutely no respect otherwise, claims that Amazon should already been collecting taxes from its customers…because it has a legal existence in Texas….The new law simply closes a door Amazon and others wanted to use in order to claim that that had no legal existence here thru a legal fiction that only a “Philadelphia Lawyer” (look it up) could come up with. ONCE MORE…AMAZON WILL PAY NO TAXES BECAUSE OF THIS BILL…IT WILL COLLECT TAXES PAID BY ITS CUSTOMERS (and get a fee for doing it). In effect, it will be treated just like any other business in the state. I am sure you can go on line to the Comptroller’s website and information on how the sales tax works. I suggest you do so before you once more FALSELY CLAIM that Amazon will have to pay a new tax or any tax. The $6 million is money that Amazon’s customers will pay as a sales tax on the goods they purchase from Amazon…Again, what Amazon wants is to keep an “ADVANTAGE” over all Texas businesses, which pay local taxes and employ your neighbors. All GOOD TEXANS SHOULD WANT TO HELP THEIR NEIGHBOR…NOT SOME OUT-OF-STATE FIRM LIKE AMAZON.
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WUSRPH says:
RG: If you write about this again, please make the distinction between a tax ON Amazon and a tax AMAZON COLLECTS….Your usage above just seems to have confused Julie and others who do not understand how the General Sales & Use Tax works. Amazon WILL NOT PAY A TAX..IT WILL COLLECT A TAX FROM ITS CUSTOMERS. I recongize this will require an extra sentence of 20 words at the most, but it is an IMPORTANT DISTINCTION.
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Karen says:
WUSRPH,
Please stop yelling at people.
Actually, this is increasing taxes on Texans that they had been allowed to avoid paying by Amazon due to a loophole.
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JohnBernardBooks says:
It doesn’t bother liberals that 47% of tax payers pay no federal taxes, it does bothers liberals that some Texans object to a new tax collected by Amazon.
Is the new sales tax to be collected by Amazon a “tax on the rich”?
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R.G. Ratcliffe says:
Wow, an argument on the semantics of the Amazon tax.
If I buy at Shepplers.com, I pay the sales tax because they have stores in Texas.
If I buy at B&H Photo, I don’t, because they are located only in New York City.
When Amazon was the first big online retailer, Comptroller Strayhorn and Governor Perry resisted efforts to tax online sales, saying the Internet needed the advantage to launch. That’s not really the case any more, but here we are today.
Personally, I always thought the tax break for online retailers gave them an unfair advantage over local businesses. And I have made purchase decisions based on the fact that something was cheaper online, that I could get free shipping and that there is no sales tax collected. Then I feel guilty about it.
But my real point on the Amazon bill is that by closing the loophole Amazon operates under, the House just increased my personal annual tax bill, as well as the tax bill of any other Texan who makes purchases through Amazon.
Is a tax increase narrowly defined as the institution of a new tax or the increase in rates of an existing tax, or is a tax increase a rise in the amount of taxes paid by the taxpayer? If you close a loophole and it causes Texans to pay more taxes, I’d call that a tax increase.
Good policy probably would be to collect sales taxes on all online and catalogue sales. But that also would result in higher tax revenues for the state.
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Anonymous Reply:
April 29th, 2011 at 8:11 am
You ignore the fact you have always owed the tax and have been liable for it even when Amazon didn’t collect. It is called the use tax. This doesn’t change your personal tax obligation one bit. It’s just you can’t get away with not remitting it as easily.
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Vernon Reply:
April 29th, 2011 at 4:05 pm
Not including porn and my Russian bride, I’ve made about six online purchases in my entire life.
While it may be technically true that closing the loophole increases the tax bill of average Texans who make purchases through Amazon, are any of those items truly necessities? Is it really going to hurt those who can least afford it?
My point is that the things you buy online are mostly junk. A mindful shopper won’t need most of that “Made-in-China” garbage. But if they have enough disposable income to buy a burnt orange Snuggie emblazoned with the UT logo through Amazon, they can afford to pay the tax on it.
But if you feel the tax is going to break you, chances are you didn’t need it to begin with. It’s a lot like taxing cigarettes.
But if the state starts taxing online porn, I’m taking this fight out into the streets. Who’s with me?
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longleaf says:
Those in the 47 percent who have jobs would still be paying federal taxes unless they are working off the books and avoiding the FICA and Medicare payroll taxes.
I see where you are headed logically, though. Limbaugh’s been counseling this for years. Anyone who takes in more from the “feral gubmint” than he or she pays in taxes should be eliminated via final solution or, at the very least, disenfranchised.
This would eliminate/disenfranchise a great many members of Congress as well (including my own rep, that great statesman Louie Gohmert), so I don’t see this as all bad myself. We need to define this broadly enough to where it even eliminates much of Wall Street.
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JohnBernardBooks Reply:
April 29th, 2011 at 9:22 am
ahh liberal logic what a hoot!
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longleaf Reply:
April 29th, 2011 at 1:27 pm
It’s your logic and I said I agree with you. Go get’er done.
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JohnBernardBooks Reply:
April 30th, 2011 at 9:36 am
A “gitRdone” hat will not make you look smarter.
Julie says:
WUSRPH.
We all know that closing the loophole requires Amazon to pay sales taxes, which come from customers. Still, it’s a tax that Amazon has not had to pay in the past, so it’s new for Amazon.
Another point. Many businesses use sales tax revenue to pay their bills in the short run, since monthly sales and use tax returns are due on or before the 20th day of the month following the month in which the taxes were collected.
Some businesses end up pocketing the sales tax money, leaving it up to the state comptroller to go after them for not paying up.
And some businesses collect sales taxes on sales where no tax is due, then keep the money.
The comptroller will go after those businesses, too, if so informed.
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Kenneth D. Franks says:
“That great statesman Louie Gohmert,”now that is a good one. I have had the great honor to hear him speak. He uses “In the year of our lord,” a lot and it is printed on the letterhead if you notice when he sends you a letter. He wants to make sure he is not mistaken for a nonbeliever. He gave out a few pens like we spent millions developing for the space program. (Even though you know he hates that kind if spending.) On the why back to the class room one of my students asked me what did the Russians do since they didn’t have this type of pen, my reply was that they used a pencil.
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Julie says:
Brooks
It bothers me that many corporations pay no taxes, while other corporations pay too much. Congress should lower the corporate tax rate and close many of the the tax loopholes in the 17,000 pages of the tax code.
We need fairness in the federal tax code, something that both major parties favor.
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JohnBernardBooks says:
The IRS is a punishment arm of the democrats. If you’re a corporation like GE that gives huge sums to money to the democrats you get a loophole to avoid paying taxes.
Unites States Treasury Secretary Timothy Franz Geithner while overseeing the IRS still hasn’t paid his back taxes.
Censured United States Representative Charles Bernard Rangel avoided paying taxes while being the esteemed Chairman of The Ways and Means Committee as he gave waivers to GE so they could avoid paying taxes they owed. Democrats remain silent.
But democrats scream “cruicify him” if Amazon doesn’t become a tax collector for a new tax.
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Karen Reply:
April 30th, 2011 at 8:03 am
John,
Please provide your source for your claims.
History of Income Tax in the U.S.
http://history1900s.about.com/od/1910s/a/incometax.htm
“But democrats scream “cruicify him” if Amazon doesn’t become a tax collector for a new tax.”
Isn’t the Texas House controlled by the GOP?
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JohnBernardBooks Reply:
April 30th, 2011 at 9:38 am
with a democrat backed Speaker.
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Karen Reply:
April 30th, 2011 at 10:20 am
Your point?
The Author says:
WUSRPH, Would love to buy you a beer sometime. You are completely accurate in that the tax is already due and HB 2403 only deals with who is responsible for collecting and remitting it. I wish some of these people arguing it is a new tax would go into business, purchase something from out of state for their business without paying sales tax and then learn that they are responsible for remitting the use tax and will do so if audited. That would happen whether the bill passes or not. All this bill does is define who has physical presence and should therefore be responsible for collecting sales tax. That is the standard under the Quill decision and has been for over 20 years.
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Ike's lawyer says:
Between them I think Mr. Ratcliffe and WUSRPH have given us a lot of clarity on this issue and I appreciate that. To me it matters whether we’re talking about imposing a tax on a type of business just to raise general revenue, imposing a fee on those businesses because their activities burden their neighbors and government pays to clean up after (businesses that pollute or tend to bring increased crime to an area, for example), or asking those businesses to collect the sales tax from their customers just like a Texas business with a store here on the ground.
It also matters to me that internet businesses like Amazon were originally exempted from collecting the sales and use tax because we wanted to encourage that kind of business; but today we probably no longer need to nurse the internet along, it seems to be thriving and here to stay.
I’d also like to see a little more clarity and debate on some of the more basic issues of the day. Do we still want government heavily involved in using our tax money to pay for roads and public transportation? If so how much transportation infrastructure do we need or want; what are the costs and the benefits; do we need to pay more to get more or pay less and get less? Do we still generally believe as a society in providing public free schools for a general dissemination of knowledge, and if so where do we draw the line between equity and fairness on the one hand (favoring the idea that children in poor districts should get just as good of an education as children in wealthy districts) and acknowledging the reality that some wealthier districts will want to pay for enhancements to provide a better education? Same for health care – do we believe as a society in providing basic and emergency health care services for the poor? If so should that health care be provided at a minimum level or should we spend more in the name of fairness? And if you want to spend more in the name of fairness is that affordable?
In the current political climate I think these questions need to be revisited. I’ve come to believe that most conservatives (by which I mean for these purposes those to the right of center-right) and most liberals (by which I mean for these purposes those who are center-left or to the left of center-left) are afraid to revisit and openly debate these questions because they’re afraid of the answer. Many conservatives, I’ve come to believe, have decided that most people want and are willing to pay for infrastructure and public education and a health care safety net at levels higher than right of center-right conservatives want. So the strategy is to talk always about taxes without reference to the services provided, except to generally demonize government competence at providing them. Most liberals, I’ve come to believe, are afraid that many people would start worrying about cost and the tax burden sooner than liberals would like; and that many people would be unwilling to pay for the same levels of government services for people of other races that they want for themselves. So the strategy is to win a victory for a higher and more expensive level of some government service and then hold on for dear life, resisting efforts to revisit the issue with charges of racism (which sometimes are warranted but many times are not warranted) or by taking the attitude that intelligent and caring people know this level of government is for the best so now let’s not discuss the matter any further.
I don’t see a good way out of the current political climate that does not involve an open and wide-ranging discussion over time about what specifically we do best collectively through government and how much we’re willing to pay for that, and what specifically we do best individually or through voluntary association with others. I know these questions are considered in the legislature and in Congress but my point is that in the current political climate these questions will also need to be discussed more often and more specifically in the wider public debate.
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Karen Reply:
April 30th, 2011 at 8:24 am
Ike’s lawyer,
Both sides are putting out so much false and/or misleading information that an honest debate is impossible.
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Ike's lawyer Reply:
April 30th, 2011 at 11:58 am
Karen, I agree that in the current political climate an honest wide-ranging public debate is impossible. My aim is to be part of a larger conversation through which we help lay the groundwork for making such a debate possible.
It’s going to take a lot of subtle work.
During World War II I understand that when people would talk about the advantages totalitarian countries had in keeping the people focused on war goals, Eisenhower would reply that an aroused democracy was the most effective fighting force. President Carter, if my memory is correct, once stated that to solve the energy crisis we needed to find the moral equivalent of war. Buckminster Fuller once stated I think that a person should decide what needs doing and then throw the person’s weight behind doing that.
I think that what some number of us come up with and do to help change the current political climate will have to be consistent with what these three men had in mind. It will be a different process than either Democrats sitting around waiting for a bold and charismatic leader to lead and inspire them or Republicans rallying around their talking points with disciplined tenacity.
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WUSRPH says:
THE AUTHOR:
Thanks…make it a Pacifica….I hope I learned a little about state government in my more than 30 years working in and around the Leg….including more than 15 with Bob Bullock…both as Comptroller (the last good one) and as lt. gov.
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Anonymous Reply:
April 29th, 2011 at 1:27 pm
You just threw my friend Mr. Sharp under the bus.
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WUSRPH says:
Sorry Anonymous but I am not, never have been and never will be a fan of John Sharp. That includes when he was in the Texas House and Senate. For all her demerits Carol of the many names was a better Comptroller than he was.
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Anonymous Reply:
April 29th, 2011 at 2:10 pm
One Tough Monogram
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anita says:
Now that’s funny.
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anon-p says:
I got lost in the raft of recent posts, guys.
How are we going to pay for $20+ billion dollar deficit (plus more projected in the future?) without significant cuts?
Significant taxes?
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Karen says:
What is driving some of this future deficit? The inadequate and unfair margins tax which has not lived up to the project revenue which was known from the git go. This is where you begin whether it would be throwing the margins tax out all together and finding another solution to adequately fund public education in Texas. Budget cuts alone will not solve the problem in this budget or future budgets.
http://m.reporternews.com/news/2011/apr/12/think-tank-head-chimes-in-on-budget-debate/
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Julie says:
Karen,
The Legislature will have no option but to raise taxes in the next regular session. It’ll have to fix the margins tax and consider other revenue enhancements. Medicaid will continue to drain the budget unless Congress makes changes to the program.
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Gary D says:
It is 45% of households that pay no federal INCOME tax. The low income members pay other taxes and often their total tax percentage burden is more then that of a hedge fudge manager who made over $500 million last year but paid a top rate of 15% on what he didn’t defer, write off, or use other loopholes to avoid.
Tax policy in recent decades has been for more breaks to the very poor but working and even more for those at the very top and for squeezing the majority in the middle.
The Texas deficit is totally a GOP problem as this has all developed since the GOP took control and starting granting more tax breaks that would be paid for and fixed in the future. Guess what, it’s the future and Perry didn’t fix it, refused to talk about it in the campaign and won’t fix it now.
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R.G. Ratcliffe says:
Anyone want to weigh in on what part of the arguments on the left and right are logical positions or just dogma?
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R.G. Ratcliffe says:
On the Amazon tax fight front, here’s an interesting column by George Will:
http://wapo.st/iQlTRX
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JohnBernardBooks says:
Will gets it right.
The bloated city, county, state and Fed governments need to look at reducing spending and not finding new taxes.
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