Fri March 20, 2015 3:46 pm By Erica Grieder

Since the beginning of session, the Senate’s leaders have been calling for billions of dollars in tax relief via a package deal focused on property taxes and the franchise tax. Considered together, the package has been met with opposition from Democrats and even from some Republicans, on the basis that the state revenue is already amply constrained and that for a number of reasons this isn’t the right time for Texans to be cavalier about the state’s economic outlook or ongoing spending commitments. Considered separately, the property tax relief proposal has been the most controversial. As I’ve written, it would effectively create a recurring obligation for the state to subsidize local school districts. As others have noted, it wouldn’t mean that much to the average homeowner; it would work out to about $200 a year, a figure that homeowners might not even notice, as property values, and therefore property taxes, continue to rise. Plus, the property tax proposal is what’s spurred the absurd claim, from the Senate Finance Chair, that state spending isn’t necessarily state spending.

But I wanted to take a moment to look at the franchise tax proposals, SB 7 and SB 8. Both are controversial because of the aforementioned context: if passed, they would cut biennial revenue collections by about $2.2 billion. That’s a significant figure in an austere state, especially at a time when revenue collections are already vulnerable to low oil prices and a slowing rate of economic growth. However, the bills are worth considering separately, and seriously. One strikes me as a reasonable idea that would have a lot of appeal if not for Texas’s overall tax structure. The other has a lot of appeal regardless. 

The former is SB 7, from Jane Nelson. It would ratchet down the franchise tax rate (which varies depending on the nature of the business), meaning a tax cut for all businesses currently paying the tax, big or small, rich or poor. Ultimately, business interests would like to see the franchise tax repealed, because they consider it burdensome, complex, and even punitive. And although Big Business isn’t necessarily a sympathetic character, their perspective has defenders; earlier this week the Houston Chronicle’s Chris Tomlinson summarized the case for reform, and endorsed it. I see the reasoning, but in light of Texas’s overall tax structure, I can’t endorse the idea of repealing the franchise tax. Texas is one of only a few states that taxes gross margins, but we’re also one of the only states that doesn’t have a personal income tax; the former is, in practice, a substitute for the latter. It may not be a good substitute, but as things stand, it’s the only one available. if we repealed the franchise tax we would be creating a gaping hole in the budget.

If we lowered the tax, as Nelson’s proposal suggests, it would be a smaller hole, and in some years it might seem like a manageable one. But 2015 isn’t one of those years. Paul Bettencourt, one of the freshmen Republicans in the Senate, said as much in January: in light of the economic outlook, it would be an unrealistic moment for major tax cuts. And intervening events have only strengthened the case for caution. I’m still not panicking about oil prices. But I am thinking that if whatever Barack Obama’s doing with Iran results in sanctions being lifted, that’s an extra 500,000 barrels of oil hitting an already oversupplied global market every day. And I’m noticing that as a result of America’s crude oil export ban, storage capacity is quickly being exhausted; that’s putting US producers in a tough position, and creating pressure for them to produce less oil—and Texas’s overall economy is a lot more vulnerable to production levels than prices. 

SB 8, however, from Charles Schwertner, is worth considering even in the current context. This would exempt businesses with less than $4m a year in gross receipts from paying the francise tax at all. Currently, the exemption applies to businesses with receipts less than $1m. It would help thousands of businesses across the state, and unlike blanket changes to the franchise tax rate, it differentiates between small businesses, which could probably use the help, and big ones, which don’t like the franchise tax but manage to survive it. And because these businesses are small, the aggregate cost to the state—the taxes that the businesses would no longer be paying—would be modest; the fiscal note puts it at about $380m a year. Put differently, of the $2.2bn biennial price tag for the franchise tax proposals, only about a third of that would come from this bill. And since small businesses usually aren’t wildly profitable, the tax cut would probably spur some extra activity on their end—the money would reappear on the payroll, as business spending, or even just as consumer spending from the business owners themselves. Some of the foregone revenue would thus be recaptured via the sales tax and so on. I doubt it would add up to $380m a year, but the damage to overall state receipts, under this proposal, would be more of a ding than a disaster.

On balance, SB 8 is easily the best of the tax proposals on offer this session. If it was the only one, it would still face reasonable resistance because of the context, but Senate Republicans could make a great case for it. Since it’s been dragooned into this tax relief reform package, though, the case for the bill has been subsumed by the case for the package—and that’s a weaker case, on the merits and in context.

Fri March 20, 2015 9:43 am By R.G. Ratcliffe

There’s a new definition of gun nuts

During the Texas Senate debate over the open carrying of handguns by license holders, Senator Craig Estes of Wichita Falls suggested that anyone who is afraid of guns needs to get psychiatric help.

Senator Sylvia Garcia of Houston told bill sponsor Estes that “I can tell you nothing is putting more fear in some of my seniors than some of that crazy gun stuff, and that’s what they call it.” She said there are a lot of people afraid of having pistols openly carried in an urban setting. Estes replied that fear is unfounded.

“Human beings have a lot of fears. I don’t know what it is called, a phobia of just seeing a gun on a person,” Estes said.

“It’s called human nature, I think,” Garcia replied.

“I don’t have that phobia myself,” Estes said. “If someone has that phobia, sincerely, clinically, I would think they would need to get help.”

Read More
Fri March 20, 2015 7:54 am By R.G. Ratcliffe

Barack Obama this week proved presidents are unwise to muse in public. At an event in Cleveland on Wednesday, he thought out loud about how the neighborhood would be more beautiful if everyone voted. Perhaps we should make voting mandatory like Australia, said the Muser in Chief.

Fired upon by the right and the left, it was White House down. The Boss was disavowed faster than Secret Service agents ramming the gates. “The president was not making a specific policy prescription for the United States,” said press secretary Josh Earnest.

But the whole tempest – which teapots are wont to have – got me wondering what effect mandatory voting might have in Texas, a state with a woeful history of voter turnout.


Read More
Wed March 18, 2015 8:53 pm By Erica Grieder

Open Carry passes Texas senate. While the House was busy debating Dennis Bonnen’s border security bill, which ultimately passed with overwhelming bipartisan support on a 131-12 vote, the Senate was tackling Texas’s top priority: guns. Craig Estes’ SB 17, which would allow licensed open carry, passed on third reading, despite vigorous and occasionally inventive but ultimately futile opposition from Democrats when it came to the floor on Monday. Brian Birdwell’s SB 11, which would allow campus carry, still needs a third reading but is as good as passed despite vigorous and occasionally inventive but ultimately futile opposition from Democrats on the floor today. 

I have a long story on the 84th Legislature’s great open carry debate in the April issue. It will be available online pretty soon and on newsstands next week. So for today, I’ll just give away the plot twist: this entire saga has effectively been the result of a Freaky Friday-type confusion, in which “open carry” has been used interchangeably to mean “licensed open carry”, as in the Estes bill, and “constitutional carry”, as in the arguably radical belief that insofar as the Second Amendment is a license to carry, no further such license should be required. The Republican Party of Texas’s platform, however, helpfully refers to both “constitutional carry” and “open carry”; the logical implication is that licensed open carry is the real open carry, or real enough. In other words, Dan Patrick has now fought for open carry, and won. Congratulations, Governor Patrick.

I don’t have much to say about campus carry, either, other than this: gun laws are like abortion laws. Both are emotive, divisive, and don’t have many effects in practice.

Read More
Wed March 18, 2015 5:43 pm By R.G. Ratcliffe

Probably the most interesting thing I heard during the entire House debate on HB 11 for border security was that the $12 million-a-month DPS and National Guard surge last year primarily secured the border in ony two counties: Hidalgo and Starr. Together, they contain 121 miles of the Texas-Mexico border, less than 10 percent of the entire length of the state’s 1,254-mile boundary with Mexico.

These two counties may well serve as the international spigot for illegal immigration and drug smuggling, but that hardly seems to match the rhetoric of securing the border. In fact, several border area lawmakers took to the back microphone in the House to make certain the legislation was not going to taint the public view of where they live.

“A few of the concerns we have is the branding of the (Rio Grande) Valley. People are branding it as an area where there’s bloodshed and there’s fighting going along on the street. How does this bill help us not brand it in this manner?” asked Representative Armando Martinez, D-Weslaco.

Read More