Bush Tackles Taxes

There were no surprises on Tuesday when Gov. George W. Bush delivered his long-awaited State of the State speech to a joint session of the Texas Legislature. Bush did what everyone expected. He talked about education, crime, and welfare. He talked about God. "It's time to seek, not shun, divine help," he told the standing-room-only crowd in the House chamber.

And when he finally got around to the specifics of his long-awaited tax plan, there were no surprises there, either. Almost every aspect of the plan had already been made public and discussed at length. Nevertheless, the governor, who, like his father former president George Bush, is not a scintillating orator, pressed through his 28-minute-long speech in workmanlike, if sometimes droning, fashion.

Bush talked about issues like parental consent for minors wanting to have abortions (he favors it) and a plan (which he also favors) that would require unmarried teen mothers on public assistance to live with their parents or in a group home. But the majority of the people in attendance were waiting for details on his tax plan. Bush told them that "property taxes are threatening the Texas dream." To restore the dream, he wants to cut statewide property tax collections by some $3 billion per year. Part of that cut will come from his plan to increase the homestead exemption on residential properties from $5,000 to $25,000. And while homeowners will find that palatable, other aspects of Bush's plan are in for a fight.

The governor wants to eliminate the corporate franchise tax and taxes on business inventory. He will replace those revenues with a 1.25% tax on businesses that have sales in excess of half a million dollars, less the cost of goods and capital. Bush also wants to hike the sales and motor vehicle tax by half a cent on every dollar's worth of goods sold.

The tax on businesses will be challenged by a fleet of lobbyists hired by lawyers, doctors, and others who have businesses with revenues exceeding $500,000. Businesses will get some benefit from the reduction in property taxes, but overall, business will end up paying more taxes. And guess, dear consumer, who's next in line to share the burden? Restaurants, auto dealers, and retail merchants, in particular, are said to be very concerned about the sales tax portion of Bush's plan, which will be challenged on the grounds that it is regressive -- that is, that it will shift more of the tax burden from the wealthy onto the less affluent. Dick Lavine, a fiscal analyst with the Center for Public Policy Priorities, an Austin-based think tank which analyses the effect of state policies on poor and middle-income families, says both the business tax and the sales tax "are among the most regressive possible taxes. Almost every aspect of the plan would be bad."

The motor vehicle tax is also in for tough sledding. One of the most powerful lobbyists at the Capitol, Gene Fondren of the Texas Auto Dealers Association, is a long-time friend of Lt. Gov. Bob Bullock; the two worked together as lobbyists for the auto dealers some 30 years ago. Fondren will fight the tax on motor vehicles, which would be applied to both new and used car sales. Remarking on Fondren's clout, one Capitol insider said, "If that part of Bush's plan passes, I will personally eat your shoes."

After Bush's speech, Comptroller John Sharp said that getting votes for property tax relief in the Texas Legislature will be easy. The debate, he said, "will be over the $3 or $4 billion in new taxes and whether they will be palatable." On the sales tax issue, Sharp said, "Many of the people in Texas like the sales tax compared to other things. But you have to build in exemptions on food, medicine, and other things to prevent it from being regressive."

The fine print of the governor's plan will be further scrutinized later this week, when Representatives Rob Junell (D-San Angelo) and Tom Craddick (R-Midland) will file a bill known as the Property Tax Cut Act of 1997. Look for it on the House side of the Texas Legislature's website. Go to: http://www.capitol.state.tx.us

-- Robert Bryce

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