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
This article appears in January 31 • 1997 and January 31 • 1997 (Cover).