Brownwood: Pocketbooks & Politics

These are the topics that are "NOT" being discussed on Brownwood "Neo-Conservative" Talk Radio. These are the issues that directly relate to Brownwood Residents but the talking heads would rather "smoke and mirror" their listeners and "spoon feed" them away from the current goings on in Austin !

Analysis: Tax bill would benefit richest
Burden would rise 5% for poorest 1.7 million households in state
09:45 AM CST on Wednesday, March 9, 2005
By ROBERT T. GARRETT / The Dallas Morning News
AUSTIN – Only Texans in households making more than $100,000 would receive a net tax cut under the tax overhaul bill that the House is considering, according to a nonpartisan legislative analysis.
Under the bill, the poorest 1.7 million households – those earning less than $23,000 – would see their tax burden rise more than 5 percent, as lawmakers would add a penny to the sales tax rate and sharply boost taxes on snacks and cigarettes.
The richest 840,000 households – those with annual incomes of more than $140,000 – would have their taxes cut nearly 3 percent, according to the Legislative Budget Board, a research agency run by a group of legislative leaders who track the budget.
The bill, slated for debate by the House on Thursday, would cut school property taxes by a third. To make up the loss, it would levy the highest state sales tax rate in the nation, 7.25 percent, and impose a new business payroll tax. Other changes include an increase in motor vehicle sales taxes, the cigarette tax, and a new 3 percent levy on soft drinks and snack food not sold in restaurants.
Democrats quickly seized on the analysis as cinching their argument that the bill is unfair, and Lt. Gov. David Dewhurst, a Republican, emphasized that the Senate intends to try to cushion the poorest Texans from a bigger sales tax bite. The Senate's plan would cut by 40 percent the sales tax rate levied when welfare or food stamp recipients use the Lone Star Card.
House leaders downplayed how the tax increases are distributed, emphasizing property tax relief.
Rep. Jim Dunnam, the House Democratic leader from Waco, cited the analysis on Tuesday as the House took up a companion measure on school finance.
"The net effect is raising taxes to the tune of $1.1 billion on all Texans making under $100,000 a year," he said, citing the estimate for how much more would be collected from 6.7 million households in fiscal 2007. The wealthiest 20 percent of households would pay $437 million less.
"Do you think that that is fair and real tax relief?" Mr. Dunnam said to Rep. Kent Grusendorf, R-Arlington, a leading architect of the House's proposed school finance and tax swap package.
Cutting property taxes
Mr. Grusendorf noted that the package cuts school property taxes by a third.
"Additionally, it provides that those rates will not come back up automatically," he said. "So this provides ... greater taxpayer protection than we've ever seen in the state of Texas."
The analysis has limitations. The tax bill's impact on specific individuals or families depends on whether they own or rent their homes; if they own a small business and what type; and lifestyle matters such as how much tobacco and bottled water they consume.
The analysis also uses only broad income categories, lumping together people whose housing and other choices often vary, which would alter the result. Still, it's the only in-depth economic analysis of how the bill would affect tax equity.
House leaders have insisted they want a "revenue neutral" tax bill, with increases raising no more money than it takes to slash school property taxes. They contend that cuts to other state programs and efforts to improve government efficiency would provide the $1.5 billion a year in new money promised for schools.
Some tax experts said the House bill would make Texas' tax system even more regressive – meaning that the poor pay a larger percentage of income than the rich – than it is now.
'Very regressive tax'
"We are taking a very regressive tax, the sales tax, and using it to replace a less regressive tax, the property tax," said Dick Lavine, senior fiscal analyst at the Center for Public Policy Priorities, which advocates for low-income Texans.
Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas, said, "There are two words they don't speak in the Legislature: one is income tax and the other is regressive."
He said that if the bill is enacted, the state will "still have an upside-down revenue system."
A spokesman for a group advocating limited government and free markets noted that after Congress attempted several years ago to tax luxury items such as yachts and private jets, low-income people lost jobs at factories producing those goods.
"You have to be careful about the knee-jerk statement that this is regressive or progressive, because all taxes get shared," said Michael Quinn Sullivan of the Texas Public Policy Foundation.
Mr. Sullivan said the payroll tax would eliminate jobs filled by unskilled, poorly educated Texans. Under the bill, the existing business franchise tax would be repealed and all businesses would have to pay 1.15 percent of each employee's salary, up to $90,000 per worker annually.
Mr. Sullivan said the House should have considered alternatives such as expanding the sales tax to services provided by stockbrokers, travel agents and interior designers, services that "people at the lower end of the economic scale don't use."
E-mail rtgarrett@dallasnews.com
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/030905dntextaxes.40443.html
-----------------------------------
Study weighs tax bill's burden
Impact on businesses would vary by sector, state analysis indicates
12:37 AM CST on Wednesday, March 9, 2005
By VIKAS BAJAJ / The Dallas Morning News
A proposal to overhaul Texas taxes would increase tax bills for service businesses by up to 20 percent. Finance, insurance and real estate companies would see reductions of more than 11 percent.
An analysis by the Legislative Budget Board released Tuesday tallied the impact of a House bill that would add a payroll tax, raise the sales tax, eliminate the corporate franchise tax and cut local school property taxes.
On balance, businesses would pay 0.7 percent less in all state taxes, while individuals would pay 1.32 percent more.
Most industries would see a net improvement in their tax liabilities because of the reductions in the franchise and property taxes.
Finance, insurance and real estate would benefit to the tune of $897 million, and utilities and transportation firms would gain $222 million.
Three sectors would lose: Services would pay $1.1 billion more; construction, about $206 million; and trade, about $103 million.
Bob Hamer, owner of the Wild Turkey restaurant in northwest Dallas, estimated that his state taxes would jump 57 percent. He employs about 35 people who make $8.50 to $9 an hour.
"We generally don't run with too many extra employees, but one thing is for sure, I wouldn't hire any more," Mr. Hamer said.
He said the additional taxes wouldn't put him out of business but would hit him just as he was starting to recover from the city of Dallas' smoking ban that went into effect two years ago.
"We are slowly recovering, but we have not gotten back there," Mr. Hamer said.
On the flip side, real estate and other capital-intensive businesses say they will get some relief under the proposal.
Officials at the Texas Building Owners and Managers Association say they are cautiously optimistic but realize that the House proposal is just one of several the state will consider this spring. Senate leaders have indicated that they will take a different approach.
"At this point we would have to be pleased with what has come out," said Bill Carey, president of the association and a property manager in Houston. "It's very preliminary. Until things start to solidify, it could change at any time."
Mr. Carey said most commercial property leases have provisions to pass any property tax savings or increases to tenants.
Lawmakers are tinkering with taxes for several reasons: to raise more money for public schools as required by a court ruling; to lower property taxes; and to close loopholes in the franchise tax that is only paid by one out of six businesses.
"There is a case to be made ... that the business tax burden should be more broadly based in the state," said Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas. "One way to do that is to go to the payroll tax because all businesses have a payroll."
But critics say the tax would hurt smaller, labor-intensive businesses the most and punish companies that are hiring.
Dr. Weinstein said it's unclear whether a 1.15 percent payroll tax was significant enough to hurt the job market.
"Would that drive certain industries and businesses to really look at other opportunities to substitute capital for labor? I don't know. Companies have been doing that for decades."
Texas lawmakers have left themselves only a few options.
Legislative leaders have ruled out personal or corporate income taxes, which voters would have to approve. Also, taxes on corporate income and revenue could be susceptible to the same kind of loopholes that have hurt collection of the franchise tax.
"There is no free lunch out there," Dr. Weinstein said. "And the reality is if we are not going to consider a personal income tax or a corporate income tax or a gross receipts tax, there really aren't a lot of alternatives to generating new revenue."
E-mail vbajaj@dallasnews.com

HOW BUSINESSES WOULD FARE
The service industry would take the biggest hit under a Texas House proposal to revamp the state's tax system. Here is a breakdown by industry prepared by the Legislative Budget Board. Dollars are in millions.
Industry Tax tab today Change % change
Services $5,552 $1,139 20.52%
Construction $1,129 $206 18.22%
Trade $3,028 $103 3.39%
Agriculture $690 -$73 -10.55%
Information $2,867 -$91 -3.19%
Mining $3,783 -$169 -4.47%
Utilities and Transportation $4,178 -$222 -5.32%
Manufacturing $4,637 -$231 -4.97%
Finance, Insurance,
Real Estate $7,818 -$897 -11.47%
Total $33,681 -$235 -0.70%

SOURCE: Legislative Budget Board