There is an old axiom that I have seen attributed to several prominent personages over the years. It says that “Laws are like sausages; it’s best if you don’t see them being made.” That little truism was brought home to me in a couple of ways over the past week or so. First, in doing some research, I ran across a description of how sausage is made for the school lunch program. It’s not pretty. Second, I was involved in the process of how House Bill 3, the revenue-neutral piece of property tax reduction legislation that is part of school finance reform, was narrowly approved by the Texas House of Representatives. It wasn’t pretty, either.
There has been a chorus of criticism of this bill, full of sound and fury and accusations of massive new “job killing” taxes. All of this brouhaha is misplaced. What critics are losing site of is the fact that no new revenue is being raised! It is a tax swap, not a tax increase. School property taxes would go down by $0.50 per $100 valuation and the franchise tax, a very unstable and unfair levy that penalizes capital investment, would be eliminated entirely. The revenue had to be replaced with something, and the House opted for a low-rate, broad-based payroll tax, a modestly broader and higher sales tax, and a few other odds and ends that make the numbers work. This approach is far from perfect, but it would definitely move us in a better direction in terms of modernizing and improving our tax system in Texas. It would also stimulate investment, which is the key to long-term employment growth.
More important than the specifics, however, is the process. It is a constitutional requirement that tax bills in Texas originate in the House. It is a large and diverse body with a strong philosophical bent toward limited government (which is generally a good thing). By its very nature and composition, it has difficulty passing a tax bill. If it fails to do so (as in last year’s Special Session on school finance), the whole game is over, and the courts end up deciding how to fund public education. The end result is that any bill is going to be the product of much debate, compromise, and gnashing of teeth. The job of the House at this point was to present a reasonable plan and keep all of us in the game. The members worked very hard, and they did well. The critical thing that happened was that a “real” bill was passed which can now move the sausage-making over to the Senate. The job of the House at this point was to present a reasonable plan and keep all of us in the game. The members worked very hard, and they did well. The leadership by House Speaker Tom Craddick, Ways and Means Committee Chairman Jim Keffer, and others should be commended in this regard. They succeeded where others failed.
Now, attention will focus on the Texas Senate, a smaller and more deliberative body. There will be other ideas floated, new approaches considered, and the emergence of a bill that may bear little resemblance to House Bill 3. There will then be a Conference Committee to hammer out the final measure, and the Governor, because of veto power, will be brought in as well. We can hope that the Senate takes the House version and improves on it and then final negotiations make it even better. This mechanism has worked before on many occasions.
Ideally, what all of us would like from government is great schools, uncongested roads, public safety, excellent water and sewer systems—and no taxes at all! That’s not going to happen. The issues are limited to how can we provide government services in the most efficient manner possible and pay for them in a fair and equitable manner with minimal disruption to private sector initiatives. By definition, a bill that reforms taxes and maintains the same level of revenue will result in some people paying more and others paying less. Those who will pay less can be counted on to celebrate in silence; those who will pay more will scream to the heavens. Therein lies the fundamental dilemma in measures of this nature and the emergence of another political truism—“The only good tax is an old tax!”
In Texas, we can do better than that. We have a unique opportunity to reduce property taxes and simultaneously make our state more competitive for new investment and business activity. To get there, however, we need to lay off the sausage-makers and let them do their jobs.