TTRC Report: Haven’t We Heard A Lot Of This Before?

As I was reading the Texas Tax Reform Commission’s proposal, I couldn’t help thinking: Haven’t I read something like this before? Well, of course. We wouldn’t have had a need for the TTRC in the first place if something had actually been done with the 2002 Joing Select Committee On Public School Finance’s report.

The similarities are obvious:

The TTRC Report Notes (page 2):

The Legislature should implement anti-fraud measures to boost state tax collections, including increasing the Comptroller’s audit and enforcement activities and implementing an improved tax system for the sale of used cars.

The 2002 JSCOPF Report Notes (page 27):

Give County Appraisal Districts (CADs) and the Comptroller’s Property Tax Division the legal and financial resources they need to fulfill their obligations to the children of Texas. All taxpayers must contribute their fair share to the state’s
public school system, allowing only for differences in local tax rates. School districts must be protected from losses of state aid or excess recapture due to problems which are largely beyond the control of the school districts.

Sounds like the same thing to me. More similarities when it comes to taxes:

The 2002 JSCOPF Report notes:

For FY 2002, these credits and refunds
are estimated to account for a $223 million reduction in state franchise tax receipts.
…
Overall, the Committee consistently heard from witnesses who argued that the current tax structure does not truly measure the economic activity in Texas.
…
Other types of business structures, notably general and limited-liability partnerships and sole proprietorships, are not subject to the tax. Additionally, certain industries, such as
corporations providing insurance, are wholly exempt, often because they are taxed under other statues. A number of other industries, such as solar energy companies, credit unions, and electric cooperatives, are also exempt. Generally speaking, the tax is not applied to non-profit enterprises.

“Tax fairness” was a frequently-discussed concept during the hearing process. State revenues are drawn disproportionately from corporations and industries that are property intensive, or which sell products to the general public. These same corporations and industries also bear a disproportionate burden with regard to school property taxes.

Meanwhile partnerships and industries that are predominantly service-based typically have a much lighter tax burden across the board. The extent to which this is a problem is a question for the Legislature to resolve, as is the question of whether to eliminate those loopholes, exemptions and exclusions in the current law.

The TTRC Report Notes:

Another less visible but equally powerful force contributing to the rise in property taxes has been the inability of Texas’ archaic state-level tax system to maintain a state/local balance in the financing of education. As described by Comptroller Bullock in 1986 and affirmed by Governor Bush in 1996, the Texas tax system does not reflect the Texas economy. Most symbolic and symptomatic of this failing is the state’s business franchise tax.

Of the major taxes that support the state’s general revenue fund – the largest portion of which is spent on education – the franchise tax had the lowest growth rate of all over the past decade.

Because of its antiquated structure, the impact of the Texas tax system on the various industries as it pertains to education funding is very uneven. During the past decade, the services sector of the Texas economy has
grown substantially, adding nearly one million jobs but contributing about $400 per job toward paying for schools. At the other extreme, the mining sector, primarily oil and gas, has lost more than 6,000 jobs but contributed almost $11,000 per employee. With the growth in the economy occurring in the lightly taxed industries, Texas cannot grow its way out of its tax problem. Rather, we’re growing our way into it. Therefore, a broader base for the state’s business tax is required, one that does not rely so heavily on property.

OK. First of all, the TTRC report stole its title “Tax Fairness” from the use of the same term in the 2002 JSCOPF report. In fact, I’d be willing to bet that whatever mid-level TTRC staffer that actually put the report together had a copy of the JSCOPF report on his desk. Second, the reports came to the same conclusions: the tax system doesn’t reflect the economy, franchise taxes are dwindling, a broader tax base not so heavily reliant on property taxes is required, the system is uneven.

I mean, let’s get real here, folks. I have no idea how much money and time went into the TTRC’s report. I’m sure lots of both. However, what is so utterly dissappointing is that there are really no new conclusions between what was done in 2002 and what was done by the TTRC.

Furthermore, the JSCOPF’s report addressed THE WHOLE PACKAGE: EDUCATION REFORM AND TAX REFORM. The TTRC’s report only took a bite out of half of the apple and left the rest for others to deal with. If you read the entire JSCOPF report, which I encourage you to do, you realize that it is totally impossible to do one without the other effectively.

Furthermore, the JSCOPF report from 2002 actually put out several options on the table for lawmakers as opposed to simply dictating one.

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