Roy Maynard: Early Returns

The train has already come off the tracks, state Sen. Kevin Eltife says. The state is only just now beginning to collect the new business tax, but Eltife — who opposed the new tax and the school finance fix that produced it in 2006 — says the package has failed to live up to its billing.

“I said at the time it wouldn’t work,” the Tyler Republican says. “The plan was to give homeowners much-needed property tax relief. It was touted as being a (property) tax cut of one-third. But I don’t know anyone who has seen the relief that was promised.”

For many taxpayers, the values of their homes increased enough to offset much of the cut in the school tax rate, which was phased in over three years. Soon, the entire tax cut could be wiped out for many homeowners.

“I think we’re heading back to where we started,” Eltife says. “I think peoples’ bills will be just as high before, but with an additional business tax. We haven’t truly shifted the burden.”

And that’s one of the most phenomenal failures of the so-called fix, he adds — the state added a tax on top of another tax, instead of replacing one with the other.

“So I don’t see where we’ve solved any problems,” Eltife says. “Instead, we have another tax, a business tax.”

And that’s something that will be passed along to consumers. So homeowners haven’t benefited, nor have consumers.

Nor have business owners.

According to the National Federation of Independent Business, the new tax creates a bigger burden on companies.

“In a recent survey of NFIB/Texas members, an overwhelming percentage of respondents said their property tax decrease — if any — was not enough to offset their business tax increase,” the NFIB reports. “More than 60 percent of all respondents paid the old franchise tax. Of those, 84 percent will see their tax burden increase by more than 100 percent over their old franchise tax bill. More than 40 percent of those who saw an increase in their state tax liability will now face an increase of more than 500 percent over their previous bill.”

Not even the schools are in better shape, Eltife adds. Many districts are locked into their tax rates and must go to voters for additional funding.

“Also, when we passed the plan, it had a $2 billion shortfall we’ll have to make up every two years, when we go into session,” Eltife says. “We’ve got a real mess here.”

So how to fix the school finance fix?

“We have to have a global solution,” Eltife contends. “We need to fix the appraisal system, we need to fund the schools — I prefer a consumption tax — and the tax structure, and we need to fix everything at once.”

Attempts at appraisal reform failed in the last legislative session, but a new effort must be made, he says.

“We have to have a consistent manner across every county as to how we deal with appraisals,” he says. “You can’t put a Band-Aid on this problem and expect a long-term solution.”

And schools should be funded with a consumption tax — a sales tax — he has long said.

“Everyone pays, so it’s fair,” Eltife says. “I hear over and over that it’s a regressive tax, but you can put in safeguards for those with low incomes. You can exempt necessities; you can even have rebates for the poor. But unless you shift the major portion of school property taxes, you won’t feel the tax cut.”

Finally, the convoluted, confusing business tax

“I think it’s sad we passed this tax in 2006, and here we are, without everything figured out as to how people will calculate it, two years later,” Eltife points out.

The Legislature will convene in January, and Eltife says fixing the fix will be one of his top priorities.

Roy Maynard
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