Saturday, April 2, 2011

Fixing The Tax Revenue Problem Instead Of Cutting Teachers

Texas will have a persistent $10 billion hole in its budget for years to come unless legislators address it this session, the state’s chief revenue estimator told Senators in Senate Finance Committee meeting on January 31, 2011.

Pressed by Democratic senators on the Finance Committee, John Heleman said the state will have a $10 billion structural deficit in future budgets largely because the business tax has underperformed and the 2006 property tax swap has cost more than expected.

The revised business tax was supposed to bring in $6 billion per year. Instead, it it is generating $4 billion. The cost of the property tax relief is also running about $1 billion per year above expectations.

“That gap is not closing up,” said Heleman, chief revenue estimator for Comptroller Susan Combs.

Republican state leaders have attributed the state’s budget woes to the recession and have dismissed calls to raise taxes to deal with the current budget shortfall, estimated at $15 billion to $27 billion, saying they can cut their way out of that hole.

But the structural deficit means legislators will have to come back in 2013 and beyond to deal with at least another $10 billion hole.

G.O.P. lawmakers in Austin have taken a vow of no new taxes, which is a vow to not fix the business tax revenue problem created by law makers in the 2006 legislative session.

Last week the Texas House began debate on a $164.5 billion budget bill that strips $23 billion from two-year 2011-13 state budget. The budget bill makes the kinds of spending cuts that many Conservative Tea Party lawmakers championed in their 2010 campaigns. Republican lawmakers say voters gave them a huge majority and clear marching orders last November: reduce spending, shrink state government, don't raise taxes. Shrinking state government, as it turns out, includes firing hundreds of thousands of teachers and state employees, taking billions of dollars out of the public school system and weaken the state's safety net for low-income Texans and the elderly.

Some Democratic lawmakers are, however, advocating fixing the business tax revenue side of the equation as stated in the follow press release from State Representative Yvonne Davis.

House Seal

State Representative
Yvonne Davis

April 2, 2011

For Immediate Release
Lemuel Henry Price

Stop the Bleeding...Collect the Money!

(Austin, Texas).... State Representatives Yvonne Davis, Borris Miles and other members of the Legislature called a press conference to shed light on remedies available to address the gaping budget deficit through House Bill 2434. This press statement is in lieu, due to continued floor debate on the budget.

As the House addresses the $27 billion budget deficit for the current cycle, can we trust anything that this Comptroller tells us? As an example, the Comptroller's Tax Exemptions & Tax Incidence for years 2009 and 2011 present outrageously discrepant projections between a two-year period. How can this be?

Comptroller Comb's "certified" a "balanced budget" when the current biennium's budget was passed in 2009, yet, even after an injection by the Obama administration of more than $16 billion in stimulus dollars, $4 billion more than reflected in the budget - we see a $4.3 billion deficit being filled with the Rainy Day Fund. "This fiscal fiasco is the product of poor Republican leadership," stated Representative Davis. She continued: "The alarms were sounded in 2006 - they knew a structural deficit was coming. Comptroller Strayhorn didn't mince her words - she said changes to the tax structure was equivalent to writing 'the largest hot check in Texas history.' She predicted a $23 billion shortfall over the next five years." That was an inconvenient truth ignored by the leadership.

In spite of piercing alarm bells, Republicans characterized the budget shortfall projections as "hypothetical and skeptical," and went ahead with tax cuts and exemptions that created the structural deficit. H.B. 2434 addresses these issues head on. Since 2006, Republicans have created MORE exemptions placing citizen's needs below those of highly favored businesses like XTO, an Exxon subsidiary that saved $113.2 million and Devon Energy with $113.8 million savings in FYE 2010 via a gas tax exemption - all while turning record profits. Meanwhile, Texas homeowners shoulder 39 percent of the tax burden. We must stop this now with H.B. 2434.

"Drastic cuts are not the only solution to the budget crisis. A cuts-only approach simply stops the debt collector at the door. The numbers do not lie. If H.B. 2434 passed, the state could be looking at up to $23 billion in revenue. Amendments on the floor today literally advocate robbing from one important program to pay for another. Can anyone argue that the needs of the elderly are more important than those of pre-kindergarteners? Are the needs of corporations more than both? Before we cripple the future of our children, the lives of our elderly, and the livelihoods of everyday Texans, we must explore and exhaust all options for a solution. We must consider every alternative such as zero-based budgeting and applying the sunset review process to all tax exemptions! Utilizing any other method to resolve our current budget imbalance would be irresponsible and shameful. Texas and Texans deserve better!" said Rep. Davis.

"The priorities of state government in this budget crisis should be maintaining a quality public education system and preserving crucial state services like aid to nursing homes. We can close decades-old tax exemptions and loopholes and bring in new money that will allow us to fund our priorities," said Rep. Miles.

As joint authors of House Bill 2434, Rep. Davis and Rep. Miles identify revenue sources that restore funding for education, health care, skills training, infrastructure, and other essential services necessary to maintain the State's prosperity and economic growth. Instead of focusing on a cuts only approach to the budget, House Bill 2434 helps to provide a balanced solution that allows Texas to stop the bleeding and collect the money!


Guide to Proposed Repealed Exemptions

Potential Amount of Revenue (in Millions)

11.24: Historic or archeological sites $4.2 $4.3
11.251, 11.437: Freeport property and cotton
stored in warehouses
$266.7 $271.6
11.252: Motor vehicles leased for personal use $20.6 $21.7
11.253: Tangible personal property in transit $0.4 $0.4
11.27: Solar and wind energy devices $3.9 $3.9
11.28: Tax abatement agreement $3.7 $3.0
11.31: Pollution control property $116.9 $119.1
151.308: Items taxed by other law which include-
crude oil, motor vehicles, motor fuels, mixed
beverages, cement, sulphur, aviation fuel, oil well
servicing, insurance premiums
$9,044.7 $9,480.6
151.3162: Timber items $23.4 $24.6
151.317: Gas and Electricity-Manufacturing,
Mining, and Timber
$578.3 $606.0
151.318: Property used in manufacturing $11,045.7 $11,680.3
151.319: Newspapers $17.8 $17.5
151.320: Magazine subscriptions $8.6 $8.9
151.322: Containers $146.7 $155.1
151.324: Equipment for mineral exploration
or production
$150.7 $158.3
151.328: Aircraft-Repair equipment & services
for certain aircraft
$38.0 $39.3
151.329: Certain ships and ship equipment $46.7 $49.2
151.3291: Boats and boat motors $42.9 $43.7
151.331: Rolling stock, train fuel and supplies
Railroad fuel and supplies and Rolling stock and locomotives
$54.1 $58.2
151.335: Coin-operated services $35.6 $37.2
151.336: Certain coins and precious metals $0.8 $0.8
151.351: Information and data processing services $29.0 $30.6
152.089: Vehicles taxed by other law $68.4 $72.6
N/A __ __
N/A __ __
N/A __ __
N/A __ __
TBD __ __
TBD __ __
N/A __ __
171.052-.0525: Insurance companies $253.8 $266.5
171.055: Mutual funds investment companies $138.6 $145.6
171.056: Solar energy corporations $0.5 $0.6
171.077: Credit union $13.5 $14.2
171.079: Electric cooperative corporation $17.6 $18.5
171.080: Telephone cooperative corporation $2.6 $2.8
TBD __ __
TBD __ __
$22,174.4 $23,351.1
N/A: Not Applicable
TBD: To Be Determined

Note: All figures presented in this chart are based upon the
aggregate amounts contained in the Comptroller's 2011 Tax
Exemptions & Tax Incidence
and would not necessarily
produce the dollar amounts cited. Actual receipt of revenue
would depend upon various factors. The estimated figure is
based on the best information available from public and private
sources, including the Comptroller Office's tax records.
These values should be used as a guideline only.

Pol.Ad. Pd for by Committee to Elect Yvonne Davis,Yvonne Williams, Treasurer

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