Tax Reform Commission Chairman John SharpIf you think the upcoming Special Legislative session will be short, sweet and productive – think again. Republicans are split and Democrats are happy they are and not inclined to save the GOP's bacon.

It appears a majority of GOP lawmakers want nothing to do with their own governor’s school finance plan whipped up by Democrat John Sharp and a band of Perry’s largest contributors. Why? That plan calls for new taxes (business activity), higher taxes (cigarettes), and partial use of a surplus. Worse, they say, the new tax will fall wholly on business and therefore be ripe for regular increases because the average Texan won’t know they are paying it (they hold that businesses don’t pay taxes they either pass them on to consumers or owners eat them).

Many Republican activists are appalled by the Sharp plan. Their preference is to use the projected $4.3 billion general revenue surplus (and growing) to replace local school district revenues raised from property taxes. This would lower the space between what school districts raise and the state’s cap on what they can raise. (The Texas Supreme Court has ruled that the cap creates a de facto and unconstitutional state property tax.) They would leave the fundamental Robin Hood system alone, but no one would have to defend new and higher taxes.

Many Democrats counter there is no surplus and to a point they have a point. The liberal Center for Public Policy Priorities notes that of the $4.3 billion surplus $1.8 billion is already earmarked for education and another half billion comes from gubernatorial vetoes of money the legislature wanted to spend elsewhere. They also note state appropriations usually come up short in areas like Medicaid and prisons, that the “Rainy Day Fund” is virtually exhausted, and that the Bush Administration has failed to deliver compensation for hurricane related expenses and that according to Gov. Perry himself these could cost $2 billion or more.

Where they may not have a point is their desire to restore what they see as “devastating” cuts to fundamental services since Republicans took control in 2003. These cuts can also be seen as adjusting spending to match revenue and trimming past waste but that’s another debate.

There is the problem of the future. Many GOP legislators say that if the current tax system is producing surpluses those should be spent on education or returned to the people. Democrats counter that increases to cover only increased population and inflation for the next budget cycle will consume virtually the entire surplus or at least require a tax increase if it is spent.

The biggest problem is that spending the entire $4.3 billion on property tax reduction won’t even hit the goal of a one third cut in property taxes and would leave nothing for reform. It would likely be a one-time fix not a permanent solution and that too could defeat a lot of incumbents.

[What I find amazing is the refusal of conservatives to follow their own reasoning: if you agree businesses don’t pay taxes, people do, and that a tax solely on business is too easy to raise then a flat rate personal income tax constitutionally dedicated to public education is the obvious answer. A low rate could cut school property taxes all the way to zero and take that funding source off the table for general government forever. Polls clearly show voters would buy this.]

The choice is between the Sharp/Perry plan and using the surplus.  Using the surplus is not a solution it’s a dodge and maybe a fiscal disaster.  It may be the Supreme Court won’t even buy it.  It is far from perfect but at least the Sharp/Perry plan is a real solution.

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