Texas still can’t seem to find a good solution for its school finance woes, despite the appointment of a Texas Tax Reform Commission late last year. John Sharp, former Texas Comptroller and Chairman of the Commission, presented the Commission’s proposal to the state earlier this week.

If the plan is adopted, Texans will be jumping out of the frying pan, but they will find that they have landed squarely in the fire.

The Sharp Plan has four major components. First, property taxes will be lowered by 1/3, eliminating Robin Hood for most (not necessarily all) school districts. Second, the business franchise tax will be expanded across more businesses to generate more revenue. This tax will be levied at a rate of one percent of gross (not net) receipts, although some deductions will be allowed. Third, a new cigarette tax will be imposed. Fourth, a portion of Texas’s estimated $4.3 billion surplus will be used to help pay for the property tax cuts.

The property tax reduction is to be applauded. Naturally. The nearly universal sentiment in Texas is that property tax rates have gotten too high. Yet the positive aspects of the proposal are grossly outweighed by its negative aspects.

Much as this author loves a good tax cut, the Sharp Plan should be quickly and soundly rejected.

The Sharp Plan violates one of the foremost principles of fiscal conservatism. It replaces a visible property tax with a hidden business franchise tax. Special dangers lurk in hidden taxes. Average Joe Taxpayer often doesn’t realize that he is ultimately bearing the brunt of the tax. To the degree that he does realize it, he feels the impact only indirectly. Because he mistakenly believes that he is not sharing the burden of such taxes, he is less diligent in ensuring that legislators keep these tax rates to a minimum. Ultimately, it is easier to increase hidden tax rates than visible tax rates. Indeed, Joe may never notice that a franchise tax hike proposal is on the table. To the degree that he does notice it, he is likely to find no harm in raising taxes on Dell or Exxon. Instead, he is perfectly happy to see Big Business pay its "fair share."

Notice, by the way, how easily recent school finance debates have been reduced to a discussion about how to best increase an already-existing hidden tax. Doesn’t the very existence of the Sharp Plan prove the point of this article? When legislators get in a bind, their natural tendency is to look for a hidden tax that can be raised or expanded.

The problem for Joe Taxpayer is that he ultimately bears the brunt of these ever-increasing hidden taxes.

If Dell is paying more in taxes, then Joe will pay more for his new computer. The same will hold for any company paying higher taxes. If the cost of doing business becomes higher in Texas, then those businesses will either raise their prices or leave the state. Consider it from their perspective: Companies are profit-making organizations. They are not charities. They can’t let taxes eat up their profit. They’d be out of business within a matter of weeks or months.

Yes, of course, property taxes in the State of Texas are too high. Taxpayers are outraged and have been demanding change to the system for years. This state of affairs proves the immense value of a visible system of taxation. Everyone sees the taxes. Everyone knows when spending is out of control and taxes are too high. Everyone begins to demand change. Legislators have nowhere to run. They must fix the problem. Without the ability to resort to hidden taxes, the only fix available to them is a reduction in spending.

The problem in Texas isn’t lack of money for education. The problem is that the education bureaucracy has become too expensive. The bureaucracy sucks up school funds before they ever make it to classrooms, and then it asks for more. There are nearly as many non-educators (read: bureaucrats) in the system as there are teachers. Moreover, Texas schools are unable to meet easy spending goals such as spending 65 percent of all education funds in classrooms. The education bureaucracy has become a black hole, consuming any and all funds that are thrown at it.

It is never satisfied.

Legislators need to stand up to education bureaucrats and lobbyists. Their wasteful ways are the primary problem facing Texas schools and Texas taxpayers. Once this waste is eliminated, improved education and lower property tax rates will soon follow.

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