The "Direct" Way to School Finance Reform - Six Fundamental Principles

Texans for Texas ^ | March 8, 2004 | Representatives Linda Harper-Brown, Bill Keffer, and Larry Taylor

[anymouse]

The Texas Legislature is poised to take on one of the most significant policy challenges in a decade. Not since 1993, when the Robin Hood system of recapture was created, has the Legislature been confronted with such an important constitutional matter.

This Legislature has already had to deal with daunting problems, such as a $10 billion budget shortfall, tort reform, and homeowners' insurance reform. But even they pale in comparison because school finance is such a fundamental constitutional obligation of our state government.

For that reason, we are co-chairing a task force created by the Texas Conservative Coalition Research Institute in order to review the various tax systems being proposed to the Legislature, develop principles fundamental to any tax reform, and promote debate about the end result—because no matter how much is spent on education or how the money is raised, the bottom line must always be the successful education of our children. We believe the following six principles of tax reform should guide the debate:

· Direct connection. There must remain a direct connection between taxpayers and the public schools that serve their area. One of the most undesirable aspects of the federal income tax system is that there is no relation between the taxpayer and program outcomes. Money is taken from individuals, funneled through the IRS, and spent in a manner that has the highest degree of separation from the individual. As a consequence, the taxpayer has no direct or meaningful say in the program, and federal administrators are indifferent to taxpayer views. Less separation, more participation.

· Inclusion. Any new tax system must be viewed as fair, and the best way to demonstrate fairness is to design a system that includes all Texans. In FY 2003, the value of all sales and use tax exemptions and exclusions was almost $23 billion. The value of exemptions to the school property tax is estimated to be over $4 billion. The state could scrap the Robin Hood system and provide substantial property tax relief just by ending exemptions and exclusions. Fairness through inclusion.

· Reality. The reality is that consumers almost always pay all the taxes. The Comptroller's Report, “Tax Exemptions & Tax Incidence,” makes this very important point: “It should be recognized that any tax levied directly on a business will ultimately by paid by real, live people—if not consumers via higher prices, then business owners via reduced profits or employees via reduced wages…In any case, or in any combination where the tax burden is borne jointly, the old cliché? is true: ‘Only people pay taxes.'" Any proposals to impose new or higher business taxes are somewhat disingenuous because business taxes are generally paid by consumers and workers—and not from the gross income of the business, as some would argue. Make it real.

· Economic growth. The Legislature should avoid any tax systems that will negatively affect economic development and the consumer. Consistent with the Governor's commitment to bringing new business to the state and the Legislature's interest in maximizing the benefits of the Texas Enterprise Fund, any new tax system should move away from the current system, which penalizes capital-intensive industries. A growing, healthy economy is required to provide for the future funding needs of our educational system. Taxes unavoidably affect the economy, so affect it as little as possible.

· Compliance. One of the chief problems with the current property tax system is the burdensome and costly process of assessment and collection. Collectively across the state, the apparatus necessary to administer local property taxes is immense. The burden on homeowners and businesses when disputing the amount of the tax is equally great. As with the federal income tax, only those with substantial resources are typically in a position to avoid or dispute. Keep it simple.

· Transparent. Taxes should be transparent to taxpayers. The fact that homeowners are complaining about their property taxes is manifestly one of the best features of the current system—they know what they are paying and must write a check each year to a Central Appraisal District. The most insidious taxes are those hidden from view. Transparency promotes accountability. There is no good tax; but there are those that are “less bad”. A tax system that adheres to these six principles can provide a “DIRECT” path from the current school finance crisis to a long-term solution.

[anymouse]

It's about time for Texas to reform education funding/taxes.

[anymouse]

Texas ping.

[Carry_Okie]

But even they pale in comparison because school finance is such a fundamental constitutional obligation of our state government.

Is it? As a home educator, to me, this is a disquieting attitude.

[Bigun]

If the principals set forth in this article are adhered to ALL Texas will come out winners when the coming school finance debate is done.

I say BRAVO to these folks!

[MeekOneGOP]

Please let me know if you want ON or OFF my Texas ping list!. . .don't be shy.
No, you don't HAVE to be a Texan to get on this list!

[GeronL]

I doubt they'll do the right thing and just privatize the whole thing.

[GeronL]

It won't be. Anyone smart enough to send their kids to private schools or homeschool will get punished.