KRONBERG: FOR THE IRS, ITS A PERSONAL INCOME TAX; BUT IN TEXAS THEY CALL IT A CORPORATE INCOME TAX

Quorum Report ^ | March 13, 2005 | Harvey Kronberg

[SwinneySwitch]

Buzz By Date

Legislators brace for perilous record votes on Monday

The committee substitute for House Bill 3 is a fascinating read and may work. But it also appears to have all types of political pitfalls other than the obvious one of cutting taxes on high income Texans while raising the taxes of the working and middle class.

Talk radio around the state has been ripe with questions about why a payroll tax is not a backdoor income tax. I know. I was asked that question on four different radio programs last week. Of course, the answer is that the payroll tax is paid by the employer and never shows up on a pay stub. And there are criminal penalties for adjusting wages to reflect the tax.

NFIB and others are more accurate when they describe it as a jobs tax, adding an additional cost to the privilege of being an employer. But to the average talk radio caller, the payroll tax is seen as a tax on their income, no matter who writes the check.

But the committee substitute as distributed this weekend has a whole pile of new controversies written into it.

For instance, the newly broadened mission is to create an alternative to the payroll tax by taxing the personal income of proprietors and partners. The challenge is how to do so without triggering the Constitutional requirement mandating voter approval of a personal income tax.

The Texas House would address that challenge by doing little more than changing the definition of personal income.

According to CSHB 3, any business with an employee or grossing more than $150,000 a year is now a corporation subject to state corporate income taxes.

This might come as a surprise to the state's myriad proprietors and partnerships.

Every mom and pop proprietorship knows that the IRS treats their profits as personal income. It will be an interesting exercise for elected officials to explain that the State of Texas disagrees and has simply changed the terminology in order to tax what the IRS considers to be personal income.

For the rest of this column, check today's R&D Department

[SwinneySwitch]

"Legislators brace for perilous record votes on Monday"

And the eyes of Texas are upon you!

[Petronski]

According to CSHB 3, any business with an employee or grossing more than $150,000 a year is now a corporation subject to state corporate income taxes.

Good grief! Time for pitchforks and torches.

[SwinneySwitch]

Texas Lege Ping!

[Petronski]

Seriously, this can't pass. It can't be allowed to pass.

[TexasTransplant]

Letters are too late, I have written, faxed and called all without any response. I have made it a point to bring it up in casual conversation and folks get wide eyed and say "no way", and until people realize what is about to happen it may just sleeze its way in.

The most Ironic example of Bi-Partisan Politics as usual is about to become a very, very nasty and maybe bloody page in Texas History.

[anymouse]

Texas ping

[Petronski]

If this was tried in Pennsylvania, there would be hell to pay...maybe after the fact if they were sneaky about it, but it wouldn't stay in effect for long.

[GOPcapitalist]

Seriously, this can't pass. It can't be allowed to pass.

I agree. If the GOP legislators pass this it will spell the beginning of the end to their control of Texas government. There will be political retribution when people discover they're subject to a backdoor state income tax and it won't be pretty.

Of course NONE of this would be a problem if the legislators and governor would do what the people who elected them sent them to do: eliminate government programs. It's that simple, but since government programs are the lifeblood of pork barrel politics they'd rather try and pull a tax hike over on us.

[Petronski]

It's the most idiotic thing I've read in a long while.


But it is so arcane, I wonder how many laymen even understand.

[GOPcapitalist]

They'll understand when it starts coming out of their paychecks in the form of wage stagnation and fewer perks. Businesses do not simply absorb taxes that are imposed upon them - they spread them around and pass them off to somebody else whenever they can. And who can blame them? It's human nature and part of our own self interest to minimize the amount of money we have to pay in taxes as much as the law will permit us! Nobody sends in more money to the government than they have too, and just the same nobody absorbs more of a tax hike than they have to.

It's a basic law of the economic incidence of taxation: when taxes go up all who can pass their effects onto somebody else will. And when all those somebody elses - meaning everybody who earns any income - realize they have to start paying there will be hell to pay in Austin, especially if it gets packaged in with a sales tax hike and other fees.

We sent them there to cut property taxes PERIOD and eliminate government programs PERIOD - not to play a shell game of shifting the places those are collected, all the while sustaining every government program they can.

[GOPcapitalist]

Another note: if this taxation shell game passes and Perry signs this monstrosity I will predict right here and right now that he will be defeated for governor in 2006. If Hutchison were smart she'd pick up on it and beat him over the head as a tax hiker and then some. If she isn't smart, a Jim Turner or Charlie Stenholm Democrat will come along, pass himself off as a "moderate" candidate for "fiscal responsibility," and win the governor's office right out from under us.

[TexasTransplant]

It is amazing, Gov Perry's Webpage Newsletter claims he is so danged Business Friendly "Wide open for Business" and he invites all people that want low taxes, great schools and a favorable business climate, to move to Texas. Now the only State that that could be directed to has to be California.

Gray (Grey?) Davis or is it Rick (Richard) Perry? I am looking forward to the recall.

(David Dewhurst is an absolute sham as well so it looks like we ran out of Nobles and have to look for a commoner)

[Petronski]

If Perry signs this, he SHOULD be thrown out. The rest of your analysis is great.

[politicalwit]

"If Hutchison were smart she'd pick up on it"

KBH has become just another politician. I don't trust her any more than I trust Perry.

It's time to clear the stables and get rid of both Republicans and Democrats. Both parties have produced for too much manure.

[GOPcapitalist]

It is amazing, Gov Perry's Webpage Newsletter claims he is so danged Business Friendly "Wide open for Business" and he invites all people that want low taxes, great schools and a favorable business climate, to move to Texas

That's all his translation for: "We'll give you state money to move here." One of Perry's pet projects in the governors office is the administration of state slush funds that they use to bribe companies into moving here so Perry can claim that he attracted all these wonderful "new jobs" to Texas. It's as anti-free market as it gets and in some cases it's outright apalling.

One of Perry's most recent slush fund requests tried to get $30 million worth of our tax dollars to pay off Hollywood into making movies in Texas. It was all for the jobs to RINO Rick, but quite frankly I find it nauseating that our state government would be spending money to get the likes of Rob Reiner and Michael Moore to film their garbage here. Perry's long overdue for the boot and it will be some consolation to this tax bill monstrosity if it does him in during the election next year.

[TexasTransplant]

Just wrote another letter to Gov Perry it won't make it to him in time, the email I sent wasn't as lengthy but maybe he will read it. I just can't help mentioning California and Gov Davis because I think Perry is just as inept.

[GOPcapitalist]

Perry's not the brightest bulb on the strand, but neither was Gray-out so the comparison is valid.

I just checked the legislature site and Perry's Hollywierd slush fund bill was filed last Friday - by two GOP legislators no less! Senator Carona and Representative Hamric - both Republicans - are the culprits doing the governor's dirty work and they definately coordinated because the bills were filed at the same time.

It's times like these that I wish I was a legislative gadfly from a safe rural district. I'd quietly file a rider to the Perry bill, buried deep within a bunch of other provisions, renaming the thing the "Michael Moore Memorial Hollywood Slush Fund" and UC it through the floor where it'd wait as an unpleasant surprise for Perry when it got to his desk.

Stranger things have happened in the Texas legislature so it could be done. In the 1970's a small group of rebellious state reps - Craddick was one of them - slipped in a bill commending the Boston Strangler for "population control" to embarrass the leadership. Nobody noticed it until it passed and the newspapers had a field day.

[cpdiii]

All property taxes in Texas should be abolished. The schools should be funded by an increase in sales taxes. Thus everybody pays their fair share. Also, a hike in the sales taxes would make all Texans look long and hard at how our taxes are used and abused.

The proposal of this "back door" income tax will cause thousands of job loses and insure the defeat of the Republican Party in the Texas Legislature.

I do not know what Governor Perry is drinking, but he sure as hell needs to stop.

[MeekOneGOP]

bump! bump! bump!

[MeekOneGOP]

These folks are skating on thin ice, imho.

KRONBERG: FOR THE IRS, ITS A PERSONAL INCOME TAX;
BUT IN TEXAS THEY CALL IT A CORPORATE INCOME TAX

Excerpt:

The committee substitute for House Bill 3 is a fascinating read and may work. But it also appears to have all types of political pitfalls other than the obvious one of cutting taxes on high income Texans while raising the taxes of the working and middle class.

Talk radio around the state has been ripe with questions about why a payroll tax is not a backdoor income tax. I know. I was asked that question on four different radio programs last week. Of course, the answer is that the payroll tax is paid by the employer and never shows up on a pay stub. And there are criminal penalties for adjusting wages to reflect the tax.

NFIB and others are more accurate when they describe it as a jobs tax, adding an additional cost to the privilege of being an employer. But to the average talk radio caller, the payroll tax is seen as a tax on their income, no matter who writes the check.

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