Rick Perry and the Largest Tax Hike In Texas

In Rick Perry’s August 13 presidential announcement speech in South Carolina the Texas Governor stated:

.…we have led Texas based on some just really pretty simple guiding principles. One is don’t spend all of the money. Two is keeping the taxes low and under control. Three is you have your regulatory climate fair and predictable.

I’ve cut taxes. I have delivered historic property tax reductions. I was the first governor since World War II to cut general revenue spending in our state budget.

But Perry’s record on taxes reveals something entirely different. Especially for Texas businesses, where things are far from fair and predictable.

On May 18, 2006 Perry signed into law a Business Margin Tax that dramatically changed the way businesses are taxed in Texas. The Dallas Morning News (DMN) May 16, 2006 called it ‘the largest tax increase in Texas. The paper continued,

In 2006, the state was facing a judicial mandate to change the unconstitutional way it funded public schools, mostly through property taxes. Under Perry's leadership, a tax swap was created that cut school property taxes by up to one-third. To pay for that, Perry signed a bill that nearly tripled the amount Texas collects from businesses. The tax swap created a net tax decrease, but the new business tax coupled with one added to tobacco still counts as the largest tax increase in Texas.

Crafted to replace the Texas Franchise Tax, it was explained by Harper and Pearson, a CPA firm in Houston, Texas, as “a tax on taxable margin, which is a concept similar to taxable income. Generally, an entity’s taxable margin is its revenue as reported on its federal income tax return less either its cost of goods sold or its compensation expense (limited to $300,000 per employee), but not both.” But there was widespread confusion over how the law permitted the calculation of cost of goods sold and which expenses were considered.

[W]hat really irks conservatives is a business would have to pay taxes whether it made a profit or not. In that way, it is worse than a corporate income tax. The non-partisan Tax Foundation in 2006 described gross receipts taxes as poor tax policy that lead to harmful tax pyramiding, distort companies [sic] structures, and damage the performance of state and local economies. The tax was sold as a "trade-off" for lower property taxes. This is a recurring myth that never works…

In other words, critics say, it’s the same as having an income tax. Which is prohibited by the Texas Constitution that the Governor has sworn to uphold.

It's hard to believe but the Texas Gross Receipts (Margins) Tax on business proposed by a Republican, Governor Perry, and passed by a GOP dominated legislature in 2006 was further complicated in 2007. This was the largest tax increase in Texas history, which requires business to pay up to 10% of its gross income to the state while large corporations were given loopholes.

I cast a "no" vote today on HB 3 for a number of significant reasons. First, this bill calls for the imposition of nothing less than an income tax on Texas business owners — a gross net receipts tax. Texas has a long-standing tradition of paying our way as we go. Given the substantial and ever-growing budget surplus, it is unconscionable to burden Texans with a new tax when we can simply use their money to meet the mandate imposed on us by the Texas Supreme Court.

… this new tax will have the effect of punishing many businesses that have unexpected expenses. For example, a service company that has a gross revenue of $1 million and payroll expenses of half a million dollars will pay a new income (franchise) tax of 1 percent on $500,000, or $5,000. Suppose that this company was frivolously sued and spent half a million dollars defending itself. This company would likely sustain a net operating loss in the year that it was sued but would nevertheless owe the State of Texas a franchise tax on income that was never realized. In addition, HB 3 does not take into consideration the numerous other expenses that are not related to payroll. For example, rent, phones, advertising, maintenance contracts on business equipment, casualty insurance, key man insurance, property taxes on real estate and business equipment, bank interest on notes, lease payments on equipment, occupancy taxes, filing fees, and a myriad of other expenses are not deductible under this new tax scheme.

The governor’s own policy advisor has informed members of the house that the average small service sector business will pay more in taxes and in most cases double, triple, or even quadruple what they are currently paying under the current franchise tax system.

The Houston Chronicle also argued that the tax is unconstitutional because the Texas Constitution requires a statewide vote in order to pass an income tax on individuals — including income they receive from partnerships — that Perry’s tax was enacted without a vote of the people, and that it taxes partnerships. The article noted astute law student Nikki Laing’s observation that just because the law declares itself not to be an income tax doesn’t make it so. She cited “ a number of U.S. Supreme Court decisions on the point, including one that said 'the mere declaration contained in a statute that it shall be regarded as a tax of a particular character does not make it such if it is apparent that it cannot be so designated consistently with the meaning and effect of the act.'"

Critics note that particularly unfair is the feature that businesses are taxed differently according to their classifications. According to a February 6 article in the Houston Chronicle, for example, businesses such as independently owned auto repair shops are taxed twice as much as, say, a dealership or franchise store, for the same services.

Beginning in 2012, the exemption from the tax falls from $1 million in revenue to $600,000, but it is uncertain whether that exemption will be extended.

With the Texas margin tax collecting far less in revenue than expected, causing significant confusion and compliance costs, resulting in significant litigation and controversy over "cost of goods sold" definitions, and facing calls for substantial overhaul and even repeal, it should not be used as a model tax reform for any other state.

Some want to see Perry supporters leave FR.

Just in case I need to, let me clarify my last sentence. When I said "is that what we want?" it was a rhetorical question asked of the FR public at large.

For reasons I don't pretend to understand, there are folks on this site that tend to go after every front runner we have because the candidate either isn't the perfect candidate, or isn't "their" guy!! In all honesty, I will be one of the first to say we should demand candidates who understand what we want and supports the things we need from government. Perry is my guv and I have mixed feelings about him. He is a politician's politician and knows all the right things to say. He also has some baggage. Most politicians do. I don't like his stand on immigration and controlling the border but, by the same token, he has been making a lot of noise about it and he is saying all the right things these days.

At the end of the day, I believe that actions speak louder than words. Absent a run by Sarah Palin, Perry is next on my list. And, we still have a long way to go to next November.

I'm not filling out my ballot just yet.

Another Islamic group speaking favorably of Perry and his relationship with Muslims:

Mahmoud Eboo, President of the Ismaili Council for the USA.

“We’ve seen him for 20 years at state level, as lieutenant governor and state governor,” Mr. Elbiary says.

“Throughout that whole history, Perry’s never taken an anti-Muslim or anti-Islam position. In fact, Perry’s relations with Ismailis, a Shia sect of Islam whose adherents number between 30,000 and 40,000 in Texas, have been particularly positive.

I get it you’re all for Perry...that’s pretty evident...but there is more at stake here than a Pres. candidate. He’s a Pres. Candidate who ‘believes’ there is nothing to be concerned about Islamists if he determines so.

His nievity, as with Christy’s and others who are sucked into believing there is nothing to be concerned about is far more than worrisome or troubling....it’s high risk catering to a very large political group who has a polticial agenda in our country....and that the Islamization of the United States.

Ismailism is still Islam and still reveres the prophet Muhammed. It doesn’t matter whether Ismailis under Aga Khan are Westernized or friendly to the ways of the West, their religious beliefs and ideology doesn’t change its spots, it is still Islam........they all follow the same book.

Additionally the Aga Khan is very actively involved in ‘importing large numbers of Mohammedans into the US’ and Canada, building Muslim townships from scratch. Which Texas certainly demonstraits this.

If Muslims are instructed that the ends justify the means ...and evil things are not evil if they are doing it to expand Islam can they be trusted? .......The recent history in Europe should be a distinct warning to everyone in the United States.

So no I am not worried about Perry....I am very much frightened for our country as the risk, if he determines to and I see no reason why he wouldn’t, takes this nation the same way he has taken Texas....and that by actively inviting, encouraging, recruiting, and participating in bringing Muslims into his state and honoring them for doing so. This he has done with them from his office as well as throughout the Muslim communities...including establishing specific accomodations for Muslims...via his signiture....which adheres to Shariah Law.

Let me know when you've read the article.

He’s a Pres. Candidate who ‘believes’ there is nothing to be concerned about Islamists if he determines so.

The term 'Islamist' refers to militant Muslims. There is no one outside of Barack Obama who isn't concerned with Islamists.

And, in full disclosure, yes, I'm for Perry. Not to the exclusion of any other candidate, especially Palin. The reason I'm for Perry on this particular issue is that his handling of the Ismailis is the best feasible course of action for Muslim outreach for someone that's actually dealing with the problem. I've seen engagement from the tactical-level Army's ideal, I've seen it from the national level defense ideal, from Bush's ideal and Obama's. Perry's is head and shoulders above any of them.

People below that level are free to be as cowboy aggressive as they like, but it's the actions in the big leagues that matter. Palin, who I like quite a bit, is utterly untested in this regard. While I like to think she's do well, my idea of 'doing well' and your idea are probably quite different. And her version would be much like Perry's. Find the most moderate game in town and play it up. It's not an issue in Alaska. It is an issue in Texas. So, people give Perry a lot of crap for this, but at the end of the day, their pet candidates will do the exact same thing.

Or they'll do like Bush, and saddle up with billionaire Wahabbi exporting whackjobs or straight up terrorists like Obama and the Muslim Brotherhood. The idea that some politician in 2011 is just going to grab the bullhorn and tell the Muzzies to go home is about as likely as them putting a loaded revolver in their mouth and squeezing the trigger. It won't happen, and if that's your ideal, it's outside the realm of possibility.

So you’re for appeasing and reaching out to the Muslims, and change our laws to accomodate them...make cities for them... rather than requirements they assimilate into our culture? Becuase this is what is happening.

They will never assimilate... never happen...rather they will continue with their political agenda...one of which is using politicians to help their agenda. And they are doing just that. The other is to educate the public in exactly they want Islam to be presented, INITIALLY, in the US. And to use our educational system and instructors to do just that.

They are winning and they know it.....I oppose their agenda at every level...and will do so continually. This is the United States of America.....NOT THE MIDDLE EAST!

This nation was warned time and again about Muslims coming here.....and now they’re building their communities here and bringing all who will come to populate our nation. It is how they operate.

I would have zero problem sending them all home to the nations they come from....and all Mosques and Community centers gone....but you are likely right...that’s not going to happen because they have already moved beyond simply arriving....they are digging in deep and fast. Using our laws is quickly moving to changing them to accomodate them.

We are loosing our country....and the Muslims will indeed thrive here and their political agenda succeed in no time if we do not stop this. Take a look at Europe....

Do you really want “No-Go” areas in the US...and Shariah here? Those who do not oppose are for their agenda. It’s that simple.

Europe is the key to waking up America. In 20 years, the Netherlands will be a majority Muslim state. In 50, the original Dutch will be extinct. The rest of Europe will continue along at varying levels of decay, but the Netherlands is the canary in the coalmine. You don't need to be a majority Muslim population to be controlled by them. 20% Sunnis were able to dominate 60% Shia and 20% Kurd in Iraq for decades. England, Sweden, and France will all have major civil realignments within 20 years.

America is much further behind, but the difference is, our problems are not terminal. Europe will collapse into Islamic rule long before we do, which will alert the American fence sitters as to the reality of the situation.

I have no doubt that a reckoning is coming in America as to our Muslim population. They're simply not compatible with American values. BUT, unfortunately, the vast, overwhelming number of Americans don't see that yet. If you try to force that on them, they'll resist it.

Even the Army is utterly absorbed into PC bullshit. They had no problem with the fact that 80% of the people we captured with hard evidence were released within six months, and we'd have to recapture them again after they killed yet more innocents or Soldiers. We did everything to win their favor, but there's no favor to win. They just don't like us, and don't want to be like us. They want our weapons, money and technology, and that's all. The Army knew it, but the leadership was happier to lose the war than admit the awful truth.

So I hold out even less hope for the American people.

All we can really do is slow the bleed here by minimizing the extremists, and playing up our own moderates, until the rest of the country catches on. As moderates go, Ismailis are the Episcopalians of Islam. They're just in it for the social events, but none of the real sects think they're worth half a toss.

European countries falling into flames will be the catalyst. America needs to see on live TV what happens when a Western nation falls to Islam, or they won't understand. Not enough to make a difference, anyway.

If I thought there was any other way, I'd be all for it. I just don't see the average American squish giving up on PC fantasies until they see Europe beaten to death by savages.

Ismailis are the Episcopalians of Islam. They're just in it for the social events

Is that why the Khan is very busy building Muslim communities in our country?...for social events!

Not so...further the Ismailes follow the Prophet Mohammed and adhere to the Koran....same book ...same prophet. Do you not get that?....the facade is necessary to make the inroads they have....and that will continue so people will accept them...UNTIL.....

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