What happens in the special session on school finance is mainly up to the 150 people in the Texas House of Representatives. Not that the Senate's unimportant, but when the state needs to raise new money, it has to start in the lower chamber. And that's where the first signs of success or failure in a special session will appear.The House has to decide whether it wants to pass a tax bill, and if so, how so. A tax bill that includes a number of different taxes -- what's known legally as a general tax bill -- is open to big changes in the Senate and in conference committee. A narrowly defined tax bill is safer from amendment, but lacks the cover of a big bill, which lets members explain their vote for a distasteful thing by pointing to a favorable thing that was part of the package. If the House doesn't pass a tax bill -- if, for instance, it passes a bill appropriating some of the surplus to finance a school tax reduction -- the only option open to the Senate would be to go along or pass nothing. Tax bills have to start in the House. It doesn't matter at that point what senators want to do about school finance; the House is in control.

If you don't want to read the whole bill (or read it a second time), we've extracted highlights from the tax legislation assembled by Gov. Rick Perry's Texas Tax Reform Commission. The 24-member panel included former Comptroller John Sharp, who now works for a tax consulting firm, and 23 business leaders from around the state.(There's a list of the whole crew on their website, at www.ttrc.state.tx.us, and you can get a copy of the legislation from the Files section of our website, at www.texasweekly.com/documents. The governor planned, at our publication time, to present the details of the bill in a press conference near Austin on Wednesday, followed by a fly-around tour to San Antonio, Houston, Dallas, and the Valley, with a public hearing in Austin to follow all of that on Friday. The special legislative session where it'll actually come up for consideration starts the day after Easter -- 19 days after Texans get their first real look at it. • The tax break for homeowners wouldn't come all at once; the first year break would be 17 cents under the Sharp commission's plan, followed by another 33 cents a year later. On a $150,000 home (ignoring deductions), that would save the taxpayer $255 in year one, and a total of $750 in year two and thereafter (depending on what the local school board does with future tax rates). The cap on school property taxes would be lowered to $1.30 from $1.50. • Most school district tax rates are well over $1, but not all of them. The tax bill would knock rates down 50 cents, in two whacks, but only until the rate is $1. Below that, and school districts wouldn't have to cut. • State officials on the November ballot have a sweetener built into the tax bill: Local tax officials have to mail a letter to property taxpayers telling them about their tax cuts -- at the beginning of October. Those letters should land about two weeks before the start of early voting. • To figure its taxes, a company would start with its gross receipts and subtract its choice of cost of goods sold or employee compensation. Its tax base could not exceed 70 percent of its gross receipts. Those numbers would be adjusted to toss out business activity that doesn't take place in Texas. It would then multiply that base number by its tax rate, and send the result of that formula to the state. • The tax rate for retailers and wholesalers would be one-half of one percent. For everyone else, it would be one percent. • Sole proprietors would be exempted. So would partnerships, if the partners are people (and not companies or whatever). Passive entities -- businesses that make their money primarily from investments instead of from business activity -- would be out. • Businesses with total revenue under $300,000, or whose tax bill would amount to less than $100, would owe nothing. That $300,000 limit would be adjusted every two years according to the Consumer Price Index, rounded to the nearest $10,000. • The provisions exempting proprietors, partnerships and small businesses would keep well over half the state's businesses out of the taxpayer class. • Businesses wouldn't be allowed to deduct more than $300,000 in compensation to one employee from their receipts when they're computing their taxes. Like the cap on small businesses, that limit would be tied to the Consumer Price Index. • The compensation a company can deduct would include actual pay, stock options that are expensed by the company, health and retirement and other employee benefits. The $300,000-per-employee cap applies to the total of all of those things. • The bill has a section that requires the 1,000 biggest businesses in the state -- identified by the comptroller from income and employment data -- to file reports as if the new tax had been in place in 2006 and to compile a report for the Legislature from that data to show how much money would have come in. It's not supposed to identify the companies, but apparently is intended to be a guide to budgeteers who start a regular session in January. • Another provision anticipates a challenge to the new tax on the basis of constitutionality. Read that to mean a professional suing on the grounds that this is a personal income tax. The case would go to district court and appeals would go directly -- and quickly -- to the Texas Supreme Court. • What's known as the "Liar's affidavit" is in here; it forces people selling and buying cars to use the higher of their sales price or the blue book value (maintained by the Texas Department of Transportation) as the basis for the sales tax. Under current law, the sales price is whatever the parties say it is. • The bill includes a $1-per-pack tax increase on cigarettes; taxes on other tobacco products would rise to 40 percent from the current 35.213 percent. And it would let alcohol sellers deduct excise taxes from gross receipts when they're figuring up their company taxes. Department of Corrections: The new business tax proposed by the governor's tax reformers would be due for the first time in May 2008, based on activity in 2007. We were off by a year last week and for that we are sorry, sorry, sorry.

The state's top legislative leaders gave the release of the plan tepid receptions. Lt. Gov. David Dewhurst said he and the Senate "look forward to reviewing the recommendations." House Speaker Tom Craddick stayed out of the top of news stories with this quote: "I am happy to hear that the Texas Tax Reform Commission has released its report." He said he was looking forward to the public hearing on it. Democrat Chris Bell, who's running for governor against Perry, said the Guv's plan is flawed because it doesn't put more money into schools and because it uses money from the state surplus. Comptroller Carole Keeton Strayhorn, whose agency will be putting numbers to the bill, teed off on Gov. Perry -- her target in the November gubernatorial election -- saying his bill raises taxes and doesn't do anything for schools. Perry's office touted a study from the Perryman Group that said (without the benefit of fiscal estimates from the comptroller) the tax bill would result in a $794 million increase in gross state product, an increase of $216 million in personal income for Texans (almost $10 for every human in the state), and an increase of 11,265 permanent jobs. Those changes, according to that estimate, would in turn generate an extra $301.2 million in state tax revenues. Teacher groups like the Texas State Teachers Association and the Texas Federation of Teachers want the Legislature to put more money into schools. So do House Democrats, who objected to what they called "deficit spending" -- that's the surplus -- and the absence of new money for schools. The lawyers who represented the school districts in court say more resources for the schools are implicitly called for in the Texas Supreme Court's decision in the case. Perry wants lawmakers to focus on the court's ruling that the current property tax is unconstitutional, replacing some of it with a new state tax. The Texas Association of Builders and the statewide association for Realtors endorsed the plan, as did the newly formed Texas Association of Manufacturers. The Center for Public Policy Priorities called it the "best business tax proposed to date", but remained critical. That outfit says the proposed tax is a net tax cut (because it uses surpluses to balance). And they're not convinced revenues from the new tax will grow as quickly as revenues from the tax it's replacing, which could cut into future school spending. From a Philip Morris spokesman on the proposed $1 increase in cigarette taxes: "Texas should not be raising taxes on consumers when the state has a budget surplus." The tobacco company calls the nickel-per-smoke increase a hit on consumers. The Texas PTA singled out the cigarette tax as their favorite provision of the bill, saying it'll cut teen smoking.

U.S. District Judge Sam Sparks recused himself from Carole Keeton Strayhorn's lawsuit against the state. She went to court over Secretary of State Roger Williams' statement that he'll go over every signature on her petitions before he'll put her on the ballot as an independent candidate for governor. She's for sampling, which is faster. Williams says the presence of two or more candidates presenting petitions -- her and Kinky Friedman among them -- complicates the process since signing more than one petition disqualifies a voter. He says they've got to check them all to get it right. The courts will settle that, but Sparks is out: He said in the attached order that he and his wife signed Strayhorn's petition.The recusal sends the case to U.S. District Judge Lee Yeakel, also of Austin, and gives Strayhorn a rare chance to list the support of a federal judge for a political campaign. Judges can't endorse candidates, but in this case, the lawsuit flushed out Sparks' preference.

Here's the tax bill that will be presented publicly tomorrow by Gov. Rick Perry and his Texas Tax Reform Commission; it's also available in our (free!) FILES section.The link: www.texasweekly.com/documents/taxbill20060328.pdf.

If you missed it, the Texas Ethics Commission has provided what some agitators say is a roadmap for funneling gratuities of any size to public officials.Bill Ceverha, a former House member who's now on the board of the Employee Retirement System, got a check from Houston homebuilder and GOP political financier Bob Perry, and he reported it, as required by law, saying he'd received a check. He didn't say how much it was for, however, and Texans for Public Justice and Rep. Lon Burnam, D-Fort Worth, among others, complained to the Texas Ethics Commission. That panel went into closed session to talk about the issue and while their deliberations were secret, the commission is not going to require Ceverha to say whether the check was for $1 or $1 million. In the eyes of the TEC, he met the legal requirement by reporting that he'd received a gift: a check. The check came into Ceverha's hands after he lost a civil suit that bankrupted him: a state district judge held him responsible -- as the treasurer for Texans for a Republican Majority PAC -- for money used in several campaigns in 2002 that wasn't reported legally. The ruling appears to mean a public official is okay if a gift goes on the books as a check even if the amount is unreported. Other laws on bribery and corruption might apply, but if the giver doesn't specify a purpose or a quo to go with the quid, it appears to be okay to write a check. And to take one.

Texas is one of the lowest-tax states in the country, according to the U.S. Census Bureau. That outfit says Texas collected $1,434 in taxes per capita in 2005 and reported that only South Dakota, at $1,430 per capital, was lower. The national average was $2,192. And the states on the high-tax end of the list were, in order, Vermont ($3,600), Hawaii ($3,478), Wyoming ($3,418), Connecticut, $3,300, and Delaware ($3,229). • The counting wasn't complete when we put this issue to bed, but Rep. Carter Casteel, R-New Braunfels, hadn't gained any ground on Nathan Macias in her recount of the March primary. She lost on Election Day by 45 votes; that number has wiggled some -- in Macias' favor -- but the results hadn't changed. Casteel had said she was skeptical about turning around the result but felt she owed it to supporters after such a nail-biter. • Brian Keith Walker, in a Republican runoff in HD-11 in East Texas, won endorsements from Rick Scarborough, founder of Vision America; the Texas Club for Growth and the Texas Free Enterprise Fund. • Tan Parker, in the runoff in Denton County's HD-63, gets an endorsement from Scott O'Grady, the pilot shot down and then rescued almost a week later in Bosnia. O'Grady's now a student at the Dallas Theological Seminary. • Former pro golfer Terry Dill, who finished out of the money in HD-47 in Austin, endorsed Alex Castano in the runoff against Bill Welch. Another first-round loser, Rich Phillips, also endorsed Castano. • Boyd Richie picked up another endorsement in his bid for Democratic Party chairman; former House Speaker Pete Laney added his name to the list. Richie's helpers say he's already got 40 of the 62 votes he needs to win from the State Democratic Executive Committee at next month's meeting. • The Lone Star Project, a Washington-based hive of Texas Democrats, has baked up an election simulator that purports to model the gubernatorial election for you. It's an actual spin machine, if you think about it, making the case for Democrat Chris Bell against Gov. Rick Perry and showing how difficult the Democrats think it would be for Carole Keeton Strayhorn to pull off a win. It's interesting to fiddle with, and you can do it yourself on their website: www.lonestarproject.net/2006votesim.html.

Felton West will be honored this spring with a scholarship awarded in his name by the Bess Whitehead Scott Scholarship Committee of the Writers' League of Texas. West, who died last year at 79, had been a member of the BWS Scholarship Committee since its inception in 1990.The scholarship program was created to honor the late pioneering Texas journalist, writer and teacher Bess Whitehead Scott, who died in 1997 at the age of 107. One $1,000 scholarship is for upper-level college journalism students. The other $1,000 award is for persons 40 or older who wish to pursue studies in journalism or other forms of writing. At age 16, Felton was Bess's journalism student at Milby High School in Houston when Bess recruited him for a job as copyboy at the Houston Post, where she worked. Felton went on to serve as a reporter, editor, Washington correspondent, Austin bureau chief and political columnist -- a career that spanned five decades. He and Bess renewed their friendship when the Post was preparing a special edition for its centennial, and Felton learned that his former teacher also was living in Austin. Bess was quick to remember her "star" pupil. Felton and Jean were living in Liberty Hill near Austin when he died in June 2005 after a brief bout with cancer. Donations to the BWS Scholarship Fund are welcome. To make a donation in Felton's name, please include a note with that information. Gifts to the fund, administered by the non-profit Writers? League of Texas, are tax-deductible. Make checks payable to "WRITERS' LEAGUE OF TEXAS BWS FUND" and send to: Writers' League of Texas, 1501 W. 5th St., Suite E-2, Austin TX 78703.

He won the fight and it's three weeks old now, but Rep. Tommy Merritt says he'll pursue the defamation lawsuit he filed against his opponent before the primaries.Merritt sued Mark Williams during the campaign, alleging the level of BS dished by his fellow Republican had crossed the line between smash-mouth politics and character assassination. Williams said on Election Night that he would support the party nominee. And during the campaign, he maintained that the things he said about Merritt were true. Williams was one of five Republicans challenging incumbents with nearly all their financing coming, via a PAC conduit, from Dr. James Leininger of San Antonio. Leininger, an advocate of publicly funded vouchers for private schools, knocked off two of his five targets. But Merritt, after filing the lawsuit and after he ran ads featuring his wife talking about how nasty the politics had become, survived the challenge. Now he'll press forward with his lawsuit.

Amarillo Mayor Debra McCartt is Gov. Rick Perry's newest appointee to the Texas Department of Information Resources. Perry named T. Paul Furukawa of San Antonio and Mamie Salazar-Harper of El Paso to the Family and Protective Services Council and reappointed Cristina "Ommy" Strauch of San Antonio to that panel. Furukawa is executive director of Children's Association for Maximum Potential. Salazar-Harper is president and owner of M Rentals, and Strauch has a human resources consultancy. Monica Piñon is leaving the offices of Rep. Joe Pickett, D-El Paso, for a new job at the Texas Department of Insurance. Move Mark Moreno back to Houston and back to the UT M.D. Anderson Cancer Center, where he's the new veep for government relations. Laura Smith, previously with Texas A&M's Health Science Center, moves into Moreno's job at the UT Medical Branch. Dick Sherron of Beaumont will get another run as president of the Texas and Southwestern Cattle Raisers Association. Jon Means of Van Horn was elected first vice president at that group's convention and G. Dave Scott of Richmond will be 2nd veep and secretary.