In Lt. Gov. Race, Bickering Over Minor Differences

With five months until the March primary, there's one outcome that's certain in the 2014 Texas race for lieutenant governor: It will go down as the latest proof for the political theorem that the level of acrimony among candidates is inversely proportional to their actual differences over policy.

Despite their attempts to tear one another apart based on nuances in past statements on red-meat issues like immigration and guns, the four-way race in which two statewide elected officials and a sitting state senator are vying to knock out decade-long incumbent David Dewhurst has so far had more to do with style than with substance. 

That’s partly because, to dispatch with the fact that all three of them endorsed Dewhurst in his 2012 bid for U.S. Senate, each challenger has framed his opposition as a result of the lieutenant governor’s weak leadership since then on conservative agenda items like the summer’s anti-abortion legislation. Land Commissioner Jerry Patterson, who has long made it clear he would be chasing the second spot on the ballot in 2014 whether Dewhurst went to Washington or not, is a possible exception. 

But there’s another dynamic at play. With a four-way race, each candidate must plan for the possibility that two of them will end up in a runoff election where presumably only the most motivated — and conservative — voters will show up. They're all forced into the same strategy: staking out an identity as the Republican right wing’s only authentic choice.

That gets tough when none can claim the anti-incumbent mantle. The candidate who has been in office the least amount of time, Dan Patrick, is still a three-term officeholder elected to his Harris County Senate seat in 2006. And it gets even tougher to point to a clear-cut difference in their positions, from supporting a ballot proposition to fund the state’s water plan to limiting women’s access to abortions before 20 weeks to opposing in-state university tuition for undocumented immigrants.

So who wins in that scenario?

Based on where they're targeting their attacks, Staples and Dewhurst appear to feel the biggest threat from Patrick, who has focused his own sights on Dewhurst. Patterson has mainly stayed out of the fight, picking opportunities to emphasize his record on gun rights and veterans' issues. 

Patrick opened the TV air wars with an aggressive spot claiming to be the only candidate in the race opposed to in-state college tuition for undocumented immigrants, a policy put into law by the Legislature in 2001 and signed by Gov. Rick Perry. The claim was nearly instantly met with derision from all three of his opponents, who said they supported repealing that law.

The senator’s volley did manage to highlight potential mar on Agriculture Commissioner Todd Staples’ otherwise clean record of support for the conservative immigration agenda. While in the Senate in 2001, Staples voted in favor of the in-state tuition bill as well as for a measure that would have allowed the Department of Public Safety to accept foreign birth certificates or passports as identification to obtain a driver’s license. Both are policies he now opposes.

As the author of the state’s 1995 concealed handgun law who has continued as a gun rights booster since then, Patterson appears poised to assert himself as the race’s most legitimate defender of the Second Amendment. In a recent interview, he described himself as the only advocate of an open-carry law in the race. But when the three other candidates were contacted about their positions, they each said they would also support some form of such a law.

Dewhurst won an early game of conservative leap-frog. At a candidate forum hosted by a Tarrant County Tea Party group earlier this month, he said President Obama should be impeached over his handling of the U.S. consulate bombing in Benghazi, Libya, and for other instances of federal overreach. When asked whether they would join Dewhurst in his call, none of the other candidates in the race answered affirmatively.

Patterson said he didn’t doubt the president had committed “impeachable offenses,” but he stopped short of pushing for it himself, saying it was a distraction in a state-level race. In a statement, Patrick said he, like every Republican in the country, was ready for Obama to leave office, but also did not go as far as calling for his removal from office. A spokesman for Staples declined to comment on the matter. 

An indication of whether any of this has managed to get traction with voters will come when the state’s Republican mega-donors start casting their lots. For now, many of them seem to be sitting on the sidelines.

Tax Credit for Texas Wind Could Lapse

A wind farm near Abeline, TX, April 5, 2011
A wind farm near Abeline, TX, April 5, 2011

Dec. 31 is a curious date for Texas wind energy producers.

That’s when transmission services providers expect to energize the last power lines built under the state’s $7 billion Competitive Renewable Energy Zone, or CREZ, initiative — the long-running effort to connect windy West Texas to the state’s biggest energy-thirsty cities. The 3,600-mile buildout has been credited with spurring even more investment in Texas, the country’s wind power leader. 

But 2013’s last day is also an ominous one for wind folks. It is also the expiration date of the federal Renewable Electricity Production Tax Credit, whose fate has driven booms and busts in the industry. The multibillion-dollar credit, which Congress passed in 1992, helps wind stay economically competitive with other energy sources, including low-priced natural gas. Without it, the industry can’t keep pace, even as production costs fall.

Last year as the credit neared its demise, Congress extended it has a part of a last-minute budget package, but only for a year.

Now, after Congress directed most of its recent attention to finding a way to turn the government back on and to pay its bills, lawmakers have yet to draw up a proposal for the credit, making a swift renewal increasingly unlikely. 

So how would Texas wind power fare if the 2.3-cent-per-kilowatt-hour incentive lapsed? That would depend on how long the credit is unavailable, observers say. But for a couple of reasons, the impact won’t probably be as harsh as in past uncertain times.  

Jeff Clark, executive director of the Austin-based Wind Coalition, said he’s not too worried about the ticking clock. “There’s a lot of projects in the pipeline right now,” he said.

In the past, as tax credit uncertainty loomed, turbine manufacturers laid off workers well ahead of the deadline as projects stalled. For instance, Vestas, a major turbine maker based in Denmark, closed a Houston research and development facility last year that once employed 75 people. 

But this year looks different.

Texas grid operators are reviewing some 21,000 megawatts worth of new wind capacity. Typically, about 20 percent of proposals end up being built. New projects in the Panhandle — including a 1,100-megawatt wind farm near Lubbock that would be the country's largest — are expected to exceed the capacity of the region's new transmission. (Texas’ current wind power generating capacity sits above 12,200 megawatts.)

The transmission buildout has helped stock that list of projects, and a change in federal tax rules has helped, too. Developers can now claim the production tax credit for projects that are under construction as the year ends. Under the previous policy, qualifying turbines had to be in production to get the credit. 

In other words, though new projects would stall without a prompt renewal, the new rule buys time for projects already under development.

Still, renewing the credit at a later date is hardly certain. Though the wind industry has long received bipartisan support, fiscal hawks in Congress are turning up the volume on calls that the country can’t afford the credit, whose one-year renewal would cost $6.2 billion over 10 years.

“We keep hearing that we’re almost there, or just a little bit longer,” U.S. Rep. James Lankford, a Republican from windy Oklahoma, said at a U.S. House Oversight Committee hearing this month. “There’s this point at saying, when does wind power take off on its own?”

Wind energy advocates argue the credit puts the industry on equal footing with competitors such as oil, gas and coal — industries that have also enjoyed plenty of tax incentives.

Meanwhile, Texas’ congressional Republicans in recent years have largely appeared ambivalent, despite Texas’ outsize role as a wind energy producer. And Gov. Rick Perry, once considered a champion of the industry, began denouncing federal renewable energy subsidies during his failed presidential bid.

Newsreel: Shutdown Shuts Down, and a Political Shuffle

This week in the Texas Weekly Newsreel: The federal government shutdown comes to an end, Gov. Rick Perry racks up sky miles with a trip to Israel and London, and a resignation in the state Senate starts a political land rush.

Inside Intelligence: About the Senate's Next Leader...

With four Republicans vying for lieutenant governor (no Democrats, yet), we asked the insiders what might happen to the Senate’s rules and traditions, depending on who wins the race. We included Democratic Sen. Leticia Van de Putte of San Antonio, who is openly considering the race, along with Lt. Gov. David Dewhurst, state Sen. Dan Patrick of Houston, Agriculture Commissioner Todd Staples, Land Commissioner Jerry Patterson and “a Democrat” as a placeholder.

The short form: The insiders don’t expect dramatic changes unless Patrick is elected. With the others, they don’t expect major changes in the rules, do expect committee assignments to mirror the partisan mix of the Senate, expect the lieutenant governor to maintain traditional control of the agenda and don’t think senators will change the rule that most of the time requires approval from two-thirds of the senators before an issue can be debated.

In each of those four cases, the insiders think the election of Patrick would prompt changes. There were a few differences based on party. Insiders were less certain that senators would leave the calendar in the hands of a Democrat in the presiding officer’s chair, but more than half thought they would. And a greater number thought the rules might change with a Democrat in charge; again, that group didn’t make up a majority.

We collected comments along the way and a full set of those is attached. A sampling follows:

.

Depending on who is elected, will the Senate change its 'two-thirds rule' or leave it alone?

• "Dewhurst is doing all he can to pander to the crazies in his party (don't think it will help him!) so he would probably change it. Patrick will for certain change it. Patterson, having served as a senator, will understand the detriment of changing the rule - since the Democrats will again become the majority party some day in this state. Staples - not certain - he served as a senator, but he also might want to give in to the crazies. VDP keeps it as is."

• "Senate will ignore any attempt by Patrick to change the rule."

• "For the GOP be careful what you wish for. Some day we might be sorry the 2/3 rule is abolished when the democrats take over."

• "Don't be ridiculous. That rule won't change."

• "The senate members will change the rules relating to the powers of the Lt. Gov depending on what candidate is elected but I think the 2/3rds rule stays in place."

• "May not have to do anything if a D doesn't win the Davis seat or pick up a seat elsewhere."

<

.

Depending on who is elected, will the Senate leave the lieutenant governor in charge of the daily agenda or create a calendars committee to do that?

• "The senators risk backlash if they try to strip the Lt. Gov of this power. They would only dare do it if a fringe candidate (Patrick) or a Democrat were to win."

• "Let's be more like the House!!"

• "If elected, Dewhurst or Patrick will find their powers significantly cut by the Senate."

• "That committee is dysfunctional, worse than 60%."

• "If Dan Patrick is elected, the office of Lt. Gov. will be stripped of its powers in ways never contemplated before."

.

Depending on who is elected, will Senate chairmanships mirror the partisan mix of the Senate, or will all of the chairmen be members of one party?

• "The success of the Senate, historically, is its comity. True, for most of its life it was in a Dem stranglehold, but there was division between conservative Dems and liberal/progressive Dems. But whoever the Lt. Gov. was, he split chairmanships. In later years, so did Hobby, Bullock, Perry, Ratliff, and Dewhurst."

• "Not certain whether committee chairmanship appointments will be left in the hands of Lt. Gov. if certain candidates win."

• "You need a category for 'a few democrats'. I think even Patrick will have a few demos. Dewhurst will have less than the mix, but still have a few."

• "Not necessarily mirror the partisan mix mathematically, but the Ds will get some sop somewhere."

• "Absolute power in the hands of one party in a legislative body does not work. Exhibit A: Washington DC"

.

Depending on who is elected, will the Senate make major rule changes or leave things mostly as they are now?

• "The Senate wants to stay the same, but if they do not have confidence in the Lt. Gov (fringe candidate or a D wins), they will make changes to protect themselves and the chamber."

• "'Make' or 'attempt to make'. There is a difference."

• "Patrick realizes the Lite Guv derives his power from the Senate Rules, right? If he chaps enough hides, they'll strip some powers, like setting the calendar (see above question)."

• "The Senate is all talk on changing the rules. Short of a Democrat winning Lt Gov versus a supermajority of Republicans, the rules won't change."

• "Bottom line is that DP or any Democrat will mean serious changes to the way the Senate conducts business. And not for the better."

Our thanks to this week's participants: Gene Acuna, Cathie Adams, Brandon Aghamalian, Jenny Aghamalian, Victor Alcorta, Clyde Alexander, George Allen, Jay Arnold, Charles Bailey, Dave Beckwith, Allen Blakemore, Tom Blanton, Chris Britton, Jay Brown, David Cabrales, Raif Calvert, Lydia Camarillo, Marc Campos, Snapper Carr, Janis Carter, William Chapman, Elizabeth Christian, Elna Christopher, Lawrence Collins, Harold Cook, Beth Cubriel, Randy Cubriel, Denise Davis, Hector De Leon, June Deadrick, Nora Del Bosque, Holly DeShields, Tom Duffy, David Dunn, Jeff Eller, Jack Erskine, Jon Fisher, Wil Galloway, Norman Garza, Dominic Giarratani, Stephanie Gibson, Scott Gilmore, Kinnan Golemon, Jim Grace, John Greytok, Jack Gullahorn, Clint Hackney, Wayne Hamilton, Richard Hardy, John Heasley, Ken Hodges, Steve Holzheauser, Laura Huffman, Deborah Ingersoll, Jason Johnson, Mark Jones, Robert Jones, Robert Kepple, Richard Khouri, Tom Kleinworth, Sandy Kress, Nick Lampson, Pete Laney, Bill Lauderback, Dick Lavine, James LeBas, Luke Legate, Mark Lehman, Leslie Lemon, Ruben Longoria, Matt Mackowiak, Dan McClung, Mike McKinney, Mike Moses, Steve Murdock, Keir Murray, Nelson Nease, Keats Norfleet, Pat Nugent, Todd Olsen, Gardner Pate, Jerry Philips, Tom Phillips, Wayne Pierce, Richard Pineda, Allen Place, Royce Poinsett, Gary Polland, Jay Propes, Ted Melina Raab, Bill Ratliff, Brian Rawson, Tim Reeves, Patrick Reinhart, Kim Ross, Grant Ruckel, Jason Sabo, Andy Sansom, Bruce Scott, Robert Scott, Steve Scurlock, Ben Sebree, Christopher Shields, Julie Shields, Jason Skaggs, Ed Small, Todd Smith, Larry Soward, Leonard Spearman, Dennis Speight, Tom Spilman, Jason Stanford, Bill Stevens, Bob Strauser, Colin Strother, Sherry Sylvester, Russ Tidwell, Trey Trainor, Vicki Truitt, Ware Wendell, David White, Darren Whitehurst, Seth Winick, Alex Winslow, Lee Woods, Peck Young, Angelo Zottarelli.

The Calendar

Monday, Oct. 21

  • Early voting starts

Tuesday, Oct. 22

  • Fundraiser for Rep. Tan Parker; Blue Goose Cantina, Highland Village (6 p.m.)

Wednesday, Oct. 23

  • Fundraiser for Rep. Borris Miles; Austin Club (4:30-5:30 p.m.)

Thursday, Oct. 24

  • Fundraiser for Rep. Phil King; Austin Club (4-6 p.m.)

Guest Column: Vote Yes on Prop 6 — We Need the Water

Gov. Rick Perry speaks with a reporter on Feb. 21, 2012, a month after dropping his bid for the Republican presidential nomination.
Gov. Rick Perry speaks with a reporter on Feb. 21, 2012, a month after dropping his bid for the Republican presidential nomination.

Texas voters have the opportunity in November to make one of the most significant investments in the future of this state in generations — and it won’t raise taxes one penny to do so.

Proposition 6 presents an opportunity to help our state meet its projected water needs for the next five decades without adding more to the burden of Texas taxpayers. Essentially, it allows the state to move a portion of the money already in one state savings account — the Rainy Day Fund — to a new savings account dedicated to funding water projects across the state. It’s a fiscally prudent investment in the future of Texas.

Our booming economy, rapidly growing population and the drought that has plagued most of the state for years are combining to stress our ability to meet our water demands. If we do nothing to address these needs, we place at risk the health and well-being of future generations.

Even today, there are Texas families whose water must be trucked in to meet basic needs, like cooking dinner, taking baths and brushing teeth. This is not a sustainable future for Texas in terms of quality of life, or livelihoods.

To delay acting is both needless and painful, will ultimately cost taxpayers billions more than necessary, and will risk stalling the economic prosperity and job creation we’ve enjoyed over the past decade.

For decades, some lawmakers have sounded the clarion call about the need to conserve and expand our state’s water resources, and members of our business community have made it clear that adequate water supplies are key to continuing the sort of economic expansion we’ve established.

While those efforts resulted in the adoption of a quality state water plan in 2012, drafted from the ground up — thanks to the leadership and expertise of local authorities — it’s been much more challenging to fund the infrastructure these plans call for.

Last summer, however, we found a way — without raising taxes and without dipping into general revenue, all while preserving our Rainy Day Fund and protecting the state’s AAA credit rating.

Prop 6 gives us the unique opportunity to address a critical need while saving billions in taxpayer dollars, turning $2 billion in seed money into $30 billion in much-needed financial assistance for water projects across our state. By using this revolving fund model instead of paying for it piecemeal out of general revenue, we stand to save upwards of $6 billion in taxpayer dollars over the next 50 years.

Again, this is a plan that was crafted hand-in-hand with local authorities, ensuring that the people who best understand the projects they need are the ones calling the shots.

Further, this move would leave the Rainy Day Fund with more than enough to both protect our credit rating — which was recently raised to the highest rating possible — and keep us ready for any emergencies.

Because of our economic strength, the Rainy Day Fund has reached historic highs. Even with a one-time transfer of funds to address our water needs, we’ll still have an estimated $8.3 billion in reserve.

A recent report by the Texas Taxpayers and Research Association, in fact, indicates the Rainy Day Fund might even reach its legislatively mandated capacity within the next four years, even after transferring funds to deal with water and transportation infrastructure.

How many other states would — or could — jump at the chance to solve a major challenge like this without raising taxes?

And make no mistake — other states are watching. They know that if we choose to ignore this opportunity, it will severely hamper our ability to compete for and win expansion or relocation bids involving major employers.

Prop 6 is a way to protect Texas’ future, affordably and responsibly.

Rick Perry is the governor of Texas.

Guest Column: Vote No on Prop 6 — It's the Wrong Answer

While there is near universal agreement that we must address our growing need for a readily available water supply, Proposition 6 is no solution.

Our failure to clearly understand the problem only ensures Texas will face prolonged drought. The side show being created by the fanfare surrounding Prop 6 attempts to obscure the truth about the measure: It draws down the Rainy Day Fund while doing nothing to insure implementation of the state’s water plan.

We’re being told that Prop 6 is necessary to finance water plan projects. The cast of characters clamoring for passage of Prop 6 must hope the people of Texas have very short memories. Do they expect we have forgotten that they told us as recently as 2011 they had to have $6 billion in revolving bond authority to meet the state’s growing need for water? Do they expect that we won’t realize that not one dime of that money has yet been spent? Lack of funding is not among the primary reasons for failure to develop water infrastructure. And moving money from the Rainy Day fund will do nothing to address those problems!

Prop 6 does create a new water infrastructure bank. Voters are rightly leery of government banks, especially one hidden behind an appointed board. In creating the State Water Infrastructure Fund for Texas (SWIFT), the Texas Water Development Board will be able to provide debt service, deferred loan structures and credit enhancement for loans funded by the board. In plain language, SWIFT funds only help pay the interest on loans. Funding for projects must come from Texas Water Development Board loans which were authorized back in 2011 but remain on the shelf. There is no doubt investment bankers, lawyers and financial advisors are salivating at the chance to get their hands on $2 billion. Unfortunately, while SWIFT may benefit a few political insiders, it won’t do anything to address the growing need for water infrastructure in Texas.

As Peter Drucker pointed out, “The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong questions.” How to fund water development is that very dangerous wrong question. The question must be, how can water supply meet water demand? That’s a market question, one a free market would address. But the markets are not free in Texas. Statutory restrictions on inter-basin water transfers, water right amendments and the enlarged authority of groundwater conservation districts all weave a tangled web that inevitably impedes the ability of the market to deliver water to Texans. The Texas Public Policy Foundation addressed these concerns in “Texas Water Policy Options.”

Fortunately, the 83rd Legislature was successful in implementing some process reform at the Texas Water Development Board under provisions authorized in House Bill 4, but there is much more work to be done in this regard.

It is foolish to take money from the Rainy Day fund when we have not yet prioritized projects and have reached no agreement about what role the state should play in their development. In light of recent rains, Texas will enjoy at least a brief reprieve from the severe drought and perhaps take the opportunity to ask better questions in preparation for the 2015 legislative session. It will provide yet another opportunity to perfect law and meaningfully address the state’s water needs.

In the meantime, let’s be careful not to waste another precious resource, our Rainy Day fund. Nix Six on Nov. 5.

Debra Medina, executive director of We Texans, is a Republican candidate for comptroller.

Guest Column: Tax Foundation Texas Ranking Misses Mark

Dale Craymer
Dale Craymer

The Tax Foundation’s 2014 Business Tax Rankings made a splash by announcing that Texas had fallen to 11th place, down from ninth place in 2013.

We at the Texas Taxpayers and Research Association have a tremendous amount of respect for the Tax Foundation but take issue with its annual scoring of “business” tax climates. It simply isn’t what the foundation claims it to be — a measure of business taxation.

Its rankings are based on a weighted average of five taxes, each separately scored on a mix of factors. States are ranked from 1 to 50, with 1 being the “best” (i.e., lowest). Texas scores well down in the 30s on our major taxes — property, sales and corporate taxes — and 14th in unemployment taxes, but our overall combined rank soars to 11th. That’s because the foundation’s overall score heavily rewards states, like Texas, that don’t have a personal income tax. While the lack of an income tax is a certainly an overall positive for Texas, it is a tax on individuals and not businesses. It should not count as one-third of a state’s “business” tax ranking, which is how the foundation scores it.

This weighting of the various taxes is a key flaw in the analysis because it doesn’t relate to the amounts of taxes businesses actually pay. The biggest tax Texas businesses pay is the property tax, but the foundation considers it less than half as important as the personal income tax. Direct corporate taxes, which account for only about 7.5 percent of a business’s total tax liability, account for 20 percent of a state’s score. And seemingly ignored in the foundation’s scoring are special industry taxes — severance, utility, insurance and excise taxes — that account for almost a fourth of all business taxes.

The foundation makes much of the fact that Texas’ overall score dropped from ninth last year to 11th in 2014, blaming it on the Texas franchise, or margins, tax, which it terms “one of the most destructive taxes around” — even though it’s been around since 2008, and the only changes to the tax since then have been to exempt more businesses, cut the tax rate and reduce the tax base (all of which should improve our ranking).

The foundation’s own data does not support its conclusion. Texas’ margin tax ranked 38th in both years. All other Texas taxes also matched their prior ranking, with one exception: the property tax. Texas fell in the foundation’s overall rankings because of its worsening property tax score, which dropped from 32nd to 35th.

Even more curious is the fact that the foundation subjectively downgrades a state for having credits for research and development, investment and jobs — incentives that economic literature confirms are effective tools to attract new business investment. This session, Texas lawmakers passed a new incentive for research and development that may create nearly 100,000 new jobs in Texas and $13 billion in economic activity. The foundation, though, says these incentives “distort the free market.” No business ever located a research and development facility in a state because it expressly did not offer a tax credit. The foundation’s rankings miss the point. Taxes distort the free market. Relief from taxes does not.

So where does Texas really rank? TTARA’s analysis puts Texas with the 33rd lowest tax burden on business across the states — roughly where the Tax Foundation ranks our property, sales and corporate taxes and leaving plenty of room for improvement. For individuals, we have the third-lowest effective tax rate — outstanding, thanks to the lack of a personal income tax. Both of those numbers draw from the work of the Council on State Taxation and are based on actual dollars paid relative to economic production — no subjectivity, just simple math.

Texas is a wonderful place to do business. We have a strong economy, great people, rational tort laws and an efficient regulatory environment. Our taxes on business are not our best selling point, but even so, the Tax Foundation misses the mark. The problem is not the franchise tax. It is our expansive property taxes — particularly those on business personal property — and our sales taxes on many business purchases. We can do better, but will never improve our tax system if we fail to recognize what the real challenges are.

Dale Craymer, an economist, is president of the Texas Taxpayers and Research Association.

Guest Column: The Margin Tax Holds Texas Business Back

We at the Tax Foundation recently released our latest edition of the State Business Tax Climate Index, and for the first time, Texas no longer ranks among the top 10 states. Indiana moved ahead of Texas thanks to concerted efforts by Govs. Mitch Daniels and Mike Pence to reduce and simplify their corporate and individual income taxes while repealing economically damaging taxes. Texas fell by standing still.

What’s holding Texas back? The answer isn’t sexy, but it affects the Texas economy more than the average citizen knows: Texas has one of the most destructive taxes on corporate and small businesses in the country. The Texas franchise tax, or margins tax, has been subject to criticism by tax experts and businesses since it took effect in 2008, and only four other states levy this type of tax.

Instead of being a tax on income, the margins tax is a tax on gross receipts, which means that businesses must pay it in good times and in bad. Its rates apply over and over throughout the production process, leading to double and triple taxation. So while the 1 percent rate of the margins tax looks paltry (retailers and wholesalers pay 0.5 percent), effective tax rates are in fact much higher because of how many times the tax is levied. All in all, the margins tax brings in an astounding 10 percent of state revenue.

For example, if you were going to make a loaf of bread under a gross receipts tax regime, the wheat would be taxed at 1 percent when it is sold from farmer to the miller, then the flour would be taxed at 1 percent when it is sold from the miller to the baker, then the bread would be taxed at 1 percent when it is sold from the baker to the distributor, and then the loaf of bread is taxed twice — once at 0.5 percent when it is sold to the distributor, then at 0.5 when the retailer sells the bread to the end consumer. Consumers, of course, bear the burden, as the pyramiding taxes are baked in to the price of the product they eventually buy.

Gross receipts taxes unfairly distort the economy because they favor industries with shorter supply lines over industries with longer, complex production. Just imagine the layers of taxes on a complex good like a computer. In some cases, gross receipts taxes even cause businesses to vertically integrate — to put the supply chain under one corporate roof — to avoid tax burdens, even if it doesn’t make any business sense to do so.

The good news is that policymakers are taking notice. Michigan got rid of its gross receipts tax in 2012, and the candidates in Virginia’s gubernatorial campaign want to repeal their state's. The Texas Tribune reported in May that 90 bills were introduced last session that sought reform of the margins tax; nine of them proposed repealing it entirely. These efforts succeeded in cutting the tax rate by 5 percent and sparing more small businesses from the harm of this cumbersome tax.

There’s much that shouldn’t change about Texas’ tax code. I’m a bit jealous of lifelong Texans; you don’t know the sinking feeling of finishing your federal income taxes just to remember that you need to pull out the state tax forms. Even Indiana, with its 3.4 percent flat income tax, can’t compete with that.

And Texas has a lot of other things going for it — large urban centers, a successful agricultural sector, favorable employment numbers and some of the largest business growth in the last decade. Gov. Rick Perry rightfully points to the tax code in part as a cause of the migration boom of businesses and individuals to the Lone Star State. But if Texas wants to continue to see the growth and prosperity that have characterized the last decade, the margins tax has got to go.

Scott Drenkard is an economist at the Tax Foundation and co-author of the 2014 State Business Tax Climate Index.

 

The Week in the Rearview Mirror

Texans support $2 billion in water infrastructure financing by a better than 2-to-1 margin, but nearly a quarter haven't decided how they will vote on the issue this November, according to a new University of Texas/Texas Tribune Poll. The respondents favored the measure, known as Proposition 6, 52 percent to 19 percent. A quarter said they had not decided how they would vote. The poll found Texans put a high priority on public education, water, and roads and highways. Asked to rank those things, 73 percent said they consider addressing public education needs to be very important, 65 percent said the same about water, and 55 percent gave that highest importance to roads and highways. And the respondents agree with the Legislature about who ought to be deciding the water issue: 75 percent said “it’s best to let the voters decide” big issues, while 16 percent said “we vote legislators into office to make big decisions.”

The U.S. Supreme Court has agreed to hear Texas' challenge of federal regulations on greenhouse gas emissions from stationary sources like power plants and factories. But it declined to hear the state's appeals of two other decisions, effectively upholding rules that limit such emissions from vehicles and maintaining the Environmental Protection Agency's assertion that greenhouse gases endanger public health and welfare. At issue is whether the EPA can use the Clean Air Act, which gives it the authority to regulate emissions of toxic air pollutants and to limit emissions of greenhouse gases as well. 

Texas has the greatest number of poor, uninsured adults who will fall in a "coverage gap" created by states that chose not to expand Medicaid eligibility under the Affordable Care Act, according to a report by the Kaiser Family Foundation. One million of the 5.2 million Americans who won't have health insurance options available under the new law reside in Texas, according to the report. The state has the highest rate of uninsured in the nation. More than 6 million people — nearly a quarter of the population — lack health insurance, according to census data. And Texas only allows poor parents whose incomes are at 19 percent of the federal poverty level, or about $3,737 a year for a family of three, to enroll in Medicaid.

Fifty-nine percent of front-line fast-food workers in Texas rely on public assistance programs such as food stamps and Medicaid to support their families, according to a report released this week. Nationally, more than half – 52 percent – of the families of front-line fast-food workers use at least one public assistance program, compared with a quarter of the total workforce, according to the report. The research was sponsored by the University of California, Berkeley, Center for Labor Research and Education and the University of Illinois at Urbana-Champaign Department of Urban & Regional Planning. Texas had the seventh-largest percentage of front-line fast-food workers on public assistance among the 24 states included in the report. Louisiana had the highest, 73 percent. The researchers omitted states for which there were too few fast-food workers in the census data sample.

With $27 million in unpaid tolls, the Texas Department of Transportation has taken advantage of new state legislation that allows it to publicly release the names of toll violators, posting the names of the top 25 toll scofflaws on its website. Among the top 25 toll offenders, amounts owed range from $236,026.32 to $82,297.26, and the number of unpaid tolls varied from 14,358 to 3,604. A 50-cent toll can jump to $448.50 if it is unpaid for 202 days, over which time the toll violator would receive at least two bills and a violation notice. If the toll remains unpaid, the case would be submitted to collections and the court system during that period.

Political People and their Moves

Kinky Friedman plans to run for agriculture commission as a Democrat. Among other things, he thinks the state should “legalize, cultivate, tax and regulate marijuana.” He had previously been considering a run for governor. 

Houston attorney Sam Houston filed the campaign finance paperwork to run for attorney general. He’s the first Democrat to declare interest in that race and says he’ll make a formal announcement soon.

Former state Rep. Sid Miller, R-Stephenville, says he will run for agriculture commissioner in 2014, joining a crowded field just as Rep. Brandon Creighton, R-Conroe, jumped out. Creighton will run instead for the state Senate seat opened by Tommy Williams’ resignation. So will Rep. Steve Toth, R-The Woodlands. They’ll join Richard “Gordy” Bunch and Louis Guthrie, who are also in the race. 

Glenn Hegar picked up an endorsement from Texans for Fiscal Responsibility in his bid for comptroller. 

Janiece Crenwelge, most recently an analyst on the education section of the state budget, is leaving government to join the Erben and Yarbrough lobby firm. She previously worked for Sen. Robert Duncan, R-Lubbock.

Gov. Rick Perry appointed:

• Durga Agrawal and Paula Mendoza of Houston and Peter Taaffe of Austin to the board of regents at the University of Houston. Agrawal is CEO of Piping Technology and Products. Mendoza is present and CEO of Possible Missions. Taffee is an attorney with the Buzzbee Law Firm.

John Bailey of Cisco as justice of the 11th Court of Appeals, where Bailey has worked as a staff attorney.

Ken Wise of Humble as justice of the 14th Court of Appeals. He’s currently a district judge.

Catherine Evans of Houston as judge of the 180th Judicial District Court. She’s a prosecutor in the Harris County district attorney’s office.

Jennifer Balido of Dallas as judge of the 291st Judicial District Court. Balido, a former public defender and former prosecutor, is in private practice.

Grant Dorfman of Houston as judge of the 334th Judicial District Court. He is senior counsel at Nabors Corporate Services and a former judge.

Courtney Tracy of Newton as district attorney of Newton County. Tracy is a private practice lawyer and a former assistant city attorney in Houston.

Benjamin Smith of Snyder as district attorney for Borden and Scurry counties. He is currently Borden County attorney and an assistant DA for the two counties.

Quotes of the Week

I don’t know about you, but Barack Obama ought to be impeached. Not only for trampling on our liberties, but what he did in Benghazi is just a crime.

Lt. Gov. David Dewhurst, quoted by the Texas Observer at a NE Tarrant Tea Party forum

I will remind you that this group of renegades that decided that they wanted to break from the crown in 1776 did great damage to the economy of the colonies. They created the greatest nation and the best form of government, but they did damage to the economy in the short run.

U.S. Rep. Morgan Griffith, R-Va., quoted by The Hill before Congress temporarily ended the shutdown and threat of default

It was one person who was able to steamroll Congress, and unless we target him for what he is, he's going to do it again.

U.S. Rep. Peter King, R-N.Y., speaking about Ted Cruz to Capital New York

I've found that some people, if you say anything other than Ted Cruz is the greatest living senator that America has ever had, they’re mad at you.

Former Arkansas Gov. Mike Huckabee on his radio show

Sometimes those comments like that are made out of malice, but if someone has no intelligence, I don’t view it as being a malicious statement.

U.S. Sen. John McCain to NBC News' Brian Williams on U.S. Rep. Louie Gohmert's suggestion that McCain has supported al-Qaida

These are some folks that wanted to highlight the differences in policies between the states, and identify what works to create jobs, freedom and opportunity.

Gov. Rick Perry on a radio show describing Americans for Economic Reform, a group said to be laying the groundwork for another Perry presidential bid

In a year or two, the Poteet Strawberry Festival may be called something else.

Kinky Friedman, seeking the Democratic nomination for agriculture commissioner on a platform that includes legalization of marijuana