Following a link attached to a blurb I read this morning in Wall Street Journal Blog: Real Time Economics
"Howard Gleckman examines presidential hopeful Gov. Rick Perry’s record as a low-tax politician. His record, “suggests, in fact, a politician who has gradually toughened his anti-tax views over the years but remains willing to boost some levies…Perry’s biggest revenue challenge came in 2004-2006. Texas had been funding its schools through local property taxes, an arrangement courts found problematic. In 2004, Perry proposed replacing some school property levies with a basket of other taxes, including sales taxes, a higher cigarette tax, and an increased payroll tax. Perry’s plan died in the legislature in 2004 but in 2006, after the state Supreme Court determined the school funding system was unconstitutional, lawmakers did pass a major tax reform bill—a measure praised and signed by Perry. This version reduced local property taxes but created a new gross receipts tax on business (called a margins tax), raised the cigarette tax, and even taxed patrons of topless bars…Conservatives blasted the 2006 deal as ‘the largest tax increase in state history.’”
I ended up over on TaxVox where I read a great post there: Rick Perry, Texas, and Taxes
Excerpt (the emphasis is mine):
…Perry’s plan died in the legislature in 2004 but in 2006, after the state Supreme Court determined the school funding system was unconstitutional, lawmakers did pass a major tax reform bill—a measure praised and signed by Perry. This version reduced local property taxes but created a new gross receipts tax on business (called a margins tax) , raised the cigarette tax, and even taxed patrons of topless bars. Thanks to my Tax Policy Center colleague Yuri Shadunsky for helping review the Perry years.
Conservatives blasted the 2006 deal as “the largest tax increase in state history.” While it remains unclear whether this new mix of taxes was a net revenue increase, many in Texas did pay higher taxes.
In recent years, Perry has taken a much harder line on revenues but not an absolute one. While in 2009 he signed Grover Norquist’s anti-tax pledge (to “oppose and veto any and all efforts to increase taxes”), he also increased taxes on smokeless tobacco by $105 million over two years. In June, Perry vetoed a bill that would have required some Internet retailers to collect Texas sales taxes.
While state taxes are generally regressive, Texas is among the worst– not surprising since it has no personal income tax. In 2009, the labor-funded Institute on Taxation and Economic Policy estimated that the lowest-earning 20 percent of Texas households paid about 12.2 percent of their income in state and local taxes, while the top 1 percent paid only 3.3 percent, compared to the national average of 10.9 percent and 5.2 percent .
There are a couple of things to keep in mind when reviewing Texas taxes. The first is that the state has an extremely weak governor, one of the least powerful in the nation. Thus, many of these tax changes can properly be laid at the feet of the legislature, although Perry did sign them into law.
It is also worth noting that Texas has enjoyed the benefits of the run-up in oil prices in recent years (the price of a barrel of oil was just $25 when Perry first became governor). High energy prices may be bad for most state economies, but not for Texas, where the oil and gas business produced $13 billion in state revenues last year, more than 40 percent of total revenues. Texas also receives an outsized amount of money from the federal government and has embarked on major spending cuts. In this environment, Perry has been under much less pressure to raise taxes than other governors.
"…a new gross receipts tax on business (called a margins tax)" That’s a tax on businesses right? And it’s not a tax on the profit a business earns it’s a tax on the gross receipts. Well I’ll be.
And I find the disparity between what the folks at the top pay in taxes vs. what the folks at the bottom disconcerting too. The folks at the bottom in Texas pay 400% more in terms of percentage of their income than do the folks at the top? Texas is #5 on the list of the ten most regressive tax systems in the country (regressive meaning that the poor pay a higher percentage of their income in taxes than do those that are well off) (see Who Pays? A Distributional Analysis of the Tax Systems in All 50 States).
The bit about Texas (being a lot like Alaska) in that a large substantial portion of the state’s revenues are thanks to a quirk in geography rather than any great management policy are certainly worth noting (see In Texas, Perry has ridden an energy boom).
And one last point if Rick Perry and Rick Perry’s supporters want to use the "the state has an extremely weak governor, one of the least powerful in the nation" to shirk the responsibility for such a unfair regressive tax system and not admit to the energy revenues being so helpful then they/he can’t claim it due to his brilliant fiscal management and the policies he instituted as governor.