In Focus
Common Cause Texas NEWSFLASHES:
Common Cause Texas, Public Citizen and Texans for Public Justice Ask Prosecutor to Probe Ralph Reed's Texas Lobbying Activity
December 1, 2005
Common Cause Texas, Public Citizen and Texans for Public Justice today asked Travis County Attorney David Escamilla to investigate whether Ralph Reed broke Texas law by failing to register as a paid lobbyist while working for Jack Abramoff. Documents made public by the U.S. Senate reveal that Reed's firm was paid millions to influence Texas officials and legislators on behalf of Abramoff's gambling clients.
Read the press release
Read the complaint letter
Republican party of Texas: "We didn't do anything wrong but we promise not to do it again."
November 20, 2005
In 2004, Common Cause Texas and Public Citizen Called For Criminal Investigation of the Republican Party of Texas (RPT). Following a lengthy investigation by Travis County Attorney David Escamilla, a plea agreement was reached. In return for deferred prosecution, the RPT agreed to stop using corporate money for other than narrowly defined administrative expenses.
Read the complaint letter
Read the press release
Read our response to plea agreement
Read Republican Party of Texas Agrees
Watchdogs Press for Corporate Responsibility in Future Votes
November 11, 2005
Common Cause, Texans for Public Justice, Public Citizen and Campaigns for People sent a letter to the CEOs if 54 companies that directly gave to the Texas Associaiton of Business or Texans for a Republican Majority in 2002. We urged these corporate executives to adopt a set of model principles developed by the Center for Political Accountability. The principles require: all political activity to be in the long-term interest of - and disclosed to - shareholders; all political contributions to be made directly to the intneded recipient; and corporate directors to be directly responsible for overseeing all corporate political contributions and activities.
Read the press release.
Read the letter.
FINANCIAL REFORMS THAT TEXAS VOTERS WOULD APPRECIATE
December 2, 2005
The legislature, pressured by lobbyists representing many different interests, failed after a four session effort, to reach agreement on any significant financial reforms. By his appointments to the new Commission, Governor Perry seems to be double-daring the funders of those lobbyists to come up with a workable plan. Too bad he has "taken off the table" the only reasonable solution. Maybe the Committee can call it by a different name and make it happen.
Even though Texas has about average income per capita, our growth is threatened by deficient support of fundamental investments such as schools and public health. Texas is in a race to the bottom with Mississippi and Alabama. Most Texans, given a choice, would reject such a humiliating position. Why is it that a state with oil and space and high-tech industries cannot come up to at least the average marks in providing for the public good?
The answer is that we have a lousy tax system. It over taxes those with low incomes-low ability to pay, under taxes those with high incomes-high ability to pay, and levies high tax rates that, paradoxically, deliver inadequate revenue.
The most egregious weakness in the state's financial system is corporate abuse of the franchise tax. Amended in the eighties to bring tax parity between heavy industry and the newer Texas businesses that rely more on brains than on property, this tax is now a joke since most businesses can and do avoid it by incorporating in Delaware, and operating in Texas as partnerships, which are not subject to the tax. Not only do they thus avoid the traditional tax on corporate capital, but they avoid also the alternative: a modest 4.5 % tax on corporate income. The way to patch that loophole, of course, is to tax partnership income. A good idea!
With withering franchise tax revenue, Texas effectively has only two major types of tax, one of which is assessed and collected not by the state but by local taxing districts. The school property tax is highly unpopular because it is rigid and unresponsive to the taxpayer's ability to pay, particularly as applied to businesses. At the individual level, there is some correlation between wealth and the size of homes. And homeowner and old-age exemptions help too. But the taxable property per pupil in different school districts is so unequal that an elaborate transfer system had to be devised, and that system has just been ruled to be an unconstitutional state tax. An easy and reasonable fix for the Texas Supreme Court ruling would be to amend the Texas Constitution, to provide for statewide collection of school taxes, concurrent with a method for lowering the rate of this tax. Common Cause has supported that for years. Such a system would cut out a lot of red tape. City and county and hospital district taxes would still be levied and collected locally.
Sales and excise taxes provide the bulk of state money, and they are very regressive. This means that middle and low income families pay at much higher effective rates than do high income families. Regressivity occurs because high income families don't spend all their earnings, and many things on which they do spend money are not subject to sales tax. Meanwhile, low and middle income families spend all they earn and sometimes more, much of it subject to a sales tax close to the highest in the nation. . Since the top 20% of families receive over 50% of the state's income, the state, to maintain revenue, has resorted to higher and higher tax rates. The sales tax rate needs to be lowered.
If everyone paid the same effective tax rate, revenue would increase substantially. The only way to reduce the regressivity of the tax system is to cut regressive taxes and replace them with progressive taxes that look at ability to pay. Corporate and personal income taxes are almost the only progressive taxes available, so if Texans are serious about wanting to reform our state's finances adding a personal income tax on high incomes is the most promising alternative. Forty one states have taken that approach to achieving healthy tax structures. Common Cause calls for a tax on personal incomes in excess of $100,000. That would include income from partnerships, salaries, investment income and the many other inventive ways that Texans make money. If the rate were equal to the income portion of the franchise tax, such a tax would automatically close the Delaware loophole and would keep income taxes "off the table" for the vast majority of Texans, who only dream of making $100,000 per year.
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Adding a progressive tax on personal incomes would both reduce regressiveness and increase diversification. Instead of two taxes, we would have three taxes each carrying part of the revenue load. . The Texas Constitution provides that if voters opt for an income tax, two thirds of the revenue would go to supporting schools. That would certainly take the pressure off of sales and property taxes. Under the proposed package of reforms most individuals would enjoy reductions in their total taxes.
The recommendations from the above analysis of important reforms can be summarized as follows:
1) Make the school property tax a state tax and reduce the rate substantially.
2) Reduce sales-excise tax rates by one-third.
3) Add a personal income tax on high incomes to make up the difference.
Prepared by Charles Holt PhD; Forest Hill, PhD; Mary Nell Mathis CPA for Common Cause Texas
Still No School Finance Reform
September 19, 2005
Legislators and their leaders (including Gov. Perry) failed for the fifth time to produce viable programs to fund our schools and to reform our tax structure. The latest was the Second Special Session that ended on August 19. The chronology is: 2003 & 2005 Regular Sessions; Fourth Special Session in 2004 (following three special sessions to do Tom DeLay's bidding); and two Special Sessions this summer.
What happens next depends on a decision later this fall by the Texas Supreme Court. Last December State District Judge John Dietz ruled that the current funding system does not provide enough money to meet constitutional requirements, that the state limit on local property taxes has become a constitutionally prohibited statewide property tax, and that the system does not allow districts with relatively low property values per student to provide the same opportunities as districts with more property wealth.
The state bypassed the lower court and appealed directly to the Texas Supreme Court.
The Supreme Court is expected to rule this fall. If the Court decides there is no problem Perry will not call a third special session. According to a Dallas Morning News Article (June 9, 2004) "Gov. Rick Perry, speaking privately to a group from the Park Cities last month... said a lawsuit challenging the way Texas funds its schools will fail because he has appointed a majority of the Texas Supreme Court and he knows how it will rule."
If, however, the Court agrees with Judge Dietz that schools need more revenue, then Perry will be forced to call the legislature back to Austin. Such a ruling could trigger cuts in other areas and additional taxes. If painful measures prove necessary, lawmakers could use the justices as an alibi at election time.
They could say, "It's not us, it's them. The justices said the state's paultry 38% share of the cost of education is not enough. And, if we don't increase revenue we'll be in contempt of the Texas Supreme Court."
It's time for the legislature to do their duty: fix the antiquated tax system. The only way to get enough money is to close the franchise tax loopholes and institute a broad based business tax. Not only will this provide real school finance reform, but it also will can give homeowners real property tax relief.
Impact of FCC rules on local markets
Why the Sales Tax Should Not Be Increased
Joint Statement on Tax Reform
Common Cause, the League of Women Voters of Texas, etc.
February 4, 2005
Most would agree that being a low-tax state is good for Texas business and good for Texas. However, in addition to ranking at the bottom with regard to taxes, Texas also ranks at the bottom in terms of expenditures on public education and health and human services. In the long run, that ranking is not good for Texas as an educated, productive citizenry is critical to our economic future.
We saw billion-dollar reductions in services during the last legislative session as a result of insufficient revenue coming from an out-dated tax system. Unfortunately, corrective measures focused on budget cuts rather than tax reform. We are hopeful that this legislative session will demonstrate the bold leadership necessary to reform the tax system and not just apply patchwork fixes. We applaud the efforts of Lt. Gov. Dewhurst and the Senate to address the critical need for tax reform, and we also applaud Gov. Perry for declaring such reform an emergency issue for the current legislative session. It is imperative that our state leaders create a budget that supports the basic services required by the citizens of this state, and we want to be a part of the conversation to help find solutions.
Even though an income tax is not under open consideration, we believe it is the best option available to address our inadequate, inequitable tax system. The income tax should be one of the three pillars of a fair and responsive tax system-income, sales, and property-so that legislators have the necessary tools to provide needed state revenue within shifting economic realities.
Expansion of the sales tax base to include most services is a viable option in light of the shift in our economy from a predominantly manufacturing to a predominanatly service industry. However, we strongly oppose any increase in the sales tax rate. The sales tax is not an equitable tax and falls most heavily on those least able to pay. Texas already has one of the highest sales tax rates in the nation, and this is not an acceptable option for increasing revenues.
The proposed cap on property appraisals is fraught with problems. We support appraisals that reflect fair market value. Furthermore, we are mindful of the growing needs and mandates being pushed on local governments and would not support efforts to limit their abilities to raise the necessary revenue to meet those needs. However, we could support the proposed statewide property tax for public school purposes only. It would tax all properties throughout the state at the same rate and would, therefore, be inherently equalizing. City, county, and other taxing districts would not be affected by this form of a statewide property tax. We do believe, however, that appraisal of properties should remain at the county level.
We believe the best, most comprehensive option now under consideration would be a profit-based business activity tax (BAT) on all businesses. A BAT should be simple, inexpensive to collect, and capture all entities doing business in Texas. We further suggest adding back to the taxable base all salaries in excess of $75,000, thereby capturing the higher salaries while protecting jobs. If a BAT is not feasible, we believe that the loopholes should be closed in the Texas Franchise Tax and that it should be extended to other business entities such as partnerships.
We call on our elected officials to do the right thing and provide the bold reform necessary to sustain us for years to come, and we are ready to work with you to find fair and responsible solutions to our funding crisis.
Woodford: Craddick is no longer able to serve effectively
COMMENTARY
October 12, 2004
Over the past two weeks, as the people of Texas have opened their morning papers and flipped on the TV news, they have been greeted by allegations of corruption and scandal that reach to the highest levels of government in Texas and in Washington, D.C.
The high profile indictments of three individuals connected to Texas Speaker of the House Tom Craddick, R-Midland, and Tom Delay, the Republican majority leader of the U.S. House, stem from the activities of two political action committees (PACs) with designs on winning strong Republican majorities in the Texas Legislature and Congress.
The scheme to take over the Legislature and the Congress also involves some household names in American business, including Sears, Roebuck & Co; Bacardi USA, Inc; Cracker Barrel Old Country Store, Inc.; the Alliance for Quality Nursing Home Care Corporation; and Union Pacific.
The allegations are deeply troubling. While both Craddick and DeLay deny any wrongdoing — and say that any wrongdoing by their associates was done without their knowledge — the information that has emerged raises serious concerns about both men's ethical conduct.
We know that more than $600,000 in allegedly illegal corporate contributions were solicited and accepted by DeLay, Craddick or their operatives. These contributions helped Republicans win a firm majority in both chambers of the state Legislature and allowed them to solidify their majority in the U.S. House through an unprecedented mid-census partisan gerrymander.
We know that $152,000 in non-corporate contributions from Texans for a Republican Majority Political Action Committee, were sent to Craddick's Midland office and then sent back out to 14 Republican House candidates who were crucial to his his election as speaker.
DeLay and Craddick have both tried to distance themselves from the activities of these two PACs, despite evidence of some strong ties to their operations. For example, we know that DeLay's daughter and political consultants ran the day-to-day operations of TRMPAC.
Corporate contributions have been illegal since the 1905 Legislature prohibited such donations to political campaigns. Rep. Alexander Terrell, the bill's sponsor, hoped to starve what he called the "corrupt machine politicians" who gorged themselves on special interest money.
We know that Craddick's actions — designed to influence his election to the position of Speaker of the House — have also been illegal since the 63rd Legislature met in 1973 and prohibited outside groups from offering assistance to influence the election of a speaker. It also prohibits a candidate for that post from accepting assistance from outside organizations.
Craddick is under investigation for violation of this law and that DeLay's actions are under investigation by the U. S. House ethics committee and by Travis County District Attorney Ronnie Earle. Because of the grave ethical concerns Craddick's conduct has raised, we believe that it will be very difficult for him to serve the public effectively. We do not believe he can weather this ethical storm and provide firm leadership and guidance to the Legislature. The seriousness of these allegations calls into question Craddick's ability to retain the public's trust.
And defending himself against these charges will inevitably distract him from the serious problems that confront the Legislature, such as tax reform and school financing. Texans deserve a leader who is untainted by scandal and who can devote his full attention and energy to his job.
For these reasons, Common Cause Texas is asking Craddick to step down as leader in the House.
We do not take this decision lightly. Only once in our 32-year history has Common Cause Texas called upon an elected official to resign.
In 1983, when former Attorney General Jim Mattox, a Democrat, was indicted on a felony charge of commercial bribery, we urged him to step down. This action was necessary to preserve the trust the people place in our public servants.
So it is with Craddick. We do not presume to claim that he is guilty or innocent of the accusations against him. But we do know that an elected official, hobbled by this scandal, cannot govern effectively.
Ms. Woodford is the executive director of Common Cause Texas. Contact her at comcause@ccsi.com
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