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No More Business Taxes LEGISLATIVE NOTES Repeal of Franchise? Taxes Considered V The race for the 1963 House Speakership is already on. Will Ehrle, Childress conservative, has been distributing printed cards. Bob Hughes, Dallas conservative, and Alonzo Jamison, Denton liberal, have also been soliciting pledges. Tom James, Dallas conservative who has received several pledges, announced he would not run. frit Jake Jacobsen, former aide to Gov. Daniel, has registered as a lobbyist for Continental Oil as well as for a trading stamp firm and a group of retail stores. Political Intelligence I, Dallas News, advocating bet ter support of state parks, noted these comparative spending figures on park systems per year: New York, $19 billion; California, $10 million; five Othec states more than $2 million each; Texas $270,000. v Beaumont Enterprise edi torialized that Turman’s promise to make committees representative of the House is “good . . . But he also says it should have a majority opposed to the general sales tax. This is not so good. An ideal tax committee would be made up of members who are not opposed to any financial measure.” The paper accused Turman of favoring stacked committee. tool Houston Post, taking a stand against further business taxes, said: “A broad-based tax in the end would be no harder on the people than the indirect taxes they now pay, and it could solve the state’s fiscal problems in the most equitable and auspicious way.” vf An argument between Atty. Gen. Will Wilson and Rep. Tom James of Dallas enlivened the governor’s preinaugural prayer breakfast. Wilson told James his charges against the attorney general’s office after the Jefferson vice probles were “politically motivated.” James argued they were not. James told reporters he released his charges in advance of the special committee report next month to avoid accusations of wanting to damage Wilson’s Senate campaign. V For the first time, the five Holies newspapersPampa, Odessa, McAllen, Harlingen, and Brownsvillehave sent a correspondent to cover the legislature. He is Fletcher Robertson, veteran West Coast newsman. V Arthur Goldberg, secretary of labor in the Kennedy cabinet, asked Jerry Holleman to resign his post as president of the Texas State AFL-CIO before assuming his position as assistant secretary of labor. Earlier reports were that Holleman would be given a leave of absence by the AFL-CIO until August and perhaps later. V Probably the most optimis tic translation of the governor’s speech was given in the Palestine Herald-Post’s headline: “Daniel Believes Texans to Welcome More Tax Levies.” poof Texas Businessman, weekly advisory, said “this is not the year to expector try fora sales tax . . . Force an unwanted sales tax on an unwilling legislature and on an uncompromising governorand retribution to business will come.” It added: “On top of political considerations, there’s grim economic fact. If it’s valid to argue oil shouldn’t be taxed because of present doldrums and decline, the same argument is valid against taxing retailers.” THE TEXAS OBSERVER Page 8 Jan. 21, 1961 East Texas Chamber of Com merce got replies from 120 senators and representatives to a tax survey. The organization re ported that 80 said they were not pledged against a general sales tax or personal income tax, while 21 said they were pledged against both. Chamber president Caldwell McFadden challenged Gov. Daniel’s statement that most law makers are opposed to both taxes. frolf A Belden Poll, noting that the Texas taxpayer is “ill prepared for what lies aed,” reported the following findings after questioning 1,000 citizens: only 54 per cent said they have heard or read anything about the state government’s needs for tax money for the next two years; 63 per cent said they believe present state taxes are enough to take care of needs in the next biennium; on the kinds of taxes they would least oppose, 16 per cent said a sales taxes, 15 a larger tax on alcohol, 15 a larger tax on luxuries, 8 a larger tax on tobacco, 5 per cent favored a state income tax, and 3 wanted taxes on business and corporations. V William Gardner of the Houston Post listed three suggested reforms of House Speaker races: popular vote, a special session several weeks before the regular session to give a new speaker time to organize committees, and a law on reporting of campaign contributions and expenses. “Perhaps some bold soul . . will came forth with an improvement that his colleagues and the people will buy,” he wrote. George Carmack, Houston Press editor, wrote “we had better be doing all we can to get Padre Island national seashore authorized” because other areas “more conscious than we of the value of such recreation resources are starting to move.” He complained that although 18 months have passed since the legislature enacted open beaches legislation, “the barricades are still up and the cases have not yet been brought to trial . . . It is about time the state attorney general Started pitching into this case with . . . vigor.” v0 Defeated speaker candidate Wade Spilman told the Dallas News his race with Jim Turman was “the most clear-cut issue we have ever had betwen liberalism and conservatism.” Turman, dis agreeing, said “I think there are about 10 to 20 conservatives in the House and about 20 to 30 liberals ,. All the others are in the middle, fluctuating with the issues. That’ More campus support was given this week to the organized picket teams ‘that are trying to desegregate two theaters on the Drag across from the University of Texas. The desegregation program, without pickets, is also aimed at all Drag businesses that now bar Negroes. Thirty UT library staff members signed a petition protesting the segregation policies on the Drag as “in profound conflict with the fundamental ideals of our nation.” Twenty-five graduate students in the School of Social Work signed a petition also commending the mass protest and “the mature and responsible manner” in which it is being carried out. Fred Schmidt, secretary treasurer of the State AFLCIO, urged the State Hospital Board to try to get the Legislature to take over the Texas Rehabilitation Center in Gonzales, arguing that the center is barely squeezing out an existence. where I amand we are the ones who solve the problems.” V Two colleges, San Angelo and Pan American, have asked the Cmsn. on Higher Education to make a recommendation f o r four year state supported status. If the legislature goes along, the extra state. costs would be around $2 million a year. v The Dallas White Rocker said the Dallas delegation to the legislature has “swallowed the sales tax” and argued that “the whole crew of Dallas County representatives are parroting the thinking of the big rich of this great city who refuse to bear the burden of taxation.” vir Corpus Christi Caller, noting that the entry of Will Wilson into the Senate race “brings a new dimension to that contest,” said Wilson is “almost certain” to reach the runoff, and speculated that supporters of Waggoner Carr, who lost to Wilson 696,000 to 543,000 in last year’s attorney general race, may vote for or openly advocate Wilson’s election in order to set up Carr for another bid for Wilson’s vacated office. V Austin American’s Sam Wood, on the other hand, said Carr is “reappraising the scene” and may run for governor. “Friends of Carr believe that Wil,son has weakened any bid he might make for governor” if he loses in his Senate bid. V One of the most venturesome Austin rumors: William Blakley will withdraw from the Senate race just after the March filing deadline. The purpose of his interim appointment and announced oandidaizy, the rumor goes, has been to dissuade fellow conservative Allan Shivers from making .a try. go o Cong. Jim Wright, in a ques ton-answer period after a speech before Corpus Christi Jaycees, has tossed up some hot challenges. Among the questions: Is the Kennedy old-age medical proposal “socialistic?” Why should the federal government take so many taxes and waste the ‘money? Wright’s replies: “I am against socialized medicine but something must be done to aid the aged. Insurance is avail’a’ble to younger persons, but not to those more than 65. This group lives in fear of a calamitous ailment” and does not get the preventive care they need because of fear of costs. He urged states to “seize the initiative” in the matching federal-state plan passed in the last special session. On taxes, Wright said “over 80 ‘cents of every federal dollar goes to pay for past wars or passible future wars.” Ernesto Martinez Lopez, sen tenced to death for the rapeslaying of a 12-year-old Dallas girl, was given a 30-day stay of execution, which is customary. The new date is April 13. OAustin MacCorm’ick of New York City, executive director of the Osborne Association, a national correctional iprovement group, 12 years ago was called in to suggest remedies for a badly operated Texas penal system. This week, touring the system again, he said that “the progress made . . . is almost unbelievable” and he rated the Texas prison system one of the three best in the nation. OThe Bexar County district attorney’s office has hired the first Negro assistant in its history. The new assistant DA is Andrew L. Jefferson Jr., Houston, 1959 graduate of the University of Texas law school. The post pays $4,500. “would be harder on the large corporations”on the gas companies which buy gas much more cheaply, sell at a higher price, and enjoy a wider profit margin than home companies. A dedicated reserves tax would also offer “another constitutional approach” on pipelines taxation along with the severance beneficiary tax passed by the last legislature and now in the courts. On Daniel’s recommended three percent increase in the natural gas severance tax, Eckhardt said he greatly preferred a tax on the pipelines rather than on the producers. A levy on dedicated reserves would hit the larger companies more fairly, and the governor’s tax “won’t touch the people with reserves already dedicated. Texas gas is selling at too low a rate now,” he said. “The money is being made at the pipe: lines.” He. added, however, that as an emergency measure to retire the $63 million deficit he will “keep an open mind” on Daniel’s proposal. Franchise Repeal The franchise tax, he said, “is an unjust, artificial tax.” It overtaxes highlycapitalized, lowearning industries like railroads and undertaxes closely-held, highly profitable industries with smaller ,capitalization. “There’s no ex: cuse for raising money on the franchise principle,” he said. “Capital has no relation to size.” Furthermore, the franchise formula is defective, he said, being “very favorable to exploitive industries like El Paso Gas,” which gathers gas in Texas and sells mainly outside the state. Under the franchise tax, such companies located in the state with a small ratio of Texas sales to total sales do not bear a just burden, he feels. Eckhardt advocates repeal of the franchise tax, to be replaced by his corporate net profits tax. The latter would be based on a three-factor formula of sales, property, and payroll. Such a tax, he said,. would be more in line with the “ability to pay” principle. The rates would be placed “at such a level not to increase tax rates on intra-state corporations to raise no additional money from corporations doing most of their business in the state.” Under the net profits levy, such businesses would pay roughly the same amount in taxes as they do now. The tax, he said, would be “favorable to sick ol d s corporations and to new venture corporations set up with Texas apitalvery favorable to free enterprise in its true, non-monopolistic sense.” Daniel’s proposed two factor franchise tax, he said, is based primarily on capital; Eckardt’s on earnings. It would bring in more money and measure corporate , tax rates on a “fair, comparable ‘basis.” Tripartite Tax Rep. Marco Stewart is working on ‘a hree-gauged plan coupled with repeal of all present selective sales taxes except on cigarettes, alcohol, and motor fuel, and repeal of the state ad valorem and corporate franchise taxes. Onethird would be an excise tax on all products collected at the manufacture wholesale level, excluding food, medicine, housing, and services; one-third a corporation profits tax with write-offs on taxes paid to local government; and one-third on natural gas “over one-half of which leaves our state.” He would advocate the program for ‘only one year. Stewart has distributed questionnaires to over 200 constituents. Response is running 2-1 in favor of his three-part program, he said, 2-1 against a sales tax, 3-1 against more selective sales taxes, 4-1 against personal and corporation income taxes, and 5-1 ‘against Daniel’s payrolls tax. This package, Stewart estimates, would net the state about $97 million in one year on each of the three taxes; it would “shoot at $276 million,” he said. “This is a fairly ‘based method,” Stewart said. “The people will be paying only one-third of it, not all of it like we have been.” Under his proposal, “the poor man, who spends 90 percent of his earnings on food, housing, clothes,” will be favored. The tax “would not touch the lowest rung,” the economic group with