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Sen. Mike McKool of Dallas proposed to increase the tax on cigarettes by five cents a package. He reasoned that the cigarette tax should be raised a nickel since manufacturers will raise the cost of cigarettes in vending machines by that much. “This is a humanitarian tax,” the tiny senator argued. “I checked with funeral directors and they’re all against it because it will hurt business.” The Senate, however, decided to add only four cents to the tax, bringing the total levy on cigarettes to 15 cents a package. Despite early victories in rejecting consumer taxes, the liberals were unable to put together enough business taxes to pay the state’s expenses for the next two years. Sen. Barbara Jordan of Houston introduced a 10% corporate profits tax which she estimated would bring in $220 million for the biennium “The argument is always made that if a corporate profits tax were put on, business would leave the state. Where would they go?” the senator asked. “Forty-two states already have such a tax.” Miss Jordan received only eight votes for her amendment. Senator Schwartz did even worse six favorable votes on a proposal to increase the oil production tax from 4.6 to 5%.* WHILE THE LIBERAL proposals were going down in defeat, Sen. J. P. Word, a conservative, was hastily putting together a compromise package. The Senate stood at ease as secretaries rushed to type up a copy of the patch-work proposal. Word briefly explained his proposal saying it would raise approximately $360 million in new taxes. It was engrossed on a voice vote. *Voting with Jordan on the corporate tax were Joe Bernal, San Antonio; Chet Brooks, Pasadena; D. Roy Harrington, Port Arthur; Don Kennard, Fort Worth; Mauzy; Schwartz; and Wilson. Bernal, Brooks, Jordan, Mauzy, and William Patman of Ganado votes for Schwartz’ tax on oil. 6 The Texas Observer Bound Volumes Bound volumes of the 1968 issues of The Texas Observer are now available. In maroon washable binding the same as in recent years the price is $12. Also available at $12 each are volumes for the years 1963, 1964, 1965, 1966, and 1967 the years of The Observer in its present format. A very limited number of volumes for 1960, 1961, and 1962 remain in stock. These will be sold, on a first-come first-served basis, at $25 each. Texas residents please add the 4% state and Austin city sales tax to your order. Volumes will be sent postpaid. THE TEXAS OBSERVER 504 West 24th Austin, Texas 78705 The Word package includes: An increase in the state sales tax from 3% to 31/4% \(for about $80 million in new intrastate telephone and telegraph services are brought under the sales tax \($39.6 tax, the Word version would allow cities to levy their 1% tax on the new taxable items. A four-cent increase in the cigarette tax and varying tax increases on other tobacco products to bring them more in line with the cigarette tax rate. A 1% increase in the natural gas tax An additional francise tax of 50 cents proposal to tax 25% of out-of-state sales. A. documentary stamp tax at the rate of 50 cents for each $500 value on deeds, instruments, or writings transferring land A phase out of the tax on chain stores over a five-year period. \(This tax, which brings in about $2 million yearly, is believed by some to unfairly penalize chain These 13 senators asked to be shown voting “no” on the bill: Jim Bates, Edinburg; Joe Bernal, San Antonio; Joe Christie, El Paso; Henry Grover, Houston; Ralph Hall, Rockwall; Roy Harrington, Port Arthur; Jordan; Mauzy; McKool; William N. Patman, Ganado; Schwartz; and Murray Watson, Waco. Few senators had actually seen the bill they were voting on. Although, Word originally estimated that the package would raise approximately $360 million for the biennium, the comptroller later reduced the revenue forecast to $284.2 million under an Oct. 1, 1969, effective date, and $248.4 under a Jan. 1, 1970, date. There was some question as to when the taxes would go into effect. On the day the bill was engrossed, senators were talking about Oct. 1, but a bill analysis handed out by the Secretary of the Senate after the bill was finally passed set an effective .date of Jan. 1. COMPTROLLER ROBERT CALVERT refused to estimate how much revenue Senator Wilson’s amendment to the franchise tax might raise. Calvert said the language of that part of the bill was “vague and cannot be subjected to analysis at this time.” The Texas Research League, a business-oriented research group, guessed that the new method of computing the franchise tax would raise $22.3 million for the biennium. Wilson thinks the league’s estimate is low. Even though the measure might not raise the $80 million the senator originally said it would, it apparently would affect corporations enough for the business lobby to be upset about it. Some lobbyists said they would prefer a corporate profits tax, which is based on a company’s sales volume, rather than a franchise tax, which is based on a firm’s assets. A few House members questioned the constitutionality of the tax. As the Observer went to press, the tax question was still very much up in the air. Although the Senate passed its tax bill on a Thursday, House Speaker Gus Mutscher refused to put the Senate bill before the House until the following Monday. Many senators grumbled that Mutscher was giving the lobby time to. work out a strategy to defeat the business taxes in the Senate bill. As expected, the House refused to accept the Senate bill, Mutscher appointed conservative Reps. Ben Atwell, Forest Harding, Bill Heatly, Richard Cory, and John Traeger to represent the House on a conference committee to adjust the differences between the bills. House members, mostly liberals, introduced a number of motions to instruct the conferees, but all were beaten back. Will Smith of Port Arthur lost 88-57 in an attempt to instruct them not to accept the sales tax on services. By a vote of 85 to 57 the House refused to adopt Rep. John Hannah’s motion not to reduce taxes of telephone companies. Ed Harris of Galveston unsuccessfully moved to instruct the conferees not to repeat the chain store tax. Jamie Bray of Houston managed to get only 17 votes on a motion to raise the oil tax from 4.6 to 5.5 and to raise the natural gas tax from 7% to 9%. BARNES NAMED Sens. Bill Lubbock, Republican Harris of Dallas, Don Kennard of Fort Worth, and Jack Strong of Longview to the conference committee. Kennard is the only liberal conferee. Just before the Senate went into session to act on the conference committee, Barnes met with liberal Senators Wilson, Mauzy, and Strong. All three reportedly were unacceptable appointees to the committee because they refused to agree to vote for the compromise bill the conferees write. Moore, chairman of the Senate conferees, originally asked that the Senate delegation be given a free hand in bargaining with the House. Senators Patman and Wilson, however, moved to instruct the conferees not to accept a tax reduction for the telephone companies. The motion stimulated heated debate which Barnes abruptly stopped with an announcement that Moore had decided to accept the instructions. “The Speaker and the governor are both waiting to meet with the chair,” Barnes said impatiently. “The chair has very serious reservations that we will be able to get a conference committee report as fast as I had hoped 72 hours ago.” With only six days left to pass both tax and appropriations bills, a deadlock seemed possible. Speaker Mutscher has expressed his displeasure with the Senate’s